With Incentives Cut, is Going Solar in Arizona Still Worth it?

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When it comes to sheer number of solar installations, Arizona comes in third among states, following California and New Jersey.

Until last December, Arizona’s incentive programs were among the best in the nation, with public utilities offering generous per-watt rebates in addition to a state rebate.

Solar Rebates are Fading Fast

In December, however, the Arizona Corporation Commission, the state’s regulatory board, agreed to allow utilities to decrease rebate amounts.

Public utilities are mandated by law to invest in renewable energy, and since 2006, electric utilities in Arizona have been partially meeting that mandate by offering customers who install residential solar photovoltaic (PV) systems rebates, based on the system’s size.

Some rebate programs were as high at $3 per watt. Those rebates, when combined with the federal tax credit incentive program and the state’s $1,000 rebate program, made going solar in Arizona highly affordable.

Beginning in 2010, however, utilities began to pressure the Commission to approve reductions in rebates for residential and commercial installations. Utilities like the Tucson Electric Power Company, who recently received financing for the construction of a 6.1-megawatt solar energy plant, are seeking to meet renewable energy mandates through large-scale solar farms.

In December of 2011, the Commission responded by agreeing to allow utilities to decrease rebates and to continue to decrease them as more residential solar systems are installed. California’s utilities operate their solar rebate programs under a similar tiered system. The Commission also reduced overall funding for the rebate programs.

Is Solar Still Worth it? Answer: Yes

The good news for residents of the Grand Canyon State is that Arizona is still one of the most affordable places to go solar. In sunny Arizona, an average size for a home solar system would be about 3 kilowatts and cost about $25,000, before rebates. The federal incentive program would cut up to 30 percent of that cost. The state rebate would shave off another $1,000, leaving a total of $16,500.

Most of the Arizona utilities are currently paying $.75 per-watt rebates, reducing the cost further to $14,250.

Residents could expect to recover the installation costs in around six to nine years through savings on their monthly energy bills. After that payback period, homeowners with home solar systems can enjoy years and years of free electricity, knowing that each kilowatt hour generated by their systems helps reduce the nation’s reliance on gas-emitting fossil fuel generation.

To take full advantage of the existing incentive programs, however, Arizona residents need to act soon. The new tiered system for the utility rebates allows the per-watt rebate to be reduced to $.10 per watt.

In addition, funds are limited for the current year, and it is likely that cuts will continue to the program next year. There are still substantial solar savings available in sunny Arizona, and there may never be a better time to go solar than now.

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About Author

Walter’s contributions to CleanTechies over the past 4 years have been instrumental in growing the publications social media channels via his ongoing editorial and data driven strategies. He is the founder and managing director of Sunflower Tax, a renewable energy tax and finance consultancy based in San Diego, California. Active in the San Diego clean technology community, participating in events sponsored by CleanTech San Diego, EcoTopics, and Cleantech Open San Diego, Walter has also been a presenter at numerous California Center for Sustainability (CCSE) programs. He currently serves as an adjunct professor at the University of San Diego School of Law where he teaches a course on energy taxation and policy.

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