Arizona Solar Panels

Homeowners who install a battery energy storage system can claim a 30% federal Investment Tax Credit (ITC) on the full cost of the battery, provided it has a minimum capacity rating of at least 3 kWh. This credit applies whether the battery is paired with solar panels or installed as a standalone system, and it directly reduces your federal income tax liability dollar-for-dollar. For a typical home battery like a Tesla Powerwall or similar system, this can translate to thousands of dollars in savings.

Unlike the residential solar ITC — which was eliminated by the “One Big Beautiful Bill” signed in July 2025 — the battery storage credit remains available through 2032 at the full 30% rate. It then steps down to 26% in 2033 and 22% in 2034 before expiring entirely in 2035. This gives Arizona homeowners a meaningful window to add battery storage and still capture significant federal savings.

To claim the credit, file IRS Form 5695 with your federal tax return for the year the system is placed in service. If the credit exceeds your tax liability in a given year, the unused portion can be carried forward to future tax years. You must own the battery system outright — leased systems do not qualify.

Arizona homeowners who purchase a new solar energy system — including photovoltaic (PV) systems, solar water heaters, solar pool heating, and solar batteries — can claim a state income tax credit equal to 25% of the total system cost, up to a lifetime maximum of $1,000. This credit is claimed on Arizona Form 310 and is applied directly against your state income tax liability, reducing what you owe dollar-for-dollar.

To be eligible, you must own the system outright — solar leases and power purchase agreements (PPAs) do not qualify. The system must also come with at least a two-year warranty on the panels and a one-year warranty on other equipment such as batteries and EV chargers. The $1,000 cap is a lifetime limit per taxpayer (the program has been in place since 1995), so if you have claimed this credit before, your remaining available credit may be reduced.

If the credit exceeds your Arizona tax liability in the year it is claimed, the unused portion can be carried forward for up to five years. For more information or to download Form 310, visit the Arizona Department of Revenue website or the Governor’s Office of Resiliency Clean Energy Hub at resilient.az.gov.

When you purchase a qualifying solar energy system in Arizona, you pay zero state sales tax on the equipment. This exemption covers photovoltaic panels, inverters, batteries, mounting hardware, and other eligible solar components. Arizona’s state sales tax rate is 5.6%, so on a $20,000 system, this exemption alone saves you more than $1,100 — and on larger systems, savings can exceed $1,600 or more.

The exemption applies to residential, commercial, and general public installations with no maximum cap on savings. Arizona removed its previous $5,000 savings cap in 2006, meaning the full purchase price of your system is exempt regardless of system size. Eligible technologies include photovoltaics, solar water heating, solar space heating, solar thermal electric, passive solar, wind, solar pool heating, and daylighting systems.

You do not need to take any special action to claim this exemption — your solar installer is responsible for registering with the Arizona Department of Revenue and applying the exemption at the point of sale. For questions, contact the Arizona Department of Revenue Tax Assistance line at (602) 255-3381 or (800) 352-4090.

Installing solar panels typically increases the market value of your home, but in Arizona, that added value is completely excluded from property tax assessments. This means you can enjoy the full financial and energy benefits of going solar without paying a single dollar more in property taxes — a significant long-term savings advantage that compounds every year you own the system.

The exemption applies to a wide range of eligible technologies including solar photovoltaics, solar water heating, solar space heating, solar thermal electric, passive solar, solar pool heating, wind systems, geothermal, and more. It covers residential, commercial, and industrial properties with no cap on the system size or value of the exemption.

To claim the exemption, property owners must provide their county assessor with documentation confirming the purchase and installation of the eligible equipment, including costs. This documentation must be submitted no less than six months before the notice of full cash value is issued for the initial valuation year. Contact your local county assessor’s office for specific submission deadlines and required forms.

