Why Solar System Design Has Changed—and What Arizona Homeowners Need to Know

The System That Was Right for You Then May Look Very Different Today 

Homeowners who have had success with solar in other states may expect the same results in Arizona. In many cases, their previous systems offset nearly all their annual electricity use, and generous utility credits for excess power kept monthly bills low. Naturally, they may approach solar in Arizona with the same strategy: install as many panels as the roof can accommodate and rely on utility credits for any excess electricity sent back to the grid. After all, this approach still works well in many parts of the country. 

But Arizona’s utility rate structures make that approach less effective for most homeowners. Unlike states where utilities credit excess solar power at or near the retail electricity rate, Arizona utilities generally pay new solar customers a set export rate that is significantly lower than the price of purchased electricity. Electricity rates also vary by time of day and, under some plans, peak demand adds another cost variable that is difficult for solar panels alone to address.

These changes also matter to existing solar owners whose original utility agreements are expiring or whose compensation arrangements are changing. You can read more about this in our blog: What Happens When Your Solar Grandfathering Expires?

All of this means that the priorities for solar system design have changed considerably in recent years. The right approach depends on your utility rate plan, whether you have existing grandfathering protections, and how and when your household consumes electricity. Even if you've owned solar before, whether in Arizona or another state, it's best to approach a new installation with a fresh perspective. The goal remains the same: maximize long-term energy savings. But achieving that goal in Arizona today may require a very different system design than what worked in the past.

Let’s take a deeper look at why.

How Solar System Design Used to Work—and Why It Made Sense

For years, the standard approach was straightforward: produce as much electricity as the home consumed during daylight hours, and export excess energy back to the utility for a bill credit to help offset any energy you need to purchase in the evening or during peak demand seasons. Under net metering, this approach is hard to beat. Excess daytime production earns utility credits at or near the retail rate, and those credits offset electricity bought at other times. The more a system produced, the more credit it earned.

Even after Arizona began moving away from net metering, early export (buyback) rates were generous enough to make exporting excess solar energy back to the grid financially attractive. In September 2017, APS introduced its Resource Comparison Proxy (RCP), replacing retail-rate credits for new solar customers with a separate, lower rate for electricity exported to the grid. The initial RCP rate was 12.9 cents per kilowatt-hour, with subsequent rates generally declining by as much as 10% annually for new customers. As recently as 2020, new solar customers could still receive 10.45 cents per kilowatt-hour for their excess electricity. By 2026, however, that rate had fallen to just 5.554 cents. At today's lower export rates, designing a system to produce significant excess electricity for utility credits is harder to justify. Instead, storing that energy in a home battery for use when electricity from the grid is more expensive can deliver greater value.

None of this means older designs were oversized or misguided. They were generally appropriate for the economics available at the time. It would also be a mistake to treat older systems as all alike, or to point to a single year when the approach stopped making sense. The shift has been gradual, it has varied by utility, rate plan, and household, and it's still under way.

What's Changed? The Declining Value of Exporting Solar Electricity

The decline happened gradually and it has fundamentally changed how today’s solar energy systems are designed.

Early post-net-metering export rates were still generous enough to justify larger solar arrays designed to send significant amounts of excess electricity back to the grid in exchange for utility credits. But as those credits have steadily declined, designing a system around maximizing exports has become increasingly difficult to justify financially.

To better understand the growing gap between what utilities charge for electricity and what they credit homeowners for excess solar energy, let’s consider a hypothetical example. We’ll use simple, rounded numbers that closely reflect actual Arizona utility rates to make the comparison easier to follow.

Imagine your solar panels produce one kilowatt-hour (kWh) of electricity during the afternoon. What happens to that electricity can make a significant difference in how much money it saves you. Let's assume your utility charges 10 cents per kWh during the day, 25 cents during peak evening hours, and pays just 5 cents per kWh for excess solar electricity sent back to the grid. If you export that electricity to the grid, you receive a credit worth just 5 cents. But if you use it to power your home instead, you avoid purchasing that same electricity from the utility, saving 10 cents.

