For nearly twenty years, the 30% federal solar tax credit has helped fuel the growth of residential solar across America. But it was never the only driver. Rising energy costs and the impacts of climate change have all played major roles in accelerating solar adoption. As temperatures rise and the Valley becomes more densely populated, energy demand continues to surge, and utility rates along with it. Going solar remains the only real alternative to full grid dependence—and to the relentless cycle of rising utility bills, and longer/hotter hotter summers.
As we approach the tax credit’s scheduled sunset for homeowner-owned systems after 2025, many prospective solar customers are understandably wondering what comes next. Will solar still make sense? Will the industry slow down? How will homeowners protect themselves from rising utility bills in a post-ITC landscape? The short answer is that solar isn't going anywhere, but it's certainly evolving.
And nowhere is that more true than in Arizona, a state defined by abundant sunshine, rapid population growth, skyrocketing electricity demand, and two utilities that continue to raise rates fairly consistently every few years.
This is a new chapter for solar—not an ending.
While the federal residential tax credit for owned systems ends after December 31, 2025, the incentives available to financial institutions that fund leased residential solar remain fully intact. Under Section 48E, solar leasing providers retain access to federal incentives through 2027, allowing them to continue offering competitive pricing even after the homeowner tax credit sunsets.
Many national lease providers are already preparing for this transition. Over the next 12–24 months, homeowners can expect to see a wave of new leasing offerings designed specifically for the post-ITC market—programs with low introductory pricing, predictable monthly payments, and maintenance coverage that often extends beyond standard manufacturer warranties. Most importantly, many of these new leases will include a clear path to ownership beginning around year six, giving homeowners an easy transition from low-cost access to long-term energy independence.
This shift signals a new era of diversification in solar financing, where hybrid models blend the advantages of leasing and ownership. Lease structures can remove upfront costs while still offering a straightforward, fair-market-value buyout down the road. In most cases, cash purchases will continue to deliver the fastest ROI and the greatest control, while traditional loans will remain viable, but leases may become increasingly common as homeowners look for flexible ways to adopt solar.
Most next-generation lease programs share several key benefits:
Together, these features ensure that solar remains accessible to a wide range of Arizona homeowners—even after ownership-based incentives sunset—while still offering a route to full ownership and long-term energy control.
Even as the federal residential tax credit sunsets for homeowner-owned systems after 2025, Arizona continues to offer strong state and utility incentives that add meaningful long-term value for those who purchase or finance their solar. These benefits are not available for leased systems, since the leasing company—not the homeowner—owns the energy and environmental credits. For homeowners pursuing ownership, the following programs remain powerful value multipliers:
The structural forces that have made solar so attractive in Arizona are not slowing down. In many ways, they’re accelerating.
APS and SRP—Arizona’s two dominant utilities—have both confirmed that higher rates are the new normal.
Although APS implemented a significant rate increase in 2024, the utility has already filed for its next hike—an approximate 14% increase totaling roughly $580 million. Compounding this, the Arizona Corporation Commission recently approved a change that allows APS to return for more frequent rate cases, meaning customers can expect regular price adjustments, not occasional ones.
SRP’s forthcoming changes tell a similar story. Beginning in November 2025, new rate plans for solar and non-solar customers were introduced, featuring revised time-of-use windows, updated export structures, and higher base costs.
These increases—across both utilities—are not one-off events. They are part of a long-term trajectory driven by much larger forces throughout the state.
Arizona is growing faster than almost any other state in the nation, and electricity demand is rising even faster than population alone can explain.
Maricopa County remains one of America’s fastest-growing regions, with thousands of new residents arriving each month. Each new resident adds more air conditioning demand, more water pumping, more electric vehicle charging, and more load on an already strained grid.
But residential growth is just one part of the story.
With Intel and TSMC expanding—and new fabs on the horizon—semiconductor manufacturing has become one of Arizona’s most energy-intensive industries. These facilities operate around the clock and consume staggering amounts of electricity. While many are installing onsite solar to offset daytime demand, they still rely heavily on grid power in the evenings, and many are being built in areas where significant new infrastructure will be required to support their load.
Data centers, though largely invisible in daily life, require massive, continuous power to run and cool thousands of servers. Arizona’s data center growth is among the fastest in the country, and like semiconductor fabs, many are adding onsite solar to offset daytime usage. Even so, infrastructure demands remain high, and nighttime consumption will still rely almost entirely on the grid.
Longer summers, hotter nights, and prolonged heatwaves mean air conditioning loads remain elevated deep into the evening, and well into the Fall. Utilities must build more infrastructure—not just for today’s demand, but for the record-breaking summers we now experience regularly.
As Power Magazine recently noted in its analysis of post-ITC solar economics, “Incentives may change, but the grid’s underlying pressure is only rising.” In Arizona, that pressure is uniquely intense—but so is the opportunity to relieve it. With some of the strongest sunshine in the country, the outlook for solar remains exceptionally strong, particularly for commercial applications where large-scale systems can meaningfully offset growing demand.
Utility pricing in Arizona operates under the traditional cost-of-service model, where regulated utilities recover their expenses and invest in infrastructure through customer rates. In its 2025 rate case, APS states that the proposed adjustment is “essential to cover the cost of delivering power to customers’ homes and businesses, including infrastructure upgrades.” Source: Rate Case: 2025 Update
In practice, this means that when Arizona’s power utilities invest in new infrastructure, grid upgrades, or additional generation capacity, those costs are ultimately passed through to customers. As population growth accelerates and energy-intensive industries continue migrating to the state, utilities will require even more investment to keep up. This is why APS, SRP, and other providers continue to seek rate increases—and why that trend is expected to continue indefinitely. Solar, even without the 30% homeowner credit, becomes a logical response to the growing and unavoidable burden of funding an ever-expanding grid.
Arizona homeowners cannot choose where they buy their electricity. Rate payers are captive to a single energy provider based on where they live. There is no shopping around, no competition, no negotiation, and no alternative supplier. In short, when it comes to how we buy power, all the benefits of a free market economy are wiped away. In a practical sense, this means:
That’s why solar carries so much structural value. Installing solar is the only way for a homeowner in Arizona to create their own competition. It’s the only way to push back against a monopolized energy market and reclaim a measure of long-term economic independence. As SEIA noted in its 2025 analysis on federal credits, distributed energy remains the single most powerful tool consumers have to reduce long-term exposure to utility-driven inflation.
Solar is not just an energy product—it’s a mechanism of consumer choice in a market designed to eliminate choice entirely.
The sunset of the federal residential tax credit marks a transition—not a downturn—for solar in Arizona. The forces driving solar adoption have never been tied to a single incentive. They’re rooted in something far more permanent: the reality of living in one of the fastest-growing, hottest, and most energy-intensive regions in the country.
Arizona is experiencing unprecedented population growth, booming industrial expansion, and a climate that places extraordinary pressure on the grid. At the same time, APS and SRP continue to request routine rate increases to fund the infrastructure required to keep pace with demand. With no competitive utility market and no ability to choose where you buy electricity, homeowners will continue to shoulder much of the burden.
Solar fundamentally changes that equation.
It gives homeowners the ability to generate their own power, stabilize their long-term energy costs, and insulate themselves from a grid that is likely to face decades of upward price pressure. Leasing helps keep solar accessible for those who prefer not to purchase upfront, while Arizona’s remaining incentives—state tax credits, sales-tax and property-tax exemptions, battery participation programs, and the ability to earn passive income by selling RECs—continue to offset investment costs.
The economic case for solar in Arizona remains as strong as ever. In fact, the conditions that made solar attractive in the first place are only intensifying. In short, solar has never been more essential.