There is no doubt that solar is a reliable and readily available source of energy in sunny Arizona. Installing solar in your home can have a positive impact on the environment and greatly lower your monthly utility bill. It's a great investment for its low maintenance costs and high returns. For instance, a homeowner can expect a 10 year payback time and a 10.6% Investment Return for a 5-kW system 1. Owned solar panels can add 4 to 6 percent to the value of a home 3. Homebuyers are increasingly looking for solar panels in the same way they look for granite countertops or wood floors 3.
Adding solar to your home can save you a lot on your utility bill and potentially even earn you money through feed-in tariffs annually. However, we all know that purchasing photovoltaic’s can have a high upfront cost anywhere between $18,000 and $29,000 2. While the initial investment to purchase solar panels can high, there are different payment structures and tax incentives that can greatly lower these costs.
Incentives to Installing Home Solar Panels
When installing your home solar panels, you can expect to absolutely zero sales tax! Under the Solar Equipment Sales Tax Exemption, you are free from the burden of any Arizona solar tax. Likewise, under the Energy Equipment Property Tax Exemption, the value added to your property from installing solar will not add to your property tax 5.
Arizona also offers a Residential Solar Energy Credit where the resident can get back 25% of the cost of the system through tax credits at a maximum of $1000. If the credit exceeds the taxes you owe, you are able to carry it over for up to five years 1.
In addition to state tax credit savings, there are also benefits on a federal level. Under the Federal Investment Tax Credit (ITC), a purchaser of a home solar energy system is eligible to receive a 30% tax deduction from the cost of their solar energy system after state rebates. To give you an idea of the kinds of savings you could get from this, in 2017 the average solar shopper saved over $5,000 on costs going solar from the ITC alone 4.
The ITC isn't going to last forever. in 2020, the tax credit will reduce to 26%, in 2021 it will reduce to 22%, and by 2022 there will only be a 10% credit remaining for commercial users only 4. This is all the more reason not to wait to install solar panels on your home.
Alternatives to owning solar panels
If you are looking for the benefits of solar but are not ready to invest in a solar energy system of your own, solar leasing and PPAs are both great options. Roughly 75% of solar installations in APS territory are leases, making it the current most popular choice for Arizona solar buyers.
With a solar lease, you agree to pay a fixed monthly “rent” or lease payment, which is calculated using the estimated amount of electricity the system will produce, in exchange for the right to use the solar energy system. With solar PPAs, the homeowner agrees to purchase the power generated by the system at a set per-kWh price as opposed to paying "rent" to the solar panel system.
Some of the benefits of solar leases and PPAs are that you can expect 10-30% savings over the cost of your utility bill 6. The leasing company is also responsible for maintaining and handling the panels and interactions between the utility company- making little-to-no work for you! Additionally, there are many options that have $0-down agreements, so you can be at ease.
When you sign a solar lease of PPA, it's important to note that you do not own the solar panel on your property. Under these agreements, you will not receive tax incentives. Additionally, a leased solar energy system can actually detract 3 to 8 percent from the value of a Phoenix-metro home 3. When you go to sell your home with a leased solar energy system, you are selling the lease with the home. This is often seen as unattractive to prospecting homebuyers, despite the projected savings in utility bills 3.
A solar lease will last on average 20 years 2. At the end of the lease the homeowner can resign their lease, give back the system, or choose to purchase the system from the company. So if you plan on committing to your solar energy system in the long run, choosing a lease or PPA may be a feasible and effective option for you!
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