Is Solar Worth It in Arizona? (2026)

Arizona has some of the best sunshine in the country, so solar looks like an easy win. But 2026 changed the math. The federal residential tax credit is gone, and the rates utilities pay you for extra solar power keep falling. So is solar still worth it in Arizona? For most homeowners, yes, but the payback is longer than it used to be and how you use your power matters more than ever.

The Short Answer for 2026: Is Solar Worth It in Arizona?

Solar is still worth it for most Arizona homeowners, but expect a payback of roughly 10 to 13 years if you buy your system with cash. EnergySage’s 2026 Arizona city data puts payback between 10.7 and 13 years depending on the city, while Dreamy Leads Research estimates about 11.9 years for a typical Phoenix system. The two biggest factors are your electric bill and your utility’s export rate, which is what you get paid for extra power you send to the grid. Homes with high summer cooling bills and panels sized to match their own usage see the fastest returns.

What does solar cost in Arizona?

A typical home system in Arizona costs somewhere between about $2.17 and $2.40 per watt before incentives, based on EnergySage’s 2026 data from real installer quotes across Arizona cities. That works out to roughly $10,800 to $12,000 for a 5 kW system, or about $17,300 to $19,200 for an 8 kW system.

Dreamy Leads Research reports a higher average for Phoenix specifically: an 8.8 kW system at $25,520 before incentives, which is about $2.90 per watt. Prices vary by installer, roof type, and equipment, so always get at least three quotes. Costs also tend to run higher for larger systems because Arizona homes use so much power for air conditioning from May through September.

What are Arizona’s electricity rates in 2026?

Electricity in Arizona is not cheap, and it keeps getting more expensive. According to 2025 EIA annual data published in a 2026 guide, Arizona households paid an average of 15.26 cents per kWh, with an average monthly bill of about $157.15.

Rates differ by utility. Palmetto’s 2026 data puts Arizona Public Service (APS) at 15.30 cents per kWh, Tucson Electric Power (TEP) at 15.00 cents, and Salt River Project (SRP) lower at 12.50 cents, with a state average near 14 cents.

The trend matters more than any single number. In October 2026, Consumer Reports wrote to the Arizona Corporation Commission opposing APS’s request for a 16 percent residential rate increase, which would add about $240 per year to the average customer’s bill. The same letter notes APS customers have seen electricity costs rise about 58 percent over the last five years. Higher rates make every kilowatt-hour your panels produce worth more, which is the main reason solar still pays off even without the old tax credit.

How do Arizona’s export rates work?

Arizona does not have traditional net metering anymore. The Arizona Corporation Commission ended retail-rate net metering in December 2016 and replaced it with net billing. Under net billing, the power you use yourself saves you the full retail rate, but extra power you export to the grid earns a much lower export rate.

The export rate is called the Resource Comparison Proxy (RCP), set each year by the Arizona Corporation Commission. It is based on the market cost of solar energy, falls over time, and cannot drop more than 10 percent in a single year. Your rate is locked for 10 years from the date you interconnect your system.

Here is what the three big utilities currently pay for exports:

• Tucson Electric Power (TEP): TEP’s own website states an export rate of $0.0462 per kWh in effect from October 1, 2026 through September 30, 2027. That is roughly 4.6 cents, far below TEP’s retail rate near 15 cents.
• Arizona Public Service (APS): APS credits exports at its RCP rate, which the commission cuts each September. Recent analysis from Dreamy Leads Research puts it near five and a half cents per kWh, well under APS’s retail rate.
• Salt River Project (SRP): SRP’s export plans credit excess power at a fixed $0.028 per kWh, regardless of time of day, according to SolarReviews. That is under three cents.

The lesson is simple: a kilowatt-hour you use in your own home is worth two to five times more than one you send back to the grid. That makes self-consumption, not exports, the heart of Arizona solar savings in 2026.

Does Arizona’s heat hurt solar panels?

Heat does reduce panel output, but Arizona’s sun more than makes up for it. Solar panels are rated at a panel temperature of 25°C (77°F), and output falls as panels get hotter. CleanTechnica reports that high heat can cut output by 10 to 25 percent once panels go well above that temperature.

At the same time, Phoenix gets about 6.57 kWh of sun per square meter per day, according to NREL PVWatts data cited by Dreamy Leads Research, among the highest in the nation. So the heat acts like a tax on a very large paycheck: you lose some efficiency, but you still produce far more power than a cooler, cloudier state. Choosing panels with a good temperature coefficient and leaving airflow under the panels helps.

