Is solar worth it in Arizona?

What drives solar payback in Arizona

Arizona homeowners pay about 15.5¢/kWh, which is 2.9¢ below the national average. A rooftop here generates roughly 1650 kWh per kW each year — better than the typical US figure. On exports, Arizona offers partial / below-retail export credit: Excellent sun and high output; export credits are below retail under most utilities now.

A worked example

For an Arizona home with a $136/month power bill (typical household usage at Arizona’s rate):

That nets out to a payback of about 17.2 years — shorter than simply dividing net cost by year-one savings, because power prices climb ~2.5%/yr so your savings grow each year. Year-one savings already reflect Arizona’s below-retail export rate (you save full value on the power you use as it’s made, less on what you export), which is why they’re lower than the bill. Assumes 3.00 $/W installed before incentives and a typical 40% self-consumption; your actual cost, roof and usage will differ — adjust the calculator above.

Who supplies your power in Arizona

Arizona's solar terms vary a lot by who serves you. The big investor-owned utilities — Arizona Public Service (APS) and Tucson Electric Power (TEP), along with its affiliate UniSource Energy Services (UNS) — are regulated by the Arizona Corporation Commission (ACC) and follow its export-credit rules. Salt River Project (SRP), the large public power utility across the Phoenix area, sets its own rates and is not bound by the ACC; its solar plans lean heavily on demand charges. Rural co-ops such as Trico Electric, Sulphur Springs Valley (SSVEC) and Mohave Electric add further variation. Where you sit on that map matters more in Arizona than in most states.

What you’re paid for what you export

Arizona no longer offers true 1:1 net metering. The Corporation Commission replaced it in 2016 with "net billing": you still offset your own use behind the meter at the full retail rate, but any surplus you send to the grid is bought back at a lower export rate set by the Resource Comparison Proxy (RCP) formula — an avoided-cost-style figure that for the ACC-regulated utilities now runs about 5–7 cents per kWh (APS a little higher, TEP/UNS around 5 cents after their October 2025 step-down) against a retail rate roughly in the mid-teens of cents. That rate is locked for ten years once you interconnect, but it ratchets down for new customers by up to 10% a year. SRP goes further, pairing even leaner export credits (only a few cents) with demand charges that penalise short bursts of high usage. The practical lesson: exports are worth only about a third to a half of retail, so self-consumption — and increasingly a battery — is where the value now lies.

Arizona incentives & taxes in 2026

What's left for Arizona buyers is state-level, and it's modest but real. The Residential Solar Energy Credit returns 25% of system cost against your state income tax, capped at $1,000 — claimable in the year you install and carryable forward for up to five years. Solar equipment is exempt from state sales tax, and a property-tax exemption means the panels add nothing to your assessed home value. None of this was touched by the federal expiry. There's no SREC market, though, so unlike New Jersey there is no ongoing production payment.

The 30% federal credit ended on 31 December 2025 and can now only reach a homeowner indirectly through a lease or PPA. Check the current state and utility programs on DSIRE’s Arizona list, then type any incentive into the calculator above to see how it shortens your payback.

What solar costs in Arizona

$2.30 to $2.90 per watt is the going rate in Arizona's mature, competitive install market — around or slightly under what most states pay — which puts a typical 7–8 kW array on the order of $16,000–$23,000 before incentives. And because the sun delivers about 1,650 kWh per kW each year, every watt works harder here than almost anywhere, so the cost per unit of energy generated is among the best in the country.

The honest verdict for Arizona

Arizona's case rests on sunshine, not subsidy. The easy 1:1 economics are over — exports pay below retail, SRP customers face demand charges on top, and Washington no longer chips in — but exceptional production and low install costs still carry it. Payback typically comes in somewhere between 11 and 15 years for an export-heavy design, and noticeably better if you size for self-consumption and add storage. Arizona is a "size it to use it" state now. Model your own roof and utility carefully — the gap between APS, TEP and SRP is real.

Driving electric — or heating electric — in Arizona?

Your home electricity rate also sets what it costs to charge an EV and whether a heat pump beats a gas furnace. See the Arizona EV charging cost and the Arizona heat pump vs gas comparison.

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