Is solar worth it in Arizona? What the real numbers show

Two things changed in Arizona solar economics recently, and they pull in opposite directions.

The 30 percent federal tax credit ended on December 31, 2025. On a median-priced 8 kW system that removed about $8,400 overnight. At the same time, APS is asking the Corporation Commission for a 15.99 percent revenue increase, which makes every kilowatt-hour you avoid buying more valuable.

Whether solar is worth it now depends almost entirely on one variable most sales conversations skip: what fraction of your own production you consume yourself, rather than export.

This piece works through the numbers. Where a figure comes from a primary source, it is cited. Where it is an assumption, it says so.

Arizona’s electricity situation, in three numbers

Source: EIA, Table 5.A, Average Monthly Bill by Census Division and State (opens in a new tab), 2024 data released October 7, 2025.

This is the single most misunderstood thing about Arizona solar.

Arizona is not an expensive-electricity state. At 14.91 cents, Arizona sits about 10 percent below the national average. More recent monthly data says the same: EIA’s Electric Power Monthly for May 2026 puts Arizona residential at 15.23 cents against a U.S. average of 18.44 cents.

What Arizona has is high consumption. 1,075 kWh a month is about 25 percent above the national figure, which is what happens when you air-condition a house through a Phoenix summer.

Cheap power times a lot of power equals an above-average bill. Arizona’s $160.24 monthly average runs about 13 percent above the national $142.26.

That distinction matters because solar pays you in avoided kilowatt-hours. A high-consumption, low-rate state is a genuinely different investment case from a low-consumption, high-rate state like California. You have more kilowatt-hours to offset, but each one is worth less.

The rule that drives everything: self-consumption beats export

Arizona does not have retail net metering. The Corporation Commission ended it for new solar customers in Decision No. 75859, issued January 3, 2017, in Docket No. E-00000J-14-0023.

What replaced it is an export credit. APS currently pays 6.171 cents per kWh for exported power under Rate Rider RCP, Tranche 2025, effective September 1, 2025 through August 31, 2026.

Now compare that to what you pay APS for power. On the Fixed Energy Charge Plan, the large tier rate is 15.418 cents per kWh.

A kilowatt-hour used at home is worth 2.5 times one sent to the grid.

View the numbers as a table

What one kilowatt-hour of your own solar is worth — full dataset

What you do with the kilowatt-hour	Value (¢)
Use it in your house	15.418¢
Export it to APS	6.171¢

Retail rate from the APS R-1 Fixed Energy Charge Plan, Large tier, March 8, 2024 tariff revision. Export rate from APS Rate Rider RCP, Tranche 2025, effective September 1, 2025.

This is the whole game. Two identical systems on two identical roofs can have payback periods four years apart purely because one household is home during the day and the other is not.

It also explains a question people ask constantly.

Why is my APS bill so high with solar panels?

Usually one of four reasons, and none of them means the panels are broken.

You are exporting most of your production. Panels peak around midday. If nobody is home from 8 to 6, most of that production leaves at 6.171 cents and comes back in the evening at 15.4 cents. You are effectively selling wholesale and buying retail.

You are on a demand plan and your peak did not move. APS’s on-peak window is 4 p.m. to 7 p.m. weekdays. Solar output is falling through exactly that window. On plan R-3, the summer demand charge is $19.585 per kW based on your single highest on-peak hour. Solar barely touches it.

Fixed charges do not scale down. The daily basic service charge stays. So does the Grid Access Charge, which applies to solar customers based on system nameplate: $0.242 per kW-dc on TOU-E, $0.215 on R-3.

Your system is sized to your annual kWh, not your usage shape. A system that produces 100 percent of your annual consumption does not produce a zero bill under an export-credit regime. It never has in Arizona since 2017.

The payback arithmetic

Here is where honesty matters more than a confident number.

