Arizona has more sunshine than any of the 48 contiguous states. Phoenix gets roughly 300 sunny days a year. The solar resource is genuinely exceptional, and for years Arizona had some of the most generous solar policies in the country.
That changed. Arizona’s major utilities moved away from full retail net metering over the past decade, and the result is a more complicated solar landscape. Solar is still worth it in Arizona for most homeowners — but the calculation is more nuanced than it used to be, and your utility matters more than your roof orientation.
This guide covers the numbers Arizona homeowners need to run the math in 2026.
The solar resource: Arizona’s biggest advantage
Phoenix averages 6.5 to 7.0 peak sun hours per day. Tucson runs slightly lower at around 6.0 to 6.5. Even in northern Arizona, sun hours are well above the national average of around 4.5.
What this means in practice: a 10-kilowatt system in Phoenix produces roughly 16,000 to 18,000 kWh per year. The same system in Boston or Seattle produces 10,000 to 11,000 kWh. More production means faster payback and more savings over the life of the system, everything else being equal.
The catch is “everything else being equal.” In Arizona, everything else is not equal — specifically, how your utility pays you for the power your panels produce.
Net billing: what replaced net metering
Arizona’s three investor-owned utilities — Arizona Public Service (APS), Salt River Project (SRP), and Tucson Electric Power (TEP) — no longer offer traditional net metering. Under the old system, every kWh you exported to the grid earned you a full retail-rate credit. Under net billing, you earn a much lower export rate set by each utility.
The export rates as of 2026:
- APS: approximately $0.03–$0.04 per kWh exported (retail rate is around $0.14/kWh)
- SRP: approximately $0.057 per kWh exported (retail rate is around $0.15/kWh)
- TEP: approximately $0.057 per kWh exported (retail rate is around $0.15/kWh)
Why self-consumption matters so much in Arizona
Self-consumption means using the electricity your panels produce directly in your home — running your AC, dishwasher, or EV charger while the sun is shining — rather than letting that power flow back out to the grid. In Arizona, the difference between self-consuming and exporting is large enough to significantly affect your payback period.
Here is the core problem in plain terms. Your panels produce the most power in the middle of the day. If nobody is home and your AC is off, all that power flows to the grid — and your utility credits you at the export rate, which is $0.03 to $0.06 per kWh. But when you get home in the evening and turn the AC back on, you pull power from the grid at the full retail rate of $0.14 to $0.28 per kWh (more if you are on a time-of-use (TOU) plan with peak evening pricing). You are selling cheap and buying expensive.
The practical implication: size your system to cover your consumption without a large surplus, and if you work from home or can run appliances during the day, do it. A battery that stores midday solar and discharges it in the evening essentially converts the export scenario into a self-consumption scenario — which is why storage matters so much in Arizona.
SRP has an additional complication. SRP charges a fixed fee of around $32 per month for solar customers before you use a single kilowatt-hour. This is a structural cost that affects payback calculations and makes solar harder to pencil out for lower-usage households on SRP. Battery storage is essentially required for SRP solar customers to get the most from their system.
Arizona solar incentives in 2026
With the federal Investment Tax Credit expired as of December 31, 2025, Arizona’s remaining incentive stack looks like this:
- Arizona state income tax credit. 25% of system cost, up to $1,000. Applies to residential installs on your primary or secondary home. You can carry unused credit forward up to five tax years. Your installer must provide a certificate showing your equipment meets Arizona’s solar device requirements. See the Arizona Department of Revenue for claim instructions. This is a modest credit but it is real money and straightforward to claim.
- Property tax exemption. The added value that solar brings to your home is exempt from property tax assessment. A typical Arizona solar install adds $15,000 to $25,000 in home value. Without the exemption, that could translate to $150 to $300 per year in higher property taxes. The exemption applies for as long as you own the home.
- Sales tax exemption. Solar equipment is exempt from Arizona’s state sales tax, which reduces your upfront installation cost by roughly 5 to 6 percent.