Arizona transitioned from traditional net metering to a net billing policy in 2017. Under net billing, when your solar panels produce more electricity than your home uses, the excess energy is sent to the grid and credited to your account — but at a rate lower than the retail price of electricity. As of 2026, export rates vary by utility: Arizona Public Service (APS) credits excess generation at approximately $0.076/kWh, Tucson Electric Power (TEP) at approximately $0.057/kWh, and Salt River Project (SRP) at approximately $0.028/kWh.

One important protection for solar homeowners: when you interconnect your solar system, your export rate is locked in for 10 years. Even if the utility lowers the rate for new customers in future years, your rate remains the same for the duration of that period. Additionally, Arizona’s net billing policy limits how quickly rates can drop — compensation rates cannot decrease by more than 10% per year for new customers.

Because export rates are lower than retail electricity rates, pairing your solar system with a battery storage system is a smart strategy in Arizona. Instead of exporting excess solar energy to the grid at a reduced credit rate, you can store it in a battery and use it later when your panels aren’t producing — maximizing your self-consumption and reducing your reliance on grid power. Note that SRP is transitioning new solar customers to net-billing-based time-of-use (TOU) rate plans starting in late 2025, which further rewards solar-plus-battery systems.

If you are a Mohave Electric Cooperative (MEC) customer in northwestern Arizona, you may qualify for the SunWatts Renewable Energy and Rebate Program, which provides an upfront cash rebate to help offset the cost of installing a rooftop solar system. The rebate is calculated at $0.05 per watt of installed solar capacity, with a maximum payout of $2,500. For a typical 7 kilowatt (kW) system, this translates to a rebate of approximately $350.

To be eligible, you must be a Mohave Electric Cooperative member and your solar installation must meet the co-op’s technical and safety standards. Importantly, you must submit a reservation and application before any installation work begins — applications submitted after installation may not be accepted. Working with a qualified solar installer who is familiar with MEC’s requirements is strongly recommended.

In addition to the solar PV rebate, MEC also offers a solar water heating rebate of $0.75 per kilowatt-hour of estimated first-year energy savings. Contact Mohave Electric Cooperative directly or visit their website for current program availability, application forms, and eligibility requirements.

Mohave Electric Cooperative (MEC) members who install a home battery storage system may be eligible for a $500 rebate through the co-op’s battery incentive program. This rebate is designed to encourage energy storage adoption and help members manage their electricity usage more efficiently, particularly during on-peak demand periods.

To qualify, the battery system must meet the following requirements: a minimum usable capacity of 5 kilowatt-hours (kWh), a warranty of at least 10 years or 5,000 cycles, programmable controls, Wi-Fi connectivity, and the battery must not be charged during on-peak hours. These requirements ensure the battery can be used to support grid stability and reduce demand during high-usage periods.

As with the SunWatts solar rebate, you must submit an application to Mohave Electric Cooperative before installation begins. Contact MEC directly to confirm current program availability, review all terms and conditions, and obtain the necessary application materials.

Tucson Electric Power (TEP) customers who own a home battery storage system can earn ongoing annual payments through the Energy Storage Rewards Program. TEP pays participants $120 per kilowatt of average battery output for allowing the utility to draw on their stored energy during high-demand “control events.” For a typical home battery system, this can be worth up to approximately $720 per year.

TEP may call up to 100 control events per year, with each event lasting no more than four hours. Customers receive advance notice of upcoming events through the battery management app or via email, giving them time to prepare. During these events, TEP discharges a portion of the stored energy in your battery to help balance grid demand — your home’s power supply is not interrupted.

This program is an excellent way to generate passive income from your battery investment while supporting grid reliability in the Tucson area. Contact Tucson Electric Power or visit their website for current enrollment details, compatible battery systems, and program terms.

Arizona Public Service (APS) operates a Storage Rewards Pilot program that compensates residential customers for making their home battery storage available to the utility during periods of peak electricity demand. By enrolling, homeowners can earn financial incentives while helping APS manage grid stress — a win-win for both participants and the broader electricity system.