Verified inputs:

• APS retail energy rate, Fixed Energy Charge Plan large tier: $0.15418/kWh
• APS export rate: $0.06171/kWh
• Arizona state tax credit: 25% of cost, capped at $1,000 (A.R.S. § 43-1083)
• Federal credit: $0, repealed by Public Law 119-21 § 70506 for expenditures after 2025-12-31
• Arizona average consumption: 12,900 kWh/year (1,075/month, EIA 2024)

Production, modeled for Phoenix. Running PVWatts (opens in a new tab) v8 for Phoenix (33.4484, -112.0740) with an 8 kW-dc system, 20 degree tilt, south-facing, fixed roof mount, 14 percent system losses, against the NSRDB PSM V3 GOES tmy-2020 weather file:

For context, 14,041 kWh against Arizona’s average 12,900 kWh of annual consumption is a 109 percent gross annual offset. That is energy matching, not bill matching, and the difference between those two things is this entire article.

System size. Arizona’s installed residential fleet averages 7.49 kW per customer, derived from EIA Form EIA-861M net metering data for May 2026 (2,499 MW across 333,513 residential customers). The national median for 2024 installations was 7.2 kW. An 8 kW modeling assumption sits slightly above the Arizona fleet average.

Installed cost. Two credible sources disagree, and the gap between them is the most useful thing here.

LBNL is explicit that loan-financed systems ran “considerably higher priced than cash-purchase systems in 2024 (median prices of $4.7/W vs. $3.5/W), due partly to the loan fees rolled into the up-front price.” Both are gross prices before incentives.

That $1.20/W spread between cash and financed is not a rounding error. On an 8 kW system it is $9,600.

Excluded from every calculation below: financing interest, maintenance, inverter replacement, degradation, and future rate increases.

Annual savings, by self-consumption share

At 50 percent self-consumption:

Self-consumed  7,020 kWh x $0.15418 = $1,082
Exported       7,020 kWh x $0.06171 =   $433
                        Annual value = $1,516

At 70 percent self-consumption:

Self-consumed  9,829 kWh x $0.15418 = $1,515
Exported       4,212 kWh x $0.06171 =   $260
                        Annual value = $1,775

Same panels. Same sun. A $259 a year difference, purely from when the power gets used.

Simple payback, in years

Net cost is the installed cost of an 8 kW system minus the $1,000 Arizona credit.

Read across a row and you see the self-consumption effect. Read down a column and you see something more uncomfortable: the financing decision moves payback more than the sunshine does.

A cash buyer at the LBNL median with good daytime load lands at 15 years. A loan buyer at the LBNL median with poor daytime load lands at 24, which is past the point where inverter replacement and degradation stop being ignorable.

• 50% self-consumption
• 70% self-consumption

View the numbers as a table

Simple payback in years, by installed cost and self-consumption share — full dataset

Category	50% self-consumption ( yrs)	70% self-consumption ( yrs)
$2.32/W	11.6 yrs	9.9 yrs
$3.25/W	16.5 yrs	14.1 yrs
$3.50/W	17.8 yrs	15.2 yrs
$4.70/W	24.1 yrs	20.6 yrs

Cost points from LBNL's 2025 Data Update (2024 installations, median cash $3.50/W and median loan $4.70/W) and NREL's Q1 2025 modeled benchmark ($2.32 to $3.25/W). Production from a PVWatts v8 run for Phoenix. Rates as cited above.

What the federal repeal did

Same 8 kW system at the LBNL 2024 median cash price, same 50 percent self-consumption, finished one year apart:

Roughly five and a half years added to payback on identical hardware. That is the honest scale of what changed, and any current guide showing a 6 to 8 year Arizona payback is using pre-2026 incentive math.

How long does it take for solar panels to pay for themselves in Arizona?

On the figures above, somewhere between 10 and 24 years. The spread is driven by installed cost and self-consumption share, not by anything about Arizona’s sunlight, which is excellent and roughly the same for everybody. Solar payback period in Arizona walks through the full year-by-year math behind that range.

