Arizona Solar Panel Cost: Local Guide (2023)

Arizona is the sunniest state in the U.S., which means solar panels are more productive than in other regions. Solar panel costs in Arizona are also below the national average, and the price becomes even lower when you apply the financial incentives available in the Grand Canyon State.

We at the Guides Home Team have researched and analyzed top solar panel companies to help you better understand the cost of switching to solar energy. In this detailed guide, we will break down what factors into solar costs in Arizona, including the price of your panels, solar incentives and financing options.

Arizona homeowners can expect to pay an average price of $2.53 per watt when installing solar panels, or $15,180 for an average-sized 6 kilowatt (kW) solar system. That cost is lower than the national average of $3.27 per watt, as reported by the Solar Energy Industries Association (SEIA).

However, your out-of-pocket cost will be significantly lower thanks to the solar incentives available in Arizona. Solar panels qualify for a 30% solar investment tax credit (ITC) nationwide, and Arizona offers an additional 25% tax credit, up to a maximum amount of $1,000. Arizona also offers sales and property tax exemptions for solar panels, making them even more affordable.

The chart below lists the average cost of solar panels by system size in Arizona, both before and after you apply the 30% federal tax credit.

*Figures expected payback periods are based on an average monthly electric bill price of $136.70 in Arizona. We divided that number by the cost of each solar system after incentives.

Solar panels achieve a productivity over 1,800 kilowatt-hours (kWh) per year in most Arizona locations, according to the World Bank Global Solar Atlas. So if you live in Phoenix and install a 5 kW system, you can expect your panels to generate over 9,000 kWh of energy per year.

The average price of electricity in Arizona is 13.11 cents per kWh, according to the U.S. Energy Information Administration. So if your panels generate around 9,000 kWh of solar energy to use towards your electricity bills, you can save around $1,180 on energy costs each year.

If you consider the typical price of a 5 kW solar system ($8,855 after tax credits), you can expect an annual return on investment (ROI) of over 13%. In other words, you could earn back what you paid for your panels in energy savings alone in around 5.3 years.

High quality solar panels can last more than 25 years, which is much longer than the typical payback period in Arizona. You can protect your investment and ensure you see these expected savings by purchasing your panels from leading solar companies like Palmetto Solar, which offer 25-year product warranties to cover repairs and replacements.

If you’re considering purchasing solar panels for your home in Arizona, there are two main ways to reduce the cost. The first is comparing multiple quotes to make sure you’re getting the best deal. Then, once you have chosen a solar provider that offers the best value for your investment, you can take advantage of several tax incentives to reduce your out-of-pocket cost.

If you live in Arizona, you can take advantage of the following incentives, including federal and state tax credits and net energy metering.

The solar investment tax credit is a federal incentive, which means it can be claimed in Arizona and you can combine it with local benefits. The credit allows you to claim 30% of the cost of your solar project as a deduction against your federal income taxes, and unused credit can be rolled over to the next year.

Keep in mind that this credit is a tax deduction, not a refund or rebate. So for example, if you install a solar panel system for $15,000, you can credit $4,500 toward your federal tax return burden.

Arizona offers three additional tax incentives than you can combine with the federal tax credit.

Arizona has had a net metering policy in place since 2009. The program allows you to earn credits for any excess energy produced by your solar panels. So if your panels generate more energy than needed to power your home, you can send it back to the utility grid in exchange for credits toward future electricity bills. If there is a billing period where your solar credit exceeds your electricity cost, you can roll over the difference to the next month.

To qualify for this benefit, your solar capacity must not exceed 125% of your connected load or your equipment's total energy usage. You will be paid a specified rate per kilowatt-hour for any surplus energy your panels generate, as set by your utility service.

The rates for Arizona utility companies are as follows:

Since solar export rates are slightly lower than the retail electricity prices in Arizona, you may also benefit from installing a solar battery to store surplus energy for later use.

If you’re considering solar panels for your home, we recommend comparing quotes from multiple companies before you buy. Keep in mind that you’re buying a 25-year asset when you purchase a solar system, and the first offer you get may not be the best available. Comparing quotes also allows you to be cost-effective by identifying over or underpriced offers.

We suggest you keep the following tips in mind when shopping for solar equipment to meet your home energy needs:

Home solar system prices vary depending on multiple factors. This means you can expect differences in cost, even if you’re comparing the same solar equipment from multiple trusted installers. Below, we’ve detailed some of the main factors that determine the cost of solar panels in Arizona.

The price of a solar panel system is directly related to how many panels you need to power your home. Since Arizona experiences abundant sunshine, your solar panel will be more productive than if you lived elsewhere. Homeowners in less sunny states may have to install more solar panels to compensate for lower energy sources and productivity, making their systems more expensive.

