Arizona Solar Incentives at a Glance
Avg Cost per Watt
$2.50
6 kW System Cost
$15,000
Avg Electricity Rate
$0.15/kWh
Payback Period
8-11 years
25-Year Savings
$32,000-$50,000
Total Installations
380,000+
| State Tax Credit | Yes - AZ Residential Solar Tax Credit |
| Net Metering | Varies by utility (reduced export rates) |
| Property Tax Exemption | Yes |
| Sales Tax Exemption | No (but reduced) |
If you are considering going solar in Arizona, understanding the full range of available incentives is essential to maximizing your return on investment. This guide covers every Arizona solar incentive available in 2026 -- from state tax credits and utility rebates to net metering policies and tax exemptions -- so you can make an informed decision before signing a contract.
Federal Tax Credit No Longer Available
The federal residential solar tax credit (ITC) under Section 25D expired on December 31, 2025. It is no longer available for new residential solar installations in 2026. This guide focuses exclusively on Arizona state and local incentives that are still available to help reduce your solar costs.
Arizona State Tax Credits and Rebates
Arizona offers a state solar tax credit of 25% of the cost of a solar energy device, capped at $1,000. While the cap is modest, it is a direct credit against your Arizona state income tax liability. The credit is available for the year the system is installed and operational.
Net Metering in Arizona
Arizona Net Metering Policy: Varies by utility (reduced export rates)
Arizona's net metering landscape has shifted significantly. APS (Arizona Public Service), the state's largest utility, replaced full retail net metering with an export rate of approximately $0.03-$0.05/kWh for new solar customers. SRP (Salt River Project) uses a demand-based rate plan for solar customers that includes demand charges. TEP (Tucson Electric Power) offers a more moderate export credit. Grandfathered customers on older NEM plans retain their original rates for a set period.
Net metering is one of the most important factors in your solar ROI. It determines how much you are credited for excess energy your panels send back to the grid. In Arizona, the net metering landscape directly affects your payback period and 25-year savings projections.
Property and Sales Tax Exemptions
Property Tax Exemption
Yes
Arizona's Energy Device Property Tax Exemption (ARS 42-11054) ensures that solar energy devices are exempt from property taxation. This is a permanent exemption that applies to all residential solar installations in the state.
Sales Tax Exemption
No (but reduced)
Arizona does not fully exempt solar from sales tax at the state level. However, the state's transaction privilege tax (TPT) rate for solar installation contracts is reduced. Some municipalities offer additional local exemptions. The effective tax on solar installations is lower than the standard rate.
Tax exemptions reduce the total cost of going solar and provide ongoing savings. A property tax exemption means you add home value without increasing your tax bill. A sales tax exemption reduces the upfront purchase price. Together, these exemptions can save Arizona homeowners hundreds to thousands of dollars.
Utility Rebate Programs in Arizona
Beyond state-level incentives, many Arizona utilities offer their own solar rebate and incentive programs. These can significantly reduce your out-of-pocket costs or provide ongoing production-based income.
APS Battery Storage Incentive
APS offers incentives for customers who add battery storage to their solar system, helping to reduce peak demand on the grid. Incentive amounts vary by program cycle and battery capacity.
TEP Residential Solar Program
Tucson Electric Power offers net metering with a more favorable export rate than APS. TEP also offers time-of-use rates that reward solar customers who shift consumption to off-peak hours.
SRP Customer Generation Plan
SRP's demand-based rate plan for solar customers includes demand charges but also a solar export credit. Understanding how demand charges work is critical for SRP customers to maximize solar savings.
Arizona averages 6.5+ peak sun hours daily, among the highest in the nation. The state's Renewable Energy Standard requires utilities to generate 15% of energy from renewables by 2025, with solar-specific carve-outs. Community solar programs are growing, and Arizona's strong solar irradiance makes it ideal for solar+battery systems.
Solar Cost and Savings in Arizona
| Metric | Arizona Average |
|---|---|
| Cost per watt (before incentives) | $2.50 |
| 6 kW system cost (before incentives) | $15,000 |
| Average electricity rate | $0.15/kWh |
| Estimated payback period | 8-11 years |
| Estimated 25-year savings | $32,000-$50,000 |
| Total installations statewide | 380,000+ |
These figures represent statewide averages. Your actual costs and savings will depend on your specific location, roof characteristics, electricity usage, utility rate plan, and which incentives you qualify for. We strongly recommend getting at least three quotes from licensed installers to compare pricing for your specific situation.
For a detailed breakdown of solar costs across all 50 states, see: Solar Panel Cost by State (2026).
Is Solar Worth It in Arizona?
Arizona's incredible sunshine makes it one of the top solar-producing states per installed watt. However, reduced net metering rates from APS and SRP's demand charges have complicated the economics. The key to maximizing returns is pairing solar with battery storage to self-consume more energy and reduce demand charges. Even with these challenges, most Arizona homeowners see payback in 8-11 years.
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Get Your Free Arizona Solar Quote →Frequently Asked Questions
Does Arizona still have net metering?
Traditional full-retail net metering has been replaced by most Arizona utilities. APS credits solar exports at approximately $0.03-$0.05/kWh (well below retail). SRP uses demand-based rates with separate demand charges for solar customers. TEP offers a more moderate export credit. Check your specific utility's current solar rate plan before installing.
What is the Arizona solar tax credit?
Arizona offers a state solar tax credit of 25% of your solar system cost, capped at $1,000. This is a personal income tax credit that reduces your Arizona state tax bill. While the cap is relatively low, it stacks with the property tax exemption and any available utility incentives.
How does SRP solar billing work?
SRP (Salt River Project) uses a demand-based rate plan for solar customers. In addition to energy charges and solar export credits, you pay demand charges based on your highest 30-minute usage peak during on-peak hours. To minimize demand charges, pair solar with a battery, shift heavy appliance use to off-peak times, and monitor your demand peaks carefully.
How much does solar cost in Arizona in 2026?
The average cost of a 6 kW solar system in Arizona is approximately $15,000 ($2.50 per watt) before incentives. Arizona benefits from low installation costs due to a competitive market and excellent solar conditions that maximize energy production per panel.
Is a solar battery necessary in Arizona?
A battery is increasingly important in Arizona, especially for APS and SRP customers. With reduced export credits and demand-based charges, self-consuming your solar power (rather than exporting it cheaply) significantly improves your return on investment. A battery stores daytime solar for evening use and helps avoid demand charge spikes.
Learn More About Solar Incentives and Costs
Explore our other comprehensive solar guides to make the most informed decision: