Solar Calculator for Arizona: Costs, Incentives & ROI
Arizona has the strongest solar resource in the contiguous United States — Phoenix, Tucson, and the surrounding desert basin routinely average more than six peak sun hours per day, and on a watt-installed basis Arizona residential systems produce among the highest annual energy yields in the country. The state also has the largest legacy gap between resource quality and policy economics of any sunbelt state, because Arizona phased out traditional kilowatt-hour net metering in 2017 and replaced it with a net-billing framework in which exported solar production is credited at an annually re-evaluated avoided-cost-derived rate rather than at the customer's retail rate. Arizona Public Service uses the Resource Comparison Proxy methodology, and Salt River Project — Phoenix's largest municipal utility — uses its own Customer Generation E-27 price plan with a demand charge and a separate solar buyback rate. Arizona offers a state personal income tax credit of 25 percent of installed cost capped at $1,000 (Arizona Form 310), a property tax exemption that excludes solar equipment from assessed value, and a transaction privilege tax (sales tax) exemption on solar energy devices. Use the calculator below to estimate your specific 25-year savings based on your ZIP code, utility, system size, and electricity usage.
Incentive data updated: May 2026(may be outdated)
Average Solar Cost in Arizona
Average installed solar costs in Arizona typically run between $2.35 and $2.85 per watt for residential systems before any incentives, based on Lawrence Berkeley National Laboratory Tracking the Sun data and EnergySage marketplace pricing. A typical 6 kW system therefore costs roughly $14,100 to $17,100 before the federal Investment Tax Credit — among the lowest installed costs in the country, reflecting a mature installer market, year-round dry-weather installation conditions, low labor cost relative to coastal markets, and straightforward municipal permitting in Maricopa and Pima counties. The 30 percent federal Investment Tax Credit, available through 2032 under the Inflation Reduction Act, applies to the full cost of equipment plus labor and permitting, which brings the net cost of a typical 6 kW system down to approximately $9,900 to $12,000. Arizona's residential Solar Energy Credit — claimed on Arizona Form 310 — adds another 25 percent state income tax credit on the original installed cost, capped at $1,000 per system. Combined with the transaction privilege tax exemption on solar equipment and the property tax exemption that excludes the system's added value from assessed value, the bundle of state-level incentives is meaningful but materially smaller than New York's, California's, or Massachusetts's.
- Avg. installed cost
- $2.60/W
- Typical 6 kW system
- $14,100–$17,100
Top Solar Incentives in Arizona
Live incentive data not currently available for Arizona. See the federal incentive guidance via our Solar Tax Credit Calculator.
Electricity Rates in Arizona
Residential electricity rates in Arizona are close to the national average. The 2025 statewide average runs near 14 cents per kilowatt-hour according to EIA data, but Arizona Public Service customers on time-of-use rate schedules pay significantly higher rates during peak afternoon and early evening hours and lower rates overnight, and Salt River Project customers on the standard residential E-23 plan pay seasonal rates that rise sharply during summer billing months. APS retired traditional one-to-one residential net metering in 2017 and replaced it with a net-billing structure in which exported solar production is credited at the Resource Comparison Proxy — an avoided-cost-derived rate set annually by the Arizona Corporation Commission. The Export Price is locked in for 10 years from the date of a customer's interconnection. SRP customers with rooftop solar are required to take service on the Customer Generation E-27 price plan, which includes a monthly demand charge based on the customer's highest 30-minute on-peak demand and credits exported solar at a separate solar buyback rate. The implication is that Arizona solar economics typically favor self-consumption — production used on-site in real time at the full retail rate — over export, and battery storage materially improves returns by shifting midday production into the evening peak.
Peak Sun Hours in Arizona
Arizona averages between 5.8 and 6.7 peak sun hours per day, the strongest residential solar resource in the contiguous United States. Phoenix, Tucson, Yuma, and the Lower Colorado River basin routinely exceed 6.5 hours and experience some of the highest direct normal irradiance on Earth, with summer values that can reach 7 to 8 peak sun hours on the longest days. Flagstaff and the higher-elevation northern plateau average closer to 5.8 to 6.2 hours, with more variable winter cloud cover. Arizona's exceptional solar resource is partially offset by heat-related panel derate: photovoltaic modules are characterized at 25 degrees Celsius cell temperature under Standard Test Conditions, and most crystalline silicon panels lose roughly 0.3 to 0.5 percent of rated power per degree Celsius above STC. In Phoenix summers, cell temperatures of 60 to 70 degrees Celsius are common during peak afternoon hours, which translates to a 10 to 18 percent reduction in instantaneous output relative to nameplate. NREL's PVWatts tool incorporates ZIP-code-level temperature data in its production estimates, so the annual energy projection from the calculator below already accounts for typical Arizona heat derate rather than overstating output.