Three things move that number, and they are worth stating plainly rather than burying:

Rate increases shorten it. Every calculation above assumes electricity prices never rise, which is obviously false. APS has requested a 15.99 percent revenue increase in Docket No. E-01345A-25-0105, with a residential-class figure of 16.44 percent in the filing. A hearing began May 18, 2026. No decision has been issued. If rates rise, avoided kilowatt-hours get more valuable and payback shortens.

The export rate falling lengthens it. APS’s export rate has dropped exactly 10 percent every year since 2017, from 12.9 cents to 6.171 cents, a 52 percent decline. Your rate is locked for 10 years from interconnection, but the calculation for anyone deciding today starts from a much lower base than it did five years ago.

Degradation and maintenance lengthen it. None of the tables above include panel degradation, inverter replacement, or cleaning, and Arizona’s own heat adds a separate output derate that do solar panels work in Arizona heat quantifies city by city. Real payback is longer than simple payback. On output over time, the Department of Energy’s position is that “most systems maintain at least 80% of their initial power output for at least 25 years.” Published degradation estimates vary: NREL’s Annual Technology Baseline uses 0.7 percent per year, an NREL review of field data put the median at 0.5 percent per year, and a DOE consumer page says about 1 percent per year. Warranty terms are a manufacturer contract question and vary by product.

What is the 20% rule for solar?

There is no “20 percent rule” in Arizona utility tariffs or in Corporation Commission decisions. The phrase circulates online without a consistent definition, and it is worth being direct that it does not correspond to a rule you can look up.

The real threshold people may be thinking of is in the APS export tariff, and it is 10 percent, not 20. If you materially increase your system’s capacity, you lose your locked-in export rate. The tariff defines material as “increasing the capacity by 10% or 1 kW-ac, whichever is greater.”

That is a genuine rule with genuine financial consequences. If you have a 2019 system locked at 10.45 cents and you add panels, you can drop the entire system to the current 6.171 cent rate. Adding capacity later is not the free upgrade it sounds like.

Why don’t more people in Arizona have solar panels?

A few reasons that hold up:

The rate is below the national average. Cheaper power means less to save. The states with the fastest adoption are usually the ones with punishing rates.

Export compensation dropped 52 percent in eight years. Anyone who watched a neighbor sign up in 2017 at 12.9 cents is being offered less than half that.

The federal credit is gone. The 2026 buyer is comparing a $23,000 net cost against the $15,800 their neighbor paid last year.

Demand charges confuse the math. On SRP’s E-27 plan, the July and August demand charge runs $11.90 for the first 3 kW, $19.97 for the next 7 kW, and $36.05 for each additional kW, measured on a single 30-minute on-peak interval. Solar does very little about that.

Roofs and HOAs. Tile roofs common in Arizona subdivisions add cost and complexity relative to composition shingle.

APS or SRP changes the answer

Which utility you have matters more than most people expect, because the two use structurally different compensation.

SRP’s E-27 and E-15 plans net exported kilowatt-hours against delivered kilowatt-hours at the retail price of the plan, which is closer to old-style net metering than APS’s approach. The trade is a demand charge. SRP’s E-13 and E-14 plans drop the demand charge but pay only 3.45 cents for exports.

One planning note for SRP customers: SRP’s own tariff states “The E-27 Price Plan will be eliminated as of the November 2029 billing cycle,” with remaining customers moved to E-16. If your payback math runs past 2029 on E-27, it is running on a plan with an expiration date.

Not sure which utility you’re on? Check the top of your electric bill; it will say APS, SRP, TEP, or UNS. Your city is a rough guide too: much of Phoenix proper and the West Valley is APS, while a lot of the East Valley (Mesa, Tempe, Chandler, Gilbert) is SRP.

Utility-check tip merged from the retired /learn/srp-vs-aps-solar/ page, which is now redirected here.