The type of solar panel you choose will also affect project costs. Monocrystalline solar panels can convert sunlight into electricity more efficiently than polycrystalline panels, but the price is higher. You can also expect higher prices when purchasing top-tier solar panels with 25-year warranties from leading manufacturers like SunPower.

Local labor rates and the solar installer you choose can have a major impact on your overall solar costs. A portion of your total solar system cost goes toward labor and installation — solar panels, inverters and other equipment only represent around 47% of the final price. For example, you can expect a higher price if your roof has a complex geometry that increases the difficulty of installing solar panels. Large solar companies also tend to have higher installation costs than smaller local companies due to higher overhead.

There are three main ways to purchase a home solar system: You can buy your panels outright with cash, take out a solar loan or rent your panels through a lease or Power Purchase Agreement (PPA). There are pros and cons to each option, which we explain below:

Solar panels are very durable, and their maintenance needs are relatively simple. High-quality modules can generate electricity for decades as long as the panel surface is kept free of dust and other particles that could block sunlight.

Generally, the annual maintenance cost of a solar energy system is less than 1% of the upfront cost. Some solar installers may even offer free cleaning for a specified period after installing your solar panels.

As we’ve previously mentioned, Arizona homeowners are charged around 13.11 cents per kWh to utilize standard electricity. For a homeowner using 1,500 kWh of electricity per month, a typical bill would total around $197. Over a 25-year period, those energy bills can add up to over $59,000, and that's without considering inflation.

For comparison, a 10 kW solar energy system generates around 18,000 kWh of energy per year thanks to Arizona's abundant sunshine. A system of this size typically costs around $17,710 after you apply incentives, which is over 60% less than what you would pay in power bills over its 25-year service life.

Solar costs in Arizona have decreased by 52% over the last 10 years, according to industry data gathered by the SEIA. The Grand Canyon State currently has over 6,000 megawatts (MW) of solar capacity installed (that's enough energy to power 953,394 homes) and is projected to add 6,104 MW over the next five years.

But as in many states, while solar panels have become more affordable, electricity prices keep rising in Arizona. Average electricity rates in Arizona increased from 12.31 to 13.11 cents per kWh — or by 6.5% — between November 2021 and 2022, as revealed by the U.S. Energy Information Administration.

We at the Guides Home Team have compared the best solar companies in Arizona to help you choose which provider is the best fit for your solar project. We’ve included our top-three recommendations for solar providers for Arizona residents below. You can visit each provider's website to learn more about its services and get a free quote.

Palmetto offers a variety of solar services in Arizona, including solar system installations, backup batteries, electric vehicle (EV) installations, energy efficiency audits and system monitoring. Other pros of the company include:

To learn more: Read our Palmetto Solar review

An innovator in the renewable energy field, Tesla offers solar solutions that include panels, high-quality solar batteries and solar roofs. The company also offers the following:

To learn more: Read our Tesla Energy review

Sunrun offers multiple financing options if you’re looking to go solar in Arizona but avoid a high upfront cost. Company highlights include:

To learn more: Read our Sunrun review

If you’re wondering if solar panels are worth it in Arizona, keep in mind that the state offers many ideal conditions for solar with its abundant sunshine, multiple tax incentives and favorable net metering policy. When you consider federal incentives alone, the typical price of a 10 kW home solar system in Arizona drops from $25,300 to $17,710.

In Arizona, your panels can generate over 18,000 kWh of energy per year if installed in a favorable site that sees maximum sunlight. A 10 kW solar system can save you over $2,000 on your energy bills per year compared to standard electricity, or more than $50,000 over the 25-year lifespan of your panels.

You can expect to pay around $2.53 per watt of solar capacity in Arizona, or $12,650 for a 5 kW system. However, the net cost decreases to $7,855 after claiming the 30% federal tax credit and the $1,000 state tax credit.

Yes, considering that Arizona has abundant sunshine and electricity prices are on the rise. You can expect your panels to pay for themselves in energy savings in less than eight years, which is favorable considering quality solar panels have an average lifespan of 25 years.

Yes, the Arizona solar tax credit covers 25% of your total system cost or $1,000, whichever is less.

No, Arizona has a property tax exemption for solar energy systems. In other words, any increase in property value after you install solar panels will not be considered when calculating your taxes.

We conducted in-depth research and analyzed several factors when determining our cost data, including:

Leonardo David is an electromechanical engineer, MBA, energy consultant and technical writer. His energy-efficiency and solar consulting experience covers sectors including banking, textile manufacturing, plastics processing, pharmaceutics, education, food processing, real estate and retail. He has also been writing articles about energy and engineering topics since 2015.

Tori Addison is an editor who has worked in the digital marketing industry for over five years. Her experience includes communications and marketing work in the nonprofit, governmental and academic sectors. A journalist by trade, she started her career covering politics and news in New York's Hudson Valley. Her work included coverage of local and state budgets, federal financial regulations and health care legislation.