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Is Solar in Arizona Actually Free?

Shannon Higgins

April 2022

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It's no secret that Arizona is a great state for solar. With over 300 days annually of sunshine, solar energy simply falls from the sky to power our homes and businesses. Arizona is even ranked fifth in the nation for the amount of cumulative solar capacity installed for homeowners and businesses.

With such a solid foundation for converting sunlight into savings, Arizona is fertile ground for solar companies to take root - some being much more reputable than others.

We always advise our clients to do thorough research before selecting a potential installer. Solar panels last for many decades, with warranties ranging from 20-30 years. Your chosen solar partner is a relationship that must last for decades. Make sure you're picking a team with a good reputation and plenty of longevity.  

One easy way to spot a red flag when shopping for solar is to look at the company's advertising. If they promise free solar or that your local power utility will pay you to go solar, run for the hills. Let's get one thing straight from the beginning: solar isn't free. These headlines are a disingenuous way to lure potential solar customers into a bait and switch scenario that usually involves a special financing package or a solar lease.

In this blog, we'll go over the absolute truth behind these ploys and why these attractive marketing pitches are little more than just smoke and mirrors.

 

Free Solar in Arizona? We Wish!

If you've researched going solar in Arizona, chances are you've seen an ad or two purporting free solar, or maybe something like, "the utility is paying you to go solar." Sometimes these offers are passed off as government incentives or utility rebates. While there are indeed federal tax credits available that can help offset as much as 30% of a solar purchase for those who qualify, you must first pay for the system to benefit from the tax break on the back end.

As for utilities "paying you to go solar", this refers to a buyback credit for excess solar energy sent back to the grid. This is only offered on certain utility rate plans, and your system must overproduce to receive this benefit. Most importantly, this program does not impact the initial investment costs, instead, it pays you back over time in the form of an energy credit on your bill. You still have to purchase the system.

The term "free solar" most commonly refers to a solar lease or a similar financing package with no required down payment (upon approved credit). This approach allows the installer to put solar panels on your roof for no upfront cost. However, it's important to remember that you still have to make a monthly lease or loan payment.  

Don't get us wrong; there is ample reason for every Arizona homeowner and business to save money by turning our abundant sunlight into clean, affordable energy. But it doesn't have to be free or require a "smoke-and-mirrors" marketing gimmick to make solar a compelling case. A reputable installer will be completely transparent and share ALL the options with you upfront. Financing can be an excellent way to go solar, but it's important to look past the slogans, ask questions, and understand the numbers for yourself. 

We've listed a few important questions to ask below to help get you started.


What solar panels and inverters will be used?

Not all panels are created equal. Some produce less energy from the same footprint than a higher quality panel of the same size. A more efficient panel means that you don't have to buy as many to make the same amount of power. This is particularly important for people with less roof space. 

If the "free solar" offer you are entertaining is light on equipment details, be skeptical. Lower-grade panels may require you to purchase more panels than needed while also offsetting less of your energy bill overall. A reputable installer will provide options, take the time to show you the numbers, and help you explore the payback associated with each option. Just remember, if the offer starts with "free," there's a good chance that lower-grade panels and materials are being used. This results in a lower-wattage system that might not produce as much power or last as long as a system built with higher-quality components.

 

What will you give up if you lease?

Leases can be a great option if you don't have a tax liability. However, when you lease a system, you're giving up a couple of things compared to a system purchased with cash or traditional financing. The most notable loss is the federal solar tax credits and the eventual ownership of the system. The tax credits will go to the leasing company since they are the ones who actually own the system. Don't give up those valuable tax credits to someone else if you pay taxes. 

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Leased systems can also create snags during a home sale. The new buyer must agree to take over the lease, and they must apply for the lease as if they're a new buyer. This means a good credit score and willingness to assume the monthly payment. Some prospective buyers may find it off-putting to take over a solar lease, which could potentially kill the sale altogether. Owned solar does not have this issue - it transfers to the new owner as easily as a refrigerator or pool. 

 

Who will help if something goes wrong?

As mentioned in the point above, your leasing company owns the system. If they go out of business, what will happen to the panels on your roof? While this might sound like a long shot, you might be surprised at how many companies actually go out of business after just a few years. 

 

Download Our Free Guide: Are Solar & Batteries Right for You?

 

Benefits of Financing Your Solar System

If you're looking to go solar, we usually recommend a partial for full cash purchase and financing the rest of the cost whenever possible, in place of leasing. In fact, at Sun Valley Solar Solutions, we don't offer our customers a lease option anymore. We made this decision a couple of years ago because our financing options have better terms than leases in most cases, and it allows our customers to reap the tax benefits of going solar. Below are a few benefits of financing versus leasing.

 

You Own the System & the Tax Credits

As opposed to leasing, where the leasing company gets the tax benefits, with financing you're able to keep those for yourself - as long as you have a tax liability. The most lucrative ones are the 30% federal solar tax credit and the $1,000 state of Arizona tax credit. You'll also be the one to own the system, which adds value to your home and can give you a competitive advantage over other homes on the market.

Quicker Return on Investment

Financing your solar energy system typically results in a quicker return on your investment. Depending on your electricity costs and the size of your system, most homeowners see a positive ROI in 7-10 years.

 

Solar Incentives Can Make Solar More Affordable

As mentioned in the section above, there are some lucrative solar incentives that can make solar more affordable. The most notable is the 30% tax credit, which was refreshed in August 2022 when President Biden signed into law the Inflation Reduction Act. With this important piece of legislation, the previous ramp down schedule was revised with the reinstated 30% tax credit and a 10-year extension for any residential installations through 2032.

Rebranded as the "Residential Clean Energy Credit", the new rate is retroactive to any solar, or solar and battery system placed into service on or after January 1, 2022. Beginning in 2033 the tax credit will gradually phase out and be gone by the end of 2035. The state of Arizona also offers the $1,000 tax credit along with no sales tax on a solar energy system purchase. So although solar isn't free, the current solar incentives are there to help make it more attainable.

 

Choose Your Solar Partner Wisely

While all of these shady marketing tactics might sound intimidating when first looking into solar, they are quite easy to avoid when you know what to look for. We hope this article has helped you know what red flags to look out for when continuing your solar research.

One of the biggest pieces of advice we can give is to research all of your options thoroughly and to choose your solar partner wisely. At Sun Valley Solar Solutions, we have over 16 years of experience helping Arizona homeowners go solar. We even have an in-house service department to help keep your system performing at peak efficiency for years to come. 

 

We invite you to download our free guide, "Are Solar & Batteries Right For You?" In it, you'll learn the various factors that make up a solar and battery purchase. Or if you're ready to speak to one of our solar integrators about solar for your home, simply click the button below to request a free, no-obligation quote.

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