Example ROI for a 6 kW System
- Estimated annual savings
- $1,280
- Payback period
- 10.0 years
- 25-year net savings
- $23,000
Run a personalized estimate with your ZIP code using the Solar ROI Calculator.
Major Cities in Arizona
- Phoenix85003
- Tucson85701
- Mesa85201
- Chandler85224
- Scottsdale85251
Common Questions About Solar in Arizona
Does Arizona have net metering?
No. Arizona phased out traditional one-to-one kilowatt-hour net metering in 2017 and replaced it with a net-billing framework. Under the new structure, the home's solar production first offsets its own consumption in real time at the full retail rate — that self-consumed energy is the most valuable kilowatt-hour the system produces. Any excess production exported to the grid is credited at an avoided-cost-derived rate that is significantly lower than the retail rate. Arizona Public Service uses the Resource Comparison Proxy methodology to set the Export Price, which is locked in for 10 years from a customer's interconnection date and adjusted annually for new interconnections. Salt River Project customers with solar are placed on the Customer Generation E-27 price plan, which combines a demand charge with a separate solar buyback rate. The result is that Arizona solar economics favor system sizing that emphasizes self-consumption rather than aggressive oversizing for export.
What is the APS Resource Comparison Proxy and how does it affect payback?
The Resource Comparison Proxy is the methodology the Arizona Corporation Commission directed Arizona Public Service to use when setting the per-kilowatt-hour credit for exported residential solar production. The RCP is derived from the avoided cost of utility-scale solar generation in the relevant year — effectively pricing residential solar exports against the cost of an equivalent megawatt-hour from a large solar farm rather than against the retail rate the homeowner pays. The Export Price is recalculated annually by the Commission for new interconnections and is then locked in for the individual customer for 10 years from the date of interconnection. In practical terms, the RCP-derived Export Price has historically run roughly half of the APS retail residential rate, which extends payback periods for solar-only systems compared to states with full retail-rate net metering and significantly improves the case for adding battery storage that shifts midday production into the evening retail peak.
Does extreme Arizona heat hurt solar panel output?
Yes, modestly. Crystalline silicon photovoltaic modules are characterized at 25 degrees Celsius cell temperature under Standard Test Conditions, and most residential panels lose roughly 0.3 to 0.5 percent of rated power per degree Celsius above STC. In Phoenix and Tucson summers, cell temperatures of 60 to 70 degrees Celsius are common during peak afternoon hours, which translates to a 10 to 18 percent reduction in instantaneous output relative to nameplate at that moment. Panels with lower temperature coefficients — premium monocrystalline and heterojunction technologies — derate less and are worth considering for Arizona installations despite the higher upfront cost. Heat derate is already captured in NREL PVWatts production estimates because the tool uses local Typical Meteorological Year temperature data; the calculator below therefore reflects realistic Arizona-summer yields rather than overstating nameplate-based output. Adequate roof ventilation behind panels and elevated stand-off mounting also help reduce operating cell temperatures.
What is the SRP solar buyback rate and how is it different from APS?
Salt River Project — Phoenix's largest municipal utility — operates its own rooftop solar tariff separately from the Arizona Corporation Commission-regulated APS service territory. SRP customers with rooftop solar are required to take service on the Customer Generation E-27 price plan, which includes a monthly demand charge based on the customer's highest 30-minute on-peak demand window during a billing cycle, in addition to per-kilowatt-hour energy charges and a separate solar buyback credit for exported production. The demand-charge structure materially affects solar economics because peak demand spikes — for example, an air conditioner cycling on with an electric oven and EV charging — can drive a high monthly demand charge even if total energy consumption is modest. SRP solar customers typically benefit from load-management strategies such as staggered appliance scheduling and battery storage that shaves peak demand. APS customers in service-territory ZIPs operate under the Resource Comparison Proxy net-billing structure rather than the SRP E-27 demand-charge structure.
Are there sales tax and property tax exemptions for solar in Arizona?
Yes. Arizona Revised Statutes § 42-5061(A)(46) exempts qualifying solar energy devices from the state transaction privilege tax, which is Arizona's name for what most states call sales tax. The exemption applies to the equipment plus the labor and other costs of solar installation when bundled into a single contracted price by a qualifying retailer. Arizona Revised Statutes § 42-11054 separately exempts the added assessed value attributable to a residential solar energy device from local property tax assessment, so installing a system does not increase the homeowner's property tax bill. On top of these two exemptions, the Arizona Department of Revenue offers a personal income tax credit equal to 25 percent of the installed cost capped at $1,000 per system, claimed on Arizona Form 310 in the year the system is placed in service. The state credit is non-refundable but may be carried forward for up to five years. Combined with the 30 percent federal Investment Tax Credit, the tax-related savings on a typical 6 kW system in Arizona run to several thousand dollars.