What incentives are left in 2026?

The biggest change in 2026 is the end of the federal residential credit. The 30 percent residential solar tax credit under Section 25D expired for expenditures after December 31, 2025, under P.L. 119-21. If you buy a system with cash or a loan in 2026, you cannot claim it.

What remains:

• Arizona state tax credit: Arizona offers an income tax credit worth 25 percent of system cost, capped at $1,000, according to SolarReviews and Dreamy Leads Research. It is modest but real.
• Sales and property tax exemptions: Solar equipment is exempt from Arizona state sales tax, and the added home value is exempt from property tax, per SolarReviews.
• Lease or PPA: Dreamy Leads Research notes that leases and power purchase agreements are one path where a federal credit may still apply, because the installer owns the system and may capture the commercial credit, often passing savings on as a lower rate. This is not guaranteed and varies by provider. This is general information, not tax advice.

How can you make solar pay back faster?

Because exports pay so little, the fastest payback comes from using your own solar power instead of selling it back cheaply:

• Shift usage into the day. Run the dishwasher, pool pump, laundry, and EV charging while the sun is up. A self-used kilowatt-hour at 15 cents beats an exported one at 3 to 5 cents.
• Consider a battery. APS time-of-use plans charge far more in the evening on-peak window (about 29.78 cents per kWh in summer, per Solar Topps’ 2026 rate overview). A battery lets you store midday solar and use it during those expensive hours instead of exporting it for pennies.
• Size the system to your usage. Oversizing wastes money because the extra power only earns the low export rate. Size to your actual bill, not your roof space.
• Get multiple quotes. With per-watt prices ranging from $2.17 to $2.90 across Arizona sources in 2026, shopping around can save thousands.

Who is solar not a good fit for?

Solar is weaker for homes with heavy shading, very low electric bills (under about $75 per month leaves little to save), or a planned move in the next few years. Renters and condo owners without roof rights should look at community solar instead. Homes on SRP’s demand-charge plans need careful modeling, since demand charges can eat into savings. If any of these describe you, get a quote and check the math before signing.

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Frequently asked questions

Does Arizona still have net metering in 2026?

No. The Arizona Corporation Commission ended retail-rate net metering in December 2016. New systems go on net billing, where exported power earns the RCP export rate, which is far below the retail rate.

Is the 30 percent federal solar tax credit still available in Arizona?

No for homeowners who purchase a system in 2026. The residential credit under Section 25D expired for expenditures after December 31, 2025. A lease or PPA may still benefit from the commercial credit through the installer, but that is not guaranteed. Talk to a tax professional.

What is the payback period for solar in Arizona in 2026?

Roughly 10 to 13 years for a cash purchase, based on EnergySage’s 2026 Arizona city data (10.7 to 13 years) and Dreamy Leads Research (about 11.9 years for Phoenix). Leases and PPAs can pay back faster because there is no upfront cost.

How much can I save over 25 years with solar in Arizona?

EnergySage’s 2026 estimates, based on real installer quotes, put 25-year savings between about $30,600 and $46,500 depending on the Arizona city, after accounting for system cost. These are estimates, not guarantees.

Is solar worth it in Arizona with new export rates?

Is solar worth it in Arizona? Yes, with 10-13 year payback at $2.17-2.40/W. Solar is worth it in Arizona for most homeowners who own their roof and can use daytime power.

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Last reviewed: 11 October 2026

Prices, rates, and savings estimates change over time and vary by installer, roof, utility, and household usage. Get quotes from multiple local installers before deciding. This article is general information, not financial or tax advice.

By TheSolarCost Editorial Team

Sources: Dreamy Leads Research, “Is Solar Worth It in Arizona in 2026? The Real Payback Math” (Oct 2026); EnergySage Arizona solar panel cost pages, Buckeye, Sun City West, Oracle, Chino Valley, Marana (2026); U.S. Energy Information Administration, Electric Power Monthly Table 5.6.A (May/Apr 2026) and 2025 annual data via myhomecosts.com (Oct 2026); Palmetto, Arizona Solar Panels utility rates (2026); Consumer Reports letter to Arizona Corporation Commission re: APS 2026 rate case (Oct 6, 2026); TEP official RCP export rate page, tep.com (Oct 1, 2026 – Sep 30, 2027); SolarReviews, Going Solar with Salt River Project (2025); Solar Topps, 2026 APS Solar Program Rate Plan Overview (2026); CleanTechnica, Solar Panels Do Work on Cloudy Days (Answer Box); NREL PVWatts via Dreamy Leads Research (2026).