Solar in Arizona: the 2026 numbers
A household here spending $200 a month on electricity needs roughly a 9 kW array, which generates about 15,777 kWh in its first year. Bought outright, it returns its cost in year 14 and is worth $6,037 over 25 years — after discounting, after upkeep, and with no federal credit.
Our answer for Arizona: cash purchase
Of the four options, a cash purchase has the highest net present value at $6,037 , turning cash-positive in year 14 . Solar stops making sense in Arizona above roughly $3.67/W installed — if a quote comes in above that, the answer flips.
What Arizona gives you to work with
| Sunlight (specific yield) | 1753 kWh per installed kW per year — NREL PVWatts v8, Phoenix |
| Average residential rate | $0.152/kWh — EIA, May 2026 |
| Export credit | 75% of retail — Export compensation set annually by the Corporation Commission. |
| Federal credit on a purchase | None — §25D expired after December 31, 2025 |
| State incentives | Worth about $952 in present value here — reviewed 2026-08-14 |
The four options, run side by side
A household spending $200 a month on electricity, with the array sized to cover its usage, at the default $3.00/W installed cost. This is the same case the calculator below opens on. Net present value discounts future dollars at 5%, so these are not the inflated “lifetime savings” totals a sales quote shows.
| Option | Net present value | Payback | Cost per kWh |
|---|---|---|---|
| Cash purchase You pay for it. No fee, no interest, no escalator. | $6,037 | Year 14 | $0.147 |
| Solar loan Includes the 20% dealer fee that a low-APR solar loan hides in the financed price. | -$4,500 | Year 25 | $0.197 |
| Lease You rent the system. The owner keeps the §48E credit. | -$1,472 | Year 1 | $0.178 |
| PPA You buy the output per kWh, not the hardware. | -$5,958 | Never | $0.200 |
A cash purchase delivers electricity at $0.147/kWh against a retail rate of $0.152 — it undercuts the utility, which is the whole case in Arizona.
Best option: Cash purchase — $6,037 net present value over 25 years, paying back in year 14.
| Option | Owns it | 30% credit | Upfront | 25-yr NPV | Payback | Cost/kWh |
|---|---|---|---|---|---|---|
| Cash purchase | You | None | $27,000 | $6,037 | Year 14 | $0.147 |
| Solar loan | You | None | $0 | -$4,500 | Year 25 | $0.197 |
| Lease | Provider | Indirect (§48E) | $0 | -$1,472 | Year 1 | $0.178 |
| PPA | Provider | Indirect (§48E) | $0 | -$5,958 | Never | $0.200 |
What this calculation assumes, and where it can be wrong
Federal credit. The 30% federal residential credit (IRC §25D) expired for systems placed in service after December 31, 2025. A 2026 cash or loan purchase receives no federal credit. Leases and PPAs remain eligible indirectly: the third-party owner claims the commercial credit (IRC §48E) and reflects part of it in the price offered, provided the system is placed in service by December 31, 2027.
Estimated §48E value in a lease or PPA quote: about $4,050 for this system, assuming the provider passes through half the credit. That share is our estimate, not a published figure.
Export credit. Export compensation set annually by the Corporation Commission.
State incentives. Arizona's Residential Solar Energy Credit is 25% of system cost capped at $1,000, claimed on the state income tax return, and is unaffected by the federal expiry. The cap binds on almost any real system, so in practice this is a flat $1,000 for most households. Non-refundable, so it needs state tax liability to be worth anything — the calculator withholds it if you say you have none.
- Cash purchase: No federal tax credit is applied: IRC §25D expired for systems placed in service after 2025-12-31.
- Solar loan: Financed amount includes a 20% dealer fee, which is why a $0-down loan quote costs more than the same system bought outright.
- Solar loan: No federal tax credit is applied: IRC §25D expired for systems placed in service after 2025-12-31.
- Lease: Pricing assumes the system owner claims the §48E credit and reflects part of it in your quote. The system must be placed in service by 2027-12-31 to qualify.
- PPA: Pricing assumes the system owner claims the §48E credit and reflects part of it in your quote. The system must be placed in service by 2027-12-31 to qualify.
Sunlight data: 1753 kWh per installed kW per year (verified — NREL PVWatts v8). Retail rate: $0.152/kWh.
Why Arizona lands where it does
Across the 50 states we model, Arizona ranks #23 on the value of a cash purchase, at $6,037 — behind Minnesota at $7,167 and ahead ofNorth Carolina at $5,305 . The ordering is not the one people expect, and the reason is worth stating plainly: sunshine matters less than the price of the electricity you stop buying.
Arizona gets 1753 kWh per installed kW per year and pays $0.152 per kWh. That is a lot of sun and cheap power — the combination that flatters brochures and disappoints spreadsheets. Every kWh the array makes displaces only $0.152 of bill, so the hardware has to be very cheap before the arithmetic works.
The export rule is the main event here
Arizona credits exported electricity at 75% of retail. Export compensation set annually by the Corporation Commission. On the reference system, about 10,255 kWh a year leaves the house rather than being used in it, and the gap between what that power is worth on your bill and what the utility pays for it costs $390 a year.
That single number is the difference between the answer on this page and the answer on a calculator that values every kWh at retail — which is what almost all of them do. It is also why self-consumption is the lever that matters most in Arizona: shifting load into daylight hours, or adding a battery, an EV or a heat pump, converts exported kWh worth $0.114 into avoided kWh worth $0.152.
What the state actually pays you
Arizona's Residential Solar Energy Credit is 25% of system cost capped at $1,000, claimed on the state income tax return, and is unaffected by the federal expiry. The cap binds on almost any real system, so in practice this is a flat $1,000 for most households. Non-refundable, so it needs state tax liability to be worth anything — the calculator withholds it if you say you have none.
Run through the model, that is worth about $952 in present value on the reference system — 16% of the total value of a cash purchase here. With §25D gone, this is now the only public money on the table for a homeowner who buys.
The financing trap
A solar loan is worth -$4,500 here against $6,037 for the same system bought outright — a gap of $10,537. The interest rate is not what causes that. A 20% dealer fee is embedded in the financed price, which is how a "1.99% APR" offer ends up costing more than a bank loan at 8%. It is rarely on the quote. Ask for it by name.
Lease and PPA look different from a purchase for a structural reason: the third-party owner still claims the 30% §48E credit, which a homeowner buying outright can no longer get. How much of that credit reaches you in the price is a negotiation, and we assume half. The owner also carries the upkeep and the inverter replacement that a buyer pays for. That is why they still trail a cash purchase here, though by much less than they would have in 2025. Both are tied to systems placed in service by December 31, 2027 — see the 2027 deadline.
Before you accept a Arizona quote
- Confirm it does not apply the expired 30% federal credit.
- Ask what export rate it assumed. Arizona credits exports at 75% of retail; if the quote valued every kWh at $0.152, its savings figure is overstated.
- Check the price per watt. Above about $3.67/W the purchase stops paying for itself in Arizona.
- Ask for the dealer fee on any financed offer, as a dollar amount.
- If it is a lease or PPA, ask for a placed-in-service commitment — §48E requires the system running by December 31, 2027.
More: the 2026 credit change, when solar is not worth it, our assumptions and sources.