The program is compatible with select battery systems, including FranklinWH residential energy storage systems. Homeowners who install a qualifying battery can enroll and receive payments for allowing APS to dispatch stored energy during designated peak events. Your home’s power is maintained throughout these events, and you retain backup power capability.

For homeowners who want to participate but are concerned about upfront costs, leasing options are available through financing platforms like Palmetto’s LightReach, which can lower the initial investment while still allowing participation in the incentive program. Contact APS directly or visit aps.com for current program details, compatible equipment lists, and enrollment information.

Salt River Project (SRP) customers who install a qualifying home battery storage system can participate in the SRP Battery Partner Program and earn financial incentives by allowing SRP to draw on their stored energy during periods of high electricity demand. The program is part of SRP’s broader strategy to integrate distributed energy storage into its grid management approach.

The program is compatible with select battery systems, including FranklinWH residential energy storage units. Enrolled homeowners receive compensation for their participation in demand response events, during which SRP may discharge a portion of the battery’s stored energy to help balance the grid. Your home’s power supply is not affected during these events.

SRP is also transitioning new solar customers to net-billing-based time-of-use (TOU) rate plans starting in late 2025 (such as E-28 and E-16 plans), which are specifically designed to reward solar-plus-battery system owners who shift energy usage to off-peak hours. Pairing solar with a battery and enrolling in the Battery Partner Program can maximize your overall savings. Visit srpnet.com or contact SRP directly for current enrollment details and compatible equipment.

The SRP Solar Choice program is designed for Salt River Project customers who want to support solar energy but are unable or unwilling to install rooftop panels — such as renters, condo owners, or homeowners who prefer not to make a capital investment. Through the program, SRP owns or leases solar panels and sells the generated energy directly to participating customers at a modest premium.

Participants can choose to offset 50% or 100% of their monthly electricity usage with solar energy, paying just half a cent ($0.005) more per kilowatt-hour than the standard rate. This makes it one of the most affordable community solar options available, with no equipment to purchase, no installation required, and no long-term commitment to a solar system.

While this program does not provide the same financial return as owning a rooftop solar system, it is a simple and accessible way to reduce your carbon footprint and support the growth of solar energy in Arizona. Visit the SRP Solar Choice page at srpnet.com for current pricing, enrollment options, and program terms.

Arizona’s Renewable Energy Production Tax Credit is available to businesses and individuals who own and operate qualifying renewable energy systems with a minimum capacity of 5 megawatts (MW). The credit is calculated based on the actual kilowatt-hours (kWh) of electricity produced by the system each year and is paid out over a 10-year period. For photovoltaic and solar thermal electric systems, the credit starts at $0.04/kWh in years 1 and 2, steps down gradually, and reaches $0.01/kWh in years 9 and 10.

The maximum credit is $2 million per system per year, and the total annual program budget is $20 million statewide. The credit may be applied against either corporate or personal income taxes, providing flexibility for different business structures. Only systems installed after December 31, 2010 are eligible.

This incentive is best suited for large-scale commercial or utility solar developers rather than typical residential homeowners. For full eligibility requirements, application procedures, and current program availability, visit the Arizona Department of Revenue’s tax credits page at azdor.gov.

Customers of the Sulphur Springs Valley Electric Cooperative (SSVEC) in southeastern Arizona may be eligible for a rebate on qualifying solar water heating systems. The rebate is calculated at $0.50 per kilowatt-hour of estimated annual energy savings, providing a direct financial incentive to switch from conventional water heating to solar thermal technology.

Solar water heaters use energy from the sun to heat water for household use, significantly reducing the electricity or gas needed to power a traditional water heater. Depending on the size of the system and your household’s hot water usage, the annual energy savings — and therefore the rebate amount — can vary. This incentive helps offset the upfront cost of installation and shortens the payback period for the system.

To confirm current program availability, eligibility requirements, and how to apply, contact Sulphur Springs Valley Electric Cooperative directly. Program details and funding availability may change, so it is recommended to verify before purchasing or installing a system.