The Cost of Solar Panels in Arizona for 2023 [Accurate Data]

To work out the likely cost of home solar in Arizona, we do more than just gather online quotes. In fact, our research shows that online solar marketplace quotes are typically a staggering 63 percent below real-life costs. Here is the actual cost of installing solar in Arizona based on a number of real life scenarios.

Home solar is a great choice for many Arizona homeowners, thanks to the plentiful sunshine and decreasing cost of solar in the Grand Canyon State.

The average home solar array in Arizona is just under 10 kW, at a cost of around $35,000.

For many homeowners, though, an 8 kW can meet most household electricity needs, and thanks to a state solar tax credit, state sales tax exemption, and the 30% federal solar tax credit, the real cost of solar in Arizona could be under $20k!

To work out the likely cost of home solar in Arizona, we do more than just gather online quotes. In fact, our research shows that online solar marketplace quotes are typically a staggering 63 percent below real-life costs.

See also: Arizona solar incentives

To improve accuracy, our solar cost models rely on national average prices paid for home solar in 2022, as well as forecasts for the price of solar in 2023, and the Lawrence Berkeley National Laboratory’s Tracking the Sun report. We also build in that discrepancy between real-life costs and online quotes, providing a more likely cost of solar in Arizona in 2023.

The cost of home solar in Arizona

The Lawrence Berkeley National Laboratory’s Tracking the Sun report gives a price of $3.81 per Watt for the average solar installation in Arizona in the first two months of 2022. The average system size was 9.39 kW. This gives us an average cost of home solar in Arizona of $35,729.

Remember, though, that the economy of scale usually means a larger system will cost less per Watt than a smaller system. The data from LBNL also shows that the median (middle of the range) solar panel system price per Watt was $3.90 in Arizona. The median system size was 8.72 kW. This gives us a median system cost of $34,089.

The NREL gives a figure of $2.95 per Watt (DC) as the modeled market price (MMP) for the U.S. as a whole in 2022. Popular online solar quote marketplaces typically quote a cost of around $2.44 per Watt for Arizona home solar. This would make a 5 kW system cost around $12,000.

Our calculations for the cost of solar in California suggest, however, that online quote marketplaces can be out by as much as 80% from real-life costs. The average discrepancy we found across several areas of California was 62.86%.

Factoring in that discrepancy, homeowners in Arizona might expect to pay closer to $3.88 per Watt for home solar. This is actually very similar to the numbers from LBNL. Factor in the larger system size too, and the quoted $12,000 figure starts to look pretty shaky.

Here’s our breakdown of the likely cost of solar in Arizona.

How big a solar array do you need in Arizona?

Most home solar quotes given online are based on a system sized at 5 kilowatts. In many places, this system is too small to meet household electricity needs, meaning most homeowners will still pay a considerable electric bill each month and be at the mercy of utility price hikes.

According to the Energy Information Administration (EIA), Almost half of all Arizona’s electricity retail sales are residential. Some three in five Arizona households rely on electricity for home heating and 90 percent of homes have air conditioning. This contributes to higher average residential electricity consumption in Arizona than in nearly 75 percent of the U.S.

In fact, Arizonans use more electricity per person than half the U.S. The EIA estimates average electricity consumption is around 14,000 kWh annually in Arizona. So, despite lower than average costs per kW for electricity in Arizona, electricity bills are still high in the state.

To meet household electricity needs, the SunWatts calculator suggests that most Arizonans will need to install a system around 8 kW in size. Automatically, this makes online quote marketplaces that use a 5 kW model woefully inaccurate.

This is why we used a figure of 8 kW above to calculate the likely cost of solar in Arizona. Instead of a $12,000 cost, then, most Arizona homeowners should expect a price tag of around $30,000 for home solar.

This might appear to put a residential rooftop array out of reach, literally and figuratively, for many Arizonans. Thankfully, the state offers some generous incentives which, when added to the federal solar tax credit, help make solar much more affordable.

Lowering the cost of solar in Arizona – rebates, tax credits, and more

Arizonans with a large enough personal tax liability can claim a 30% tax credit for home solar from the federal. This doesn’t lower the upfront cost of installing solar, but does lower the overall cost. To make use of the credit, homeowners might pay lower monthly tax instalments or access a zero percent interest tax credit bridge loan that is payable in full once the tax credit generates a refund on overpaid taxes (note, the credit is not a refund or rebate, so you’ll only get a cheque if you overpaid your taxes).

Even before the federal tax credit applies, though, Arizonans can claim the Residential Arizona Solar Tax Credit. This offers a 25% credit, up to $1,000, off personal state income tax, and it can be carried over for up to five years.

Arizona also exempts home solar from state sales tax, which can save at least 5.6% on the cost of solar.

Find out more about Arizona state solar incentives here.

Now we know how much solar is likely to cost in Arizona, and how to lower that cost, we need to know what Arizonans are paying for electricity. That way, we can run the numbers to see how much a homeowner in Arizona can save through rooftop solar, and figure out the solar payback period.

How much does electricity cost in Arizona?