- Utility rebates. APS, SRP, and TEP have ended their upfront solar rebate programs. Some smaller electric cooperatives — including Mohave Electric in the northwest — still offer limited rebates. Check with your cooperative directly before assuming no rebate is available.
Arizona does not have a statewide SREC (Solar Renewable Energy Credit) market. The state’s Renewable Energy Standard was eliminated by the Arizona Corporation Commission in 2025, removing the policy that once required utilities to source a share of energy from distributed generation.
Typical system costs and payback
As of April 2026, the average solar installation cost in Arizona is around $2.20 per watt. A typical 10-kW residential system runs $22,000 before incentives. After the $1,000 state tax credit and the sales tax exemption (saving roughly $1,100 to $1,320 on a $22,000 system), your net cost is in the range of $19,500 to $20,000.
The average Arizona home uses about 1,061 kWh per month, though summer usage is much higher. Phoenix-area homes with central air conditioning often see 2,000 to 3,000 kWh per month in June through September.
Payback period depends heavily on your utility:
- APS customers with a well-sized system and time-of-use rate plan can expect payback in roughly 9 to 12 years with solar alone, shorter with battery storage that shifts consumption away from peak pricing windows.
- TEP customers in Tucson have a more favorable net billing rate than APS and typically see payback in a similar range.
- SRP customers face the toughest math. The low export rate combined with the $32 monthly fixed charge means solar alone may not pencil out well. Battery storage is important for SRP customers to optimize self-consumption and avoid demand charges.
Over 25 years, Arizona homeowners with solar avoid an estimated $40,000 to $70,000 in utility costs depending on utility, system size, rate escalation, and self-consumption habits. Real homeowner data from Arizona supports this range: bills dropping from $300 to $50–$84 per month are common for well-designed APS and TEP systems.
Should you add battery storage?
For most Arizona homeowners, battery storage is worth serious consideration — more so than in states with true net metering. The reason is the export rate gap. When you export solar power at $0.03–$0.06 per kWh and pay $0.14–$0.28 per kWh (on a time-of-use (TOU) plan with peak evening pricing) to buy it back, a battery that stores midday production and discharges it during evening peak hours earns significant value. For APS customers on a TOU plan, each kWh shifted from export to peak self-consumption can save $0.19 to $0.25.
There is also a practical safety argument specific to Arizona. Summer heat events in the Phoenix area can put the grid under stress. Outages during 115-degree heat are a genuine risk. A battery provides backup power to keep your AC running during grid outages in a way that solar-only systems cannot.
The tradeoff is cost. A 10 kW solar system paired with a 13.5 kWh battery runs $30,000 to $36,000 before incentives in Arizona. That extends payback compared to solar alone, but the combination produces better long-term returns in Arizona’s specific market structure.
HOA and permitting considerations
Arizona law (ARS § 33-1816 and ARS § 33-439) protects homeowners’ rights to install solar even in HOA communities. Your HOA cannot prohibit solar. It can make reasonable aesthetic requirements around panel placement, but those requirements cannot significantly increase cost or reduce system performance. If your HOA pushes back, point them to the statute.
Permitting and utility interconnection in Arizona is handled by your installer. The process typically takes two to eight weeks from permit submission to system activation, depending on your utility and municipality.
Bottom line: Is solar worth it in Arizona in 2026?
For most APS and TEP customers, yes. Arizona’s sun resource is exceptional, the state tax credit and property tax exemption reduce your cost, and utility rates are rising. A well-sized system — designed to cover your consumption without massive overproduction — pays back in under 12 years and generates strong 25-year returns.
For SRP customers, the math is tighter. Run the numbers carefully with your specific rate plan before committing, and factor in the $32 monthly fixed charge. Battery storage moves the needle significantly for SRP households.
The most important thing you can do before signing anything is get at least three quotes and ask each installer to model your specific utility rate plan, not just a generic production estimate. The difference between APS’s best and worst solar rate plans can change your payback period by years.