Now consider what happens if you store that electricity in a home battery and use it during the more expensive evening hours. Assuming a 90% round-trip battery efficiency, that original kilowatt-hour provides approximately 0.9 kWh of usable electricity, offsetting about 22.5 cents in utility purchases. That's more than four times the financial value of exporting the same electricity to the grid.

None of this means exporting has no value. Export credits still reduce your bill, and the right answer depends on your utility, your rate plan, your system's configuration, and how your household uses electricity. A home with heavy midday consumption, or one holding a locked-in higher export rate on a grandfathered plan, may be perfectly well served by exporting. On SRP, the older Time-of-Use Export and Electric Vehicle Export plans credit a fixed 3.45 cents per exported kilowatt-hour, while the newer plans pay an export rate that stood at 1.87 cents as of May 2026 and is recalculated each May. The point is that exporting has become one piece of the financial picture rather than the engine of it. Our overview of net billing and net metering in Arizona covers the mechanics.

Arizona Utility Rate Changes: Why Existing Solar Owners Need to Pay Attention

These shifts connect directly to real transitions facing existing Arizona solar owners. At APS, there are two different situations.

APS Legacy net metering (interconnected before September 1, 2017)

Customers whose interconnection application was submitted before September 1, 2017, and who met the contract and installation requirements, were generally grandfathered for 20 years from the date their system was interconnected. For the earliest of these customers, those protections may soon begin to expire. APS says it sends a notice about 60 days ahead, moves the account to the RCP, and asks the customer to choose a new rate plan. Rather than receiving retail-rate credits for electricity exported to the grid, these customers will be compensated at the RCP rate in effect when their grandfathering expires, which will be substantially lower than the retail-rate credits they've enjoyed for years.

APS Post-2017 RCP arrangements (interconnected after September 1, 2017)

Customers who entered under the newer framework post-September 2017 generally received a 10-year lock on their initial export rate, running from the date of interconnection. The earliest of these protections approach expiration in 2027, with later customers following in subsequent years. After the lock ends, credits follow the RCP rate in effect at that time, which will be significantly lower than it was during the initial 10 years.

In both cases, the expiration changes what excess solar production is worth without changing the equipment's ability to generate electricity. In other words, same equipment, different ROI.

Read more: What You Need to Know About Arizona's Net Billing Program

SRP is taking a different approach.

Its Board has approved the retirement of its four legacy solar rate plans (E-13, E-14, E-15, and E-27) following the November 2029 billing cycle. At that point, existing solar customers will be required to transition to one of two newer plans, E-16 or E-28, both introduced in November 2025.

Both newer plans shift on-peak hours later into the evening, when solar production naturally begins to fade. E-16 also includes a demand charge based on your highest on-peak power use. Evening peaks and demand charges are exactly where battery storage can deliver significant value. A properly sized battery can help power the home through expensive on-peak hours, reducing grid purchases and potentially minimizing demand charges. SRP's own guidance identifies batteries and demand management systems as ways to control demand.

The emphasis here should be on preparation, not alarm. SRP's retirement is three years away, and APS's first RCP locks end next year. There's time to plan well. We cover each situation in depth in what happens when your solar grandfathering expires.

Why the Best Solar System Today Might Actually Be Smaller

When exports earn less, the design goal shifts from maximizing panel count to building the most financially effective combination of solar production, battery storage, and household energy management. Too many panels may mean exporting energy in exchange for increasingly modest credits. In short, the days of a max-fit solar array are gone, the goal now is to consume all of your generated energy, and that means batteries. We covered this in detail in our recent blog: The Incredible Shrinking Solar Array: A Red Flag Warning for Solar Shoppers.