Where batteries fit now

The logic follows directly from the 2.5x ratio. Solar plus battery in Arizona works through whether the hardware pays for itself under APS and SRP separately.

If exported power is worth 6.171 cents and self-consumed power is worth 15.418 cents, then storing a kilowatt-hour instead of exporting it captures about 9.2 cents of additional value, before round-trip losses. A battery that shifts 3,000 kWh a year from export to self-use is worth roughly $277 annually at current rates.

Whether that justifies the hardware is a separate calculation that depends on battery cost, and it did not survive the federal repeal unscathed either. Battery storage of at least 3 kWh capacity qualified for the same 30 percent credit under Section 25D, and that is gone too. Batteries do still qualify under Arizona’s credit, which includes “collectors, batteries, inverters, solar system related wiring,” but that credit caps at $1,000 for the whole project.

SRP customers have one live program worth knowing about. SRP Battery Partner (opens in a new tab) pays “$55* per average kilowatt in incentives twice a year” as bill credits. It is a pilot, capped at 5,000 customers and running through April 30, 2030. It pays for grid access to your battery, not for buying one.

When solar is a weaker fit

Everything above assumes an owner-occupied home with a real bill and a workable roof. That is not everyone. Solar is a weaker fit if you rent, if you plan to move very soon and would finance rather than own, if your roof is heavily shaded or near the end of its life, or if your bill is already very small. None of those are disqualifying on their own, but they all lengthen the payback math above, sometimes past the point where it makes sense.

Merged from the retired /learn/is-solar-worth-it-in-arizona/ and /learn/how-much-do-solar-panels-cost-in-arizona/ pages, which covered this honestly and are now redirected here.

So, is it worth it?

The honest answer is that it depends on four things you can actually measure, and you should measure them before signing anything.

1. Your daytime load shape. Pull your hourly usage data from your utility account. If most of your consumption happens between 9 a.m. and 4 p.m., solar in Arizona is still a strong investment. If your house is empty all day, the export rate is doing most of the work and the case is much weaker.
2. Your installed cost per watt. Get more than one number. The payback table above moves by five years across a $1.00/W spread.
3. Your utility and rate plan. APS versus SRP is not a detail. Neither is R-3 versus TOU-E.
4. Your tax liability. Arizona’s credit is nonrefundable with a five-year carryforward. If you owe no Arizona income tax, the $1,000 is worth nothing to you this year.

Run your own production estimate at the PVWatts calculator (opens in a new tab), which is free, government-run, and does not ask for your phone number. It takes about two minutes. Then substitute that number and your actual quote into the arithmetic above.

If the payback lands past 15 years, that is not automatically a no. It is a signal to look at why, and the answer is usually one of three things: cost per watt, financing structure, or a load shape that exports too much.

Utility rates, tariffs, incentives, and consumption figures in this article were verified against EIA data, published APS and SRP tariffs, Arizona Revised Statutes, and the enrolled text of Public Law 119-21 on August 9, 2026. Production figures come from a PVWatts v8 run for Phoenix on the same date. Installed cost figures come from LBNL’s 2025 Data Update (2024 installations) and NREL’s Q1 2025 benchmark. Rates change; confirm before deciding.

Related reading

• APS solar buyback rates explained covers the export rate, the annual step-down, and the 10-year lock in detail.
• APS rate plans explained walks through which retail plan fits which usage pattern, including the demand-charge crossover.
• Arizona solar incentives and tax credits covers the state credit, the sales and property tax treatment, and what the federal repeal changed.
• Solar payback period in Arizona is the detailed year-by-year version of the payback math above.
• Do solar panels work in Arizona heat? covers the temperature derate behind the degradation numbers.
• Solar plus battery in Arizona covers whether adding storage is worth it under APS and SRP.

• Solar Basics
• Incentives
• APS
• SRP
• Arizona