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A solar system and installation costs between $15,000-$25,000 on average in Arizona 600 Watt Solar Panel
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Leonardo David is a writer and energy consultant who has worked on projects funded by the Inter-American Development Bank. An electromechanical engineer, he has written about solar energy and the electrical power industry 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.
The average cost of solar panels in Arizona is $2.53 per watt, which is lower than the U.S. average of $2.85. At that rate, Arizona homeowners can expect to pay around $20,240 for an 8 kilowatt (kW) solar system, which drops to $13,168 after you consider the 30% federal solar tax credit.
Thanks to Arizona’s plentiful sunshine, an 8 kW solar system can save homeowners more than $1,700 per year. If you purchase high-quality panels with a 25-year warranty, your potential lifetime savings can exceed $42,500.
Get an installation quote from our top provider, SunRun
Arizona homes have an average electricity consumption of 13,603 kilowatt-hours (kWh) per year, according to the U.S. Energy Information Administration’s (EIA) Residential Energy Consumption Survey. While the size of a solar system directly impacts the cost, installers also consider local solar potential and your home’s energy consumption.
The table below outlines the estimated prices of solar panel systems ranging from 5 kW to 10 kW in size in Arizona. The table also provides the net cost after the 30% federal tax credit and $1,000 state tax credit, along with an estimated payback period.
*Our team estimated electricity output using the National Renewable Energy Laboratory’s PVWatts calculator and then calculated annual savings and payback periods.
The cost of a solar panel system is directly related to its size (measured in kilowatts), which in turn depends on the energy needs of your home. Local factors like state tax incentives, rebate programs and regulations also influence solar installation costs. Here are the main factors that affect the cost of home solar systems in Arizona:
Installing solar panels is a major home investment, but you can reduce the cost in several ways.
Arizona residents who install solar panels can access many tax incentives to reduce their overall project costs:
Combined, the three tax incentives can reduce the cost of solar panel systems by several thousand dollars. For example, consider an 8 kW system with a price of $20,240. You could save $6,072 with the federal tax credit, $1,000 with the state tax credit and $1,133 in sales tax — totaling $8,205 in savings.
The MarketWatch Guides team conducted two solar cost surveys in 2023, with the participation of 2,000 homeowners nationwide. Results showed that 47% of homeowners with solar panels used federal and state tax credits to save on installation costs.
Net metering does not reduce the upfront cost of your solar system but improves your return on investment by letting you sell excess energy to local energy companies. Arizona has a net billing policy for all investor-owned utilities and electric cooperatives, ensuring you get paid for surplus solar energy. Here are the solar buyback rates paid by the three largest utility companies in the state:
Arizona’s net billing rates for excess solar energy are lower than the average residential rate of 14.52 cents per kWh. In this scenario, we recommend a solar panel system that is optimally sized for your home energy needs so you can use most of the electricity output directly without depending as much on net billing. Oversized solar systems have a lower return on investment since most of their energy output is exported to the grid at reduced tariffs.
We recommend comparing offers from multiple solar companies to make sure you get the best possible deal. If you choose the first company that sends you a solar offer, you could miss out on lower prices or longer warranties. Keep in mind that high-quality solar panels have a 25- to 40-year manufacturer warranty, while the best solar installers offer a workmanship warranty of 10 to 25 years.
You can compare quotes from top solar companies in Arizona, which our team has carefully researched and vetted.
The upfront cost of a solar panel system is typically high, but many companies offer $0 down financing options. If you want to own your panels, you can pay in cash or secure a loan and cover monthly payments with your power bill savings. You also have the option of signing a solar lease or power purchase agreement (PPA), in which you pay a monthly fee to use solar panels that remain under the provider’s ownership.
In one of our solar cost surveys, we asked 1,000 homeowners about preferred payment methods when installing solar panels. In the case of Arizona, the MarketWatch Guides team obtained the following results.
Each solar financing option has pros and cons. Our team generally recommends a cash purchase or solar loans because these options provide more savings than leases and PPAs. For example, solar leases and PPAs have higher monthly payments than loans, yielding less savings in the long run.
When you buy solar panels with cash or a loan, you also assume ownership and can claim the corresponding tax incentives. However, when you sign a solar lease or PPA, the provider owns the panels and keeps any incentives.
Arizona has a state tax credit, sales tax exemption and property tax exemption for solar panel systems. You can combine these benefits with the 30% federal tax credit, which is available nationwide. However, you only get these benefits if you buy a home solar system in cash or with loan financing. For this reason, our team only recommends a solar lease or PPA if you cannot afford a cash purchase or do not have access to solar loan options.
An 8 kW solar system can generate around 14,000 kWh of electricity per year in a city like Phoenix or Tucson, based on our calculations. Arizona homeowners pay an average electric tariff of 14.52 cents per kWh, which means you could save nearly $2,000 annually by going solar. However, most homes with solar panels cannot use 100% of the electricity their systems generate — panels only produce energy during the day, while homes use energy round-the-clock.
In addition to power bill savings, you can also save by enrolling in a net metering program. For example, assume you can use 10,000 kWh of energy directly while exporting the remaining 4,000 kWh to the grid. If your home is in the APS service territory and you enroll in net metering, you get back 7.619 cents per kWh or an extra $305 per year.
You can expect to pay $20,240 for an 8 kW solar system in Arizona, but the out-of-pocket cost drops to $13,168 after the federal and state tax credits. In this case, you would have a payback period of 7.5 years. You may even experience a shorter payback period because electricity rates usually increase over time — as rates increase, so do your solar savings.
Solar panels also increase the value of your home in the real estate market. According to the NREL, home value increases by $20 for every $1 of estimated annual savings. Based on this figure, a system that saves you $1,750 per year would be adding $35,000 of property value. Plus, homeowners do not have to worry about increased taxes, since Arizona has a property tax exemption for solar energy systems.
However, you will see lower long-term savings if you choose a solar lease or PPA. You also miss out on the federal and state tax incentives and home value increases since you do not own the system.
The cost of solar energy systems in Arizona decreased by 42% during the last 10 years, according to the Solar Energy Industries Association (SEIA). Arizona had more than 281,000 solar panel systems by the end of 2023, and the local solar industry has received more than $17.3 billion in cumulative investment.
Arizona had installed 6,731 megawatts (MW) of solar power by July 2023. According to SEIA forecasts, the state could add 8,936 MW between 2024 and 2028 — a growth of more than 130%. A 2023 study by the University of Oxford estimates that global solar costs could decrease by 40% to 50% by 2030.
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 to determine our solar cost data, which is based on the following resources:
If you have feedback or questions about this article, please email the MarketWatch Guides team at editors@marketwatchguides.com.
Leonardo David is a writer and energy consultant who has worked on projects funded by the Inter-American Development Bank. An electromechanical engineer, he has written about solar energy and the electrical power industry 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.
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