Arizona

Solar Legislative Score: ***
Arizona, with Lake Powell, the red rocks of Sedona, Flagstaff’s impressive mountains, and one of the seven natural wonders of the world, has a lot to protect by building up its renewable energy resources. Despite its abundant solar energy resources, the Grand Canyon State is in a bit of a hole when it comes to promoting renewable energy, solar in particular. What’s being done to protect the impressive native American heritage and the home of the Sun Devils? Here’s how the legislature is getting down to business.

STATE LEGISLATION
Renewable Energy Standard
At the end of October 2006, the Arizona Corporation Commission, which oversees public utilities, voted to beef up its Renewable Portfolio Standard to require 15% renewable energy, and 30% of that should come from distributed generation projects like solar photovoltaic systems. They do however have a lot of work ahead of them. The Arizona state Attorney General approved the newRenewable Energy Standard in June 2007. Now it’s up to the utilities to figure out how to comply, and that’s going to require some concerted effort.

NET-METERING
Arizona has no net-metering standard yet, and this is really holding back the development of solar electricity systems. Why? you ask. Well, without a standard, each public utility can make up its own plan for connecting private systems to the electrical grid. Arizona Public Service (APS) actually set up a system in which they got compensated for lost revenue when customers set up their own electrical system. As a result, if you set up your own solar electricity system, you paid the utility even when you were not using their power. This kind of craziness did attract the attention of lawyers, and the policy was successfully challenged in court. At the moment, most utilities cap system size at 10kW (that’s pretty low). APS now has a program (after losing the court battle for charging for net-metering) that is a bit better; it’s limited at 100kW. One other issue is that there is still no interconnection standard mandated by Arizona law. This means each utility sets its own rules for connecting your solar electricity system to their grid.

STATE INCENTIVE PROGRAMS, UTILITY REBATES, UTILITY LOANS, AND UTILITY INCENTIVES
In June 2006, Arizona extended a tax credit for solar and wind power generation for commercial uses. In July 2007, the legislature passedHouse Bill 2491, which expanded this to all non-residential electricity customers. The 10% tax credit is capped at $25,000 per year. A similar credit is offered for residential solar and wind energy systems, but it is a 25% credit capped at $1000.
House Bill 2429, the 2006 act authorizing the tax credit for corporate solar and wind energy systems also gives an exemption from property tax caused by an increase in property value due to the installation of renewable energy systems.
Lastly, House Bill 2429 offