What is the ROI of Switching to Solar in Arizona?

Sabrina Lopez
July 9, 2015
4 min read

Because of its abundant sunshine year-round, Arizona is ideally situated for the mass generation of solar power, and because solar power is a clean, renewable resource, it is the ideal means of supplying homes and businesses with all their power needs.

The advantages of switching to solar power are obvious, but what is the ROI of switching to solar? Is it financially worthwhile to make the switch? The short answer is yes, in the majority of cases. Still, the specific ROI differs greatly depending on various factors, including the structure of your business or home, your unique usage patterns, and the rate plan you select through your local utility provider.

Speaking of Rate Plans…

Suppose you pay attention to the headlines; you know that some Arizona utilities are working hard to increase fees for solar customers. Each utility also supports a different pricing structure for those who wish to connect their solar arrays to the grid. So, when it comes to assessing ROI, every case is unique, and proper assessment begins with two important considerations:

  1. Financial return varies depending on your home’s location and utility provider
  2. Whatever the solar rates are in your area today, there’s a good chance they will be higher shortly

Efforts by Arizona’s utilities to increase solar fees seem counterintuitive given our abundant sunlight, but change is hard for some--especially for businesses. For example, most people were not likely affected by the policy changes enacted by the Salt River Project (SRP) in 2015 when they effectively halted solar in its territory. Arizona Public Service (APS) is attempting to change its solar rates today. Historically, utility rate increases have applied only to new customers, while existing solar customers have been allowed to remain on their existing plans and avoid the new rates entirely. So, if you’re interested in solar, your best chance to get ahead is by beating the next round of utility changes and generating your electricity today! Download our solar guide to learn more.

Making the Switch to Solar

Many people need to be more informed about how much it costs to install a solar system in their home. Pricing for equipment, design, and installation can add up quickly, but much of this upfront cost can be easily offset by federal, state, and local incentives.

Federal incentives are particularly appealing since they offer a 30% tax credit, which will offset nearly one-third of the purchase price of a solar system. The state of Arizona offers a flat $1,000 incentive as well.

In addition to incentives, there are also compelling financing and leasing options available. Today, it’s possible to go solar with minimal or no out-of-pocket investment upfront. So long as your monthly lease or loan payment is below your average bill, you’re still left with money at the end of the month and many years' worth of predictable energy costs.

Enjoying the Solar Powered Home

Because of all that abundant Arizona sunshine and warmth, nearly 50% of all electricity used in the state is allocated to air conditioning, and that means the hottest times of the year result in enormous utility bills for the average homeowner. That being the case, the cheapest energy form should be used to keep those cooling bills manageable. The answer to that is solar power.

According to the U.S. Energy Information Administration (EIA), the cost of solar power has dropped by a factor of 100 just since 1977. In 1977, the cost of solar power was 76.6 cents per kilowatt hour, and its current cost is .74 cents per kilowatt hour (average). That dramatic drop has been largely due to tremendous increases in technology and the efficiency of solar-powered energy production, but what that means to the consumer is that it is by far the cheapest form of energy available.

The current cost of other electricity sources in the U.S. is 12.5 cents per kilowatt hour - nearly 17 times greater than the cost of solar power. Once a solar power system has been installed, the energy costs are minimal. So, regarding the return on investment, generating your electricity is a huge lifetime advantage.

In addition, adding solar is one of the few home improvement projects that can increase your home's resale value while generating money along the way. Over their useful life, solar panels return more than 5x times their cost in electricity savings—often repaying the initial investment within 7 to 10 years. Solar panels will produce power and money for decades with a warrantied life of 25 years and an effective life of 40 - 50. Compare this to typical home improvements such as a kitchen remodel, where the best one can hope for is a return of 70-80% (www.remodeling.hw.net/cost-vs-value/2014/mountain).

Where should I begin?

Solar power is not only the wave of the future - it's the most environmentally friendly, sustainable, and economical energy source for the present. Taking your first steps into energy independence requires careful assessment of various factors. It's always best to consult a solar expert who can assess your structures and lifestyle and design a specific system.

If you're interested in learning more, we've created a solar guide to help explain some of the most important considerations when switching to clean solar energy. We invite you to download the guide, and if you're interested, request a custom solar quote from one of our solar experts today.