The EIA gives an average price of 10.73 cents per kilowatt hour for residential electricity in Arizona in 2021. As we saw, Arizona households use 14,000 kWh annually on average. This means the yearly cost of electricity in Arizona was around $1502.

Utilities raise electricity prices every year, though, meaning it’s not just a case of multiplying $1502 by 25 to work out likely utility bill savings over the 25-year warranty of most solar panels.

For a more accurate prediction of potential savings by going solar in Arizona, let’s run some numbers.

At a 2.4% rate of inflation (the average historic rate we’ve used for other cities and states), we worked out that Arizona households using 14,000 kWh of electricity annually could see the following savings by going in solar in 2023:

• Over 5 years – $6,189
• Over 10 years – $13,157
• Over 15 years – $21,002
• Over 25 years – $42,817.

As of early January 2023, though, the rate of inflation in the U.S. is actually 7.1%. Here’s hoping inflation falls soon, but if it does stick around for a while, Arizonans may see higher savings on electricity bills:

• Over 5 years – $8,656
• Over 10 years – $20,853
• Over 15 years – $38,041
• Over 25 years – $95,425.

How much a homeowner actually saves will depend on the size of system installed, electricity use over time, system output, storage and utility prices, and other factors.

Putting it all together – Your solar payback period in Arizona

The cost of solar in Arizona is likely to be a lot higher than online quote marketplaces suggest. By our calculations average costs are closer to $34,000 than the $12,000 often suggested. While this might discourage some homeowners, knowing the real-life costs of installations helps homeowners make a more informed decision, and can help stave off later disappointment when faced with a final bill.

For many homeowners, calculating the solar payback period is also a key part of the decision to go solar. This calculation offers an estimate of when savings on monthly utility bills are likely to balance out the net cost of going solar. After this, any savings on bills can be considered real savings!

Here are some potential scenarios for estimated solar payback periods in Arizona, assuming homeowners are eligible for maximum tax credits.

1. Assuming a 2.4% inflation rate and average energy use and costs

Gross cost of a 5 kW solar array = $3.81/Watt x 5,000 = $19,050

Minus potential state tax credit (25%, to a maximum of $1,000) = $1,000

Subtotal = $18,050

Federal tax credit of 30% = $5,415

Net cost of solar = $12,635               

Cost of electricity = $0.1073 per kWh

Average electricity use in Arizona = 14,000 kWh per year

Estimated cost of electricity for first 14 years = $24,648

Fourteen-year savings (assuming array meets 50% of electricity needs) = $12,324

Solar payback period = Just over 14 years.

• Assuming a 7.1% increase in electricity costs each year and average electricity use

Gross cost of a 5 kW solar array = $3.81/Watt x 5,000 = $19,050

Minus potential state tax credit (25%, to a maximum of $1,000) = $1,000

Subtotal = $18,050

Federal tax credit of 30% = $5,415

Net cost of solar = $12,635

Cost of electricity = $0.1073 per kWh

Average electricity use in Arizona = 14,000 kWh per year

Estimated cost of electricity for first 12 years = $27,031

Twelve-year savings (assuming array meets 50% of electricity needs) = $13,515

Solar payback period = Less than 12 years.

• Assuming a 2.4% inflation rate and average energy use and costs but a larger array

Gross cost of an 8 kW solar array = $3.81/Watt x 8,000 kW = $30,480

Minus potential state rebate = $1,000

Subtotal = $29,840

Federal tax credit of 30% = $8,844

Net cost of solar = $20,636

Cost of electricity = $0.1073 per kWh

Average electricity use in Arizona = 14,000 kWh per year

Estimated cost of electricity for first 15 years = $26,742

Fifteen-year savings (assuming array meets 80% of electricity needs) = $21,394

Solar payback period = just under 15 years.

• Assuming a 7.1% inflation rate and average energy use and costs but a larger array

Gross cost of a 9.39 kW solar array = $3.81/Watt x 9,390 kW = $35,776

Minus potential state tax credit (25%, to a maximum of $1000) = $1,000

Subtotal = $34,776

Federal tax credit of 30% = $10,433

Net cost of solar = $24,343

Cost of electricity = $0.1073 per kWh

Average electricity use in Arizona = 14,000 kWh per year

Estimated cost of electricity for first 11 years = $23,836

Eleven-year savings (assuming array meets 100% of electricity needs) = $23,836

Solar payback period = just over 11 years.

Even with lower inflation and a larger array, Arizona homeowners are looking at a solar payback period of 11-15 years. This means many Arizonans could enjoy around 14 years of free electricity within their solar panels’ warranty period, plus many more years of output outside of the warranty.

Final thoughts on the cost of going solar in Arizona

Arizona is an odd bird for home solar in that this sunny spot seems like an obvious choice for this form of residential renewable energy production, until you look at the low cost of electricity in the state. Factor in the higher than average use of electricity, though, and home solar once again makes sense in Arizona.

The financial incentives for going solar at home in Arizona are a key reason why many residents have already installed a solar array. Even if your likely solar payback period is a little longer than the national average (around eight years), installing rooftop solar helps homeowners be energy independent, avoiding the impact of rising electricity costs. Home solar also helps to produce clean, green electricity, which improves air quality for everyone and lowers the household carbon footprint.