Arizona Solar Guide 2025: Incentives, Costs & What to Expect

I've been covering the solar industry for years, and Arizona remains one of the most fascinating markets to analyze. On paper, it should be the easiest solar decision in America—Phoenix averages 299 sunny days per year, Tucson gets 286, and the state receives more solar radiation than almost anywhere else in the country.

But here's what the marketing brochures don't tell you: Arizona's solar market has quirks that can make or break your investment. Net metering policies have changed dramatically over the past decade. Utility rate structures vary wildly between providers. And the desert heat affects everything from panel selection to inverter placement in ways that don't apply elsewhere.

I've talked to dozens of Arizona homeowners who've gone solar—some thrilled with their decision, others frustrated by unexpected complications. The difference almost always comes down to understanding these local factors before signing a contract. Here's everything Arizona homeowners need to know to make an informed decision.

Solar Costs in Arizona

Average installed price: $2.50-$2.90 per watt before incentives.

For typical system sizes:

System Size	Before Credits	After 30% Federal ITC
6 kW	$15,000-$17,400	$10,500-$12,180
8 kW	$20,000-$23,200	$14,000-$16,240
10 kW	$25,000-$29,000	$17,500-$20,300

Arizona pricing runs slightly below national average due to competitive markets and high demand. The state has been a solar leader for over a decade, which means plenty of experienced installers compete for business. That competition drives prices down and quality up—when you choose wisely.

What Affects Your Specific Cost

Your actual cost depends on several factors beyond system size:

• Roof complexity: Tile roofs (common in Arizona) cost more to install on than asphalt shingles. Flat roofs need tilted mounting systems. Multi-story homes require more labor.
• Panel efficiency: Higher-efficiency panels cost more upfront but produce more power in the same space. Worth considering if roof space is limited.
• Inverter choice: String inverters are cheapest; microinverters cost 10-15% more but provide panel-level optimization and monitoring.
• Electrical panel: Older homes may need panel upgrades. Add $1,500-$3,000 if your panel is undersized or outdated.

Arizona Solar Incentives

Federal Investment Tax Credit: 30%

Same as everywhere in the US. Deduct 30% of system cost from federal taxes. Worth $6,000-$10,000 on typical residential systems.

Critical deadline: The 30% credit for residential solar expires December 31, 2025.

Arizona State Tax Credit: 25% (Capped at $1,000)

Arizona offers a modest state tax credit on top of federal. It's 25% of system cost but capped at $1,000.

Small but it stacks. A $20,000 system gets you $6,000 federal + $1,000 state = $7,000 total tax credits.

Property Tax Exemption

Solar equipment doesn't increase your property tax assessment. Adding $20,000 of panels to your home won't raise your property taxes at all.

Sales Tax Exemption

Solar equipment is exempt from Arizona's 5.6% state sales tax. Local taxes may still apply depending on your city and county.

Net Metering Situation

Arizona's net metering landscape is complicated. Different utilities have different rules, and they've changed over time.

Salt River Project (SRP)

SRP ended traditional net metering in 2015. Instead, they offer:

• Lower credit rate for exports (around $0.03/kWh, well below retail)
• Demand charges based on peak usage
• Various rate plans with different tradeoffs

SRP customers can still benefit from solar but need careful system sizing and rate plan selection. Battery storage helps by reducing grid exports and peak demand.

Arizona Public Service (APS)

APS offers several solar-specific rate plans. The economics depend heavily on which plan you choose and how you use electricity.

Export credits are below retail rate. Time-of-use rates can make solar more or less valuable depending on when you use power.

Tucson Electric Power (TEP)

TEP has more favorable solar policies than SRP or APS. Export credits are closer to retail rates, though policies evolve.

Heat Considerations

Arizona's extreme heat affects solar production and equipment selection:

Temperature coefficient matters: Panels lose efficiency in heat. Premium panels with better temperature coefficients (like Panasonic's heterojunction technology) outperform budget panels on 115°F days.

Inverter placement: Keep inverters in shade or indoors. Heat shortens inverter lifespan.

Roof temperature: Dark asphalt shingles can reach 160°F+. Consider lighter roofing materials during replacement, or elevated mounting to allow airflow under panels.

Typical Savings

Arizona electricity rates average $0.13-$0.15/kWh, lower than the national average. But high air conditioning usage means high bills.

A typical Phoenix home using 15,000 kWh annually might spend $2,000+/year on electricity. An 8 kW system generating 13,000-15,000 kWh could offset most of that.