Consider two hypothetical systems serving the same Arizona household. Picture a household using 40 kilowatt-hours a day: 14 during solar hours, 9 during the evening on-peak window, and 17 at other times. Use the same illustrative prices as before: 5 cents for exports, 10 cents for midday and off-peak purchases, and 25 cents on-peak. With no solar, this household's bill is $5.35 a day.

Despite producing 40% less electricity, System B delivers approximately 75 cents more in daily savings, or about $274 annually. The difference comes down to when and how the electricity is used, not simply how much the panels produce.

Of course, this comparison focuses on energy savings rather than total installation costs. While the smaller system requires fewer solar panels, adding battery storage introduces additional expenses. Whether those costs are justified depends on the homeowner's utility rates, energy consumption, backup power needs, and long-term financial goals.

Overall, the objective isn't simply to produce the most solar electricity. It's to maximize the value of every kilowatt-hour generated, using battery storage to put that energy to work when and where it's needed most.

Already Have Solar? You May Not Need More Panels to Improve Your Savings

If your system was designed under an older utility arrangement, particularly one approaching a grandfathering expiration or an SRP plan transition, it may still be performing exactly as designed and delivering substantial value. The opportunity isn't necessarily to produce more electricity. It's to find ways to get greater value from the electricity you're already generating.

A battery can capture excess daytime production and shift it to the expensive evening hours, rather than exporting it for a relatively low credit. Other levers can help too: moving flexible household loads toward the middle of the day, optimizing when your EV charges, and reviewing your rate-plan options, especially if a plan change or expiration is coming.

Before recommending any upgrade, we always evaluate the existing equipment. Battery compatibility, inverter configuration, household consumption, and grandfathering protections all need to be considered together. Our guide to how rate plans change what solar and batteries are worth walks through the economics.

Not every existing solar owner should rush to add a battery. Homeowners with favorable legacy net-metering protections may face different financial considerations, and modifying an existing system can affect grandfathering. Understand those consequences first. If you'd like to go deeper, we've written about whether adding a battery to an existing system makes sense.

Buying Solar Again? Don't Assume Yesterday's Design Is Still the Best Approach

Back to our repeat buyer. Someone who had an excellent experience with solar has every reason to want to duplicate it, and that's especially natural for people relocating from states with more favorable net-metering arrangements, or for homeowners who installed in Arizona when export compensation was substantially higher.

A successful earlier investment is valuable experience. It just shouldn't dictate the design of the next system. The right starting point is the new home's electricity consumption, the applicable utility rate plan, and your financial goals, not the size or annual production of the previous installation. Two homes that look identical on paper can call for very different systems once those three inputs are on the table, which is why we believe solar and battery systems should be custom-designed rather than priced from a template.

Today's solar-plus-battery configurations may deliver better financial outcomes than the larger, export-focused systems many homeowners remember. Solar remains an excellent investment when it's designed around the economics that apply today.

The Best Solar Investment Starts With the Right Utility Rate Strategy

Solar system design has always been about delivering the greatest possible long-term financial value. What's changed is how that value is achieved. Under today's Arizona utility structures, maximizing solar production isn't necessarily the same as maximizing savings.

For existing solar owners, that may mean evaluating a battery addition. For repeat buyers, it means approaching a new installation with an understanding of today's utility economics rather than relying entirely on previous successful design. Either way, finding the best energy strategy for your home starts with your utility, your rate plan, and your goals.

This is why choosing an experienced, locally established Arizona solar installer matters. Designing the right system requires more than understanding solar technology. It demands a deep familiarity with Arizona's utilities, the history of their rate plans, how those plans influence system design, and which existing protections can be preserved when adding or upgrading equipment. An installer with decades of experience navigating Arizona's evolving utility landscape brings historical context and firsthand knowledge that can make a meaningful difference in the long-term financial performance of your solar investment.

Solar has evolved. Make sure your next energy decision reflects today's utility rates, not yesterday's assumptions.