Arizona's Rebates and Incentives for Solar Energy Systems

Arizona utilities must get at least 15 percent of their energy from renewable resources by 2025, and 30 percent of that must come through distributed generation. That spells dividends for owners of smaller systems, many of whom will be Arizona homeowners. Indeed, it is that renewable energy standard that is driving Arizona's solar industry. For the most part, the state has stayed out of solar incentives, offering no all-encompassing rebates, although a tax credit and tax exemption are available. Rebates for homeowners are coming primarily from renewable-hungry utilities, led by Arizona Public Service and the Salt River Project, the state's two largest investor-owned utilities.

Here is what the state of Arizona and its utilities are offering for solar power:

Personal Tax Credit

The state of Arizona will give a 25 percent tax credit on the purchase and installation of solar energy systems, including passive solar design, solar water heaters, solar space heat, solar ovens, solar cooling, solar pool heating and photovoltaics (PV). However, the maximum credit is $1,000 per residence, regardless of the number of energy systems purchased. Systems must be new and meet all applicable performance and safety standards. Look here for more information.

Property Tax Exemption

In Arizona, 100 percent of the increased home value resulting from solar energy system installation is exempt from property taxes. Just about every type of solar energy system you can think of qualifies for the exemption. However, passive solar heating must entail systems that are clearly "designed as a solar energy device, such as a trombe wall, and not merely a part of a normal structure such as a window." So installing new windows won't be an eligible step, although rebates for energy efficient windows may be available.

Sales Tax Incentive

In addition to property taxes, all purchased solar energy equipment is exempt from state sales taxes in Arizona. The exemption is good through 2016. The solar energy retailer or solar contractor buying the equipment must first register with the Arizona Department of Revenue. See the Arizona Solar Center for more information on this tax break.

Utility Rebates

The following are brief descriptions of utility rebate programs available to Arizona homeowners. For more specific information click on the embedded links in each summary.

• Arizona Public Service (APS) Renewable Energy Incentive Program - Residential grid-tied PV systems are eligible for up to $1.95/watt but the rebate may be decreased based on expected performance. Off-grid systems too are eligible for $2.00/watt, although max system size is set at 5 kilowatts (kW). Solar water heaters receive a rebate equal to $0.50/kWh of estimated first-year energy savings. Solar daylighting is eligible for $0.20/kWh of estimated first year savings.
• Salt River Project (SRP) EarthWise Solar Energy Incentive Program - Through April 30, 2011 residential PV systems are eligible for a $2.15/W-DC rebate. Residential solar water heaters qualify for $0.50/kWh of estimate first-year energy savings. Maximum PV incentive is $10,750.
• Sulphur Springs Valley EC SunWatts Rebate Program - Solar water heaters and PV systems are eligible for a rebate. PV systems up to 10 kW that cost less than $75,000 may qualify. Owners can choose between a production incentives (pay per kilowatt-hour produced) or an up-front rebate. The production incentive rate is $0.108 to $0.202 per kWh depending on the length of agreement with the utility. The up-front rebate is $3.00/W-DC with a maximum of 50% of project costs. Solar water heaters are eligible for $0.75/kWh of first-year expected savings.
• Tucson Electric Power (TEP) SunShare Program - This rebate program offers PV homeowners  up to $3.00/W-DC for grid-tied systems; $2.00/W-DC for off-grid. Residential solar water heaters get $0.25/kWh-equivalent plus $750, but there is a maximum of$1,750 in total rebates. PV incentives cannot exceed 60 percent of costs and, while the TEP incentive may be combined with other state and federal incentives, the combined rebates cannot exceed 85 percent of total costs.
• Trico Electric Cooperative SunWatts Incentive Program - Solar water and space heat, PV and daylighting are eligible. PV systems less than 10 kW get $3.00/W-DC, which should cover the vast majority of home solar power systems. Solar water heaters get $0.75/kWh of first year savings while solar daylighting gets $0.20/kWh. Incentives must not be more than 40 percent of total project costs. As of January 2010, rebate funds are temporarily exhausted although Trico is still accepting applications in lieu of new funding.
• UniSource Energy Services Renewable Incentive Program - Grid-tied PV is eligible for up to $3.00/W-DC (again rebates may be de-rated based on expected performance) and off-grid PV less than 5 kW gets $2.00/W. Residential solar water and space heaters are eligible for $750 and $0.25/kWh of first-year savings with a maximum of $1,750. Solar daylighting gets $0.20/kWh.