With net metering limitations, the actual savings calculation is complex. Plan for 60-80% bill reduction rather than elimination, unless you add battery storage.

Battery Storage

Batteries make more sense in Arizona than many states because:

1. Weak net metering means stored power is more valuable than exported power
2. Time-of-use rates create arbitrage opportunities
3. Demand charges (SRP) can be reduced by discharging batteries during peaks
4. Backup power matters during monsoon season outages

A Tesla Powerwall or similar system adds $10,000-$15,000 but can significantly improve solar economics on certain rate plans.

Popular Battery Options for Arizona

When evaluating batteries for Arizona homes, consider these leading options:

• Tesla Powerwall 3: 13.5 kWh capacity, $14,500 installed, includes built-in solar inverter. Popular choice with good monitoring app. Net cost after 30% tax credit: $10,150.
• Enphase IQ Battery 5P: Modular design starting at 5 kWh, scales up to 60 kWh. Works well with Enphase microinverters. Excellent warranty.
• Franklin WholePower: Newer entrant with competitive pricing. 13.6 kWh capacity, designed for whole-home backup.
• Generac PWRcell: Modular system from 9-18 kWh. Good option if you want Generac backup generator integration.

For SRP customers specifically, batteries often make the difference between solar being worthwhile or not. The math changes significantly when you can avoid demand charges and store power for evening use rather than exporting it at $0.03/kWh.

Finding an Installer

Arizona has a mature solar market with many installers. This competition benefits consumers but also means some fly-by-night operators.

Recommendations:

• Get quotes from 3-5 installers minimum
• Check ROC (Registrar of Contractors) license status
• Look for NABCEP certification
• Ask about experience with your specific utility (SRP, APS, TEP policies differ)
• Request rate plan analysis, not just system sizing

Financing Options in Arizona

Arizona homeowners have several ways to pay for solar:

Cash Purchase

Best long-term return. Pay $18,000-$25,000 upfront, get $5,400-$7,500 back through the federal tax credit plus $1,000 state credit. Net cost drops to $11,500-$16,500. With $1,500-$2,000 annual savings, payback runs 7-10 years.

Solar Loans

Most Arizona installers offer financing through solar-specific lenders. Rates range from 4-8% depending on credit. A $20,000 loan at 5.99% for 15 years runs about $168/month. Use the tax credits as lump-sum principal payments to accelerate payoff.

Solar Lease or PPA

Third-party ownership options are available but less common now than a decade ago. You don't get the tax credits (the company does), but you also have no upfront cost. Typically saves 10-25% versus utility rates.

What to Expect During Installation

The typical Arizona solar installation timeline:

1. Site Assessment (Week 1): Installer evaluates your roof, electrical panel, and sun exposure
2. Design and Proposal (Week 1-2): You receive detailed system design with cost and production estimates
3. Permitting (Weeks 2-4): Installer handles city/county permits and utility interconnection application
4. Installation (1-2 days): Crew installs panels, inverter, and wiring
5. Inspection and Activation (Weeks 4-6): City inspection, utility meter swap, permission to operate

Total timeline: 6-10 weeks from signing to generating power. Arizona utilities are generally efficient with interconnection—faster than some states.

Common Mistakes Arizona Homeowners Make

• Ignoring rate plan selection: The right rate plan matters as much as the right system size. Ask installers to model multiple rate plan scenarios.
• Undersizing for future needs: Adding an EV or pool later? Size your system for future usage, not just current bills.
• Skipping battery analysis: Batteries aren't always worth it, but with SRP demand charges, they often are. Run the numbers.
• Choosing the cheapest quote: Installation quality matters in extreme heat. Cutting corners on mounting or inverter placement can shorten system life.
• Waiting for prices to drop: Solar prices have stabilized. The 30% federal tax credit expiring December 31, 2025 is a real deadline.

Bottom Line

Arizona's abundant sunshine makes solar incredibly productive. An 8kW system can generate 13,000-15,000 kWh annually—among the highest production rates in the country. But the complicated utility landscape means system design and rate plan selection matter as much as the panels themselves.

Work with an installer who truly understands your utility's policies—not just someone who installs the same system design everywhere. Consider batteries seriously if you're on SRP or unfavorable APS rates. Get quotes from at least 3-4 installers and compare not just price but also their rate plan analysis.

And most importantly: act before the federal tax credit drops. The 30% ITC expires December 31, 2025, and there's no extension planned. That's $5,000-$8,000 in savings you won't get if you wait until 2026.