Solar Panels in Arizona: Costs and Incentives in March 2025
Compared to other states, solar panels are relatively less expensive to install in Arizona.
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The average pre-incentives price for a home solar system in Arizona is $26,855, according to data from EnergySage, a solar and home energy product comparison marketplace. The cost drops to an average of $18,799 after incentives and rebates.
Solar costs in Arizona at-a-glance
Arizona | U.S. | |
|---|---|---|
Average cost of home solar system before federal solar tax credit | $26,855. | $29,360. |
Average cost of home solar system after federal solar tax credit | $18,799. | $20,552. |
Average cost per watt | $2.07. | $2.56. |
Source: EnergySage, a solar and home energy product comparison marketplace. Data is from February 28, 2025. | ||
Costs and trends in Arizona
According to EnergySage, the average home solar power system in Arizona costs $26,855, just over $2,500 less than the average system in the U.S.
However, the low cost per watt of Arizona solar — at $2.07 per watt, it’s 49 cents lower than the national average — makes systems there cost-effective. The federal solar tax credit can reduce the upfront cost for solar by as much as 30%, bringing the average cost after incentives down to $18,799 in Arizona.
The average payback period for a solar system in Arizona is 11 years, according to data from EnergySage, with Arizona homeowners replacing 99% of their electricity from the grid with their solar power.
Arizona state incentives for solar
The Arizona Solar Energy Credit provides a tax credit of 25% of the cost of a solar system on your state income tax bill, up to a $1,000 maximum. Because it is a tax credit rather than a refund, it reduces the amount of taxes you owe. You won’t receive a check for this amount.
Solar systems in Arizona are exempt from both property taxes and sales taxes. This means you won’t pay state sales tax when purchasing a solar energy system and your property taxes won’t go up because you’ve installed a new solar system (though, they might go up for other reasons).
Have an HOA in your neighborhood? Homeowners associations in Arizona can’t prohibit homeowners from installing solar, though they can have reasonable rules about where solar panels are installed.
You can find more local benefits on the Database of State Incentives for Renewables & Efficiency (DSIRE), a project maintained by the North Carolina State University.
Net metering in Arizona
Similar to other states, Arizona replaced its initial net metering policies with one that pays homeowners less than before for excess solar energy that is sent to the power grid. Known as the Resource Comparison Proxy (RCP), the new method allows utility companies to adjust the rates they pay for customers’ excess solar energy.
Every 12 months, a utility company can change its rate, but it can’t drop it more than 10% of the previous rate. As expected, some utility companies have been lowering the rate every time the new 12-month period comes around.
Each utility company determines its own RCP rate, which is often based on the previous five year’s cost per kWh. Below are the RCP example rates for some of Arizona’s utility companies.
Utility company | RCP rate per kWh |
|---|---|
Tuscon Electric Power | $0.0570. |
UniSource Energy Services | $0.0680. |
Arizona Public Service Company | $0.06857. |
The RCP rates in this table are effective from October 1, 2024 to September 30, 2025. | |
The RCP rates customers receive for the solar energy they sell to their utility companies are determined at the time customers connect their solar systems to the grid. Those rates are locked in for 10 years, after which the rates can be adjusted.
Pay attention to if utility companies can cancel rates. Some utility companies will cancel a customer’s RCP rate if the customer upgrades their system to increase capacity. In this case, the customer is likely to receive a lower rate for excess energy.
How utilities apply customers’ credits for their excess solar energy to their bills may depend on the utility company. Most utility companies in Arizona calculate customers’ monthly bills for the electricity they pulled from the grid and then determine how much excess energy they purchased from their solar customers. Instead of paying for the excess solar energy at that time, they credit their customers for the amount the utility owes them and roll the credits over the next month.
If a customer has any credits at the end of a 12-month period, the utility will either pay the customer for the remaining credits or, if the value is below a certain amount, roll them over to start of another 12-month period.
Solar batteries in Arizona
Home solar batteries that can store up to 10 kWh cost an average of $9,990 in Arizona before incentives, according to EnergySage. This drops to $6,993 on average after the federal tax credit. Despite the cost, some Arizonians might find them worth the cost.
Many Arizona utility companies require solar customers to pay time-of-use (TOU) electricity rates, under which electricity rates are lower at times of low demand and higher at times of high demand. For example, demand tends to be higher in the afternoon in summer months when it’s the hotter part of the day as well as in the late evening in winter after the sun goes down.
If you tend to use more electricity during a peak time for demand when prices are higher, it can cost you more if your solar panels aren’t producing enough electricity at that time. Storing your solar energy for use during these times might save you money in the long run.
You may use more electricity in your home when you return home from work, demand is high, and the sun is going down so your panels are generating less electricity. A battery can lower your costs by storing the electricity your panels generate during the day for your use in the evening.
Can I get financing for a solar panel system?
In addition to tax incentives and rebates, there are options available. Many solar installers offer financing, but you may also be able to finance your solar investment through a home equity loan or home equity line of credit (HELOC). These options may have lower interest rates than financing with an installer, future opportunities for refinancing and possible tax benefits.
Home equity loans and HELOCs are ways to borrow against the value of your home, converting equity into cash. With a home equity loan, you receive a lump-sum payment and then pay it back at a fixed interest rate over an agreed period of time, typically from five to 30 years. HELOCs are more akin to a credit card, something you use as needed. You’ll usually have 10 years to draw from the line of credit, during which time you only have to pay interest, and after that you pay both the principal and interest. HELOC interest rates typically are variable, meaning your monthly payment could rise or fall over time. And with each of these options, you're using your home as collateral.
Another option is a solar loan. Many banks, credit unions and online lenders offer these to fund solar panels and installation, with amounts typically from $1,000 to $100,000, and annual percentage rates ranging from 6% to 36%. They function like a personal loan: you receive a lump sum and repay it in equal monthly installments over a set period, typically two to seven years. And unlike with home equity financing, there is no collateral required for a solar loan. This means your home or solar panels aren’t at risk if you miss payments, but you may have to pay late fees.
So, yes, you likely can get financing. If you go this route, compare interest rates, terms and fees with any financing package that a solar provider may offer you to ensure you get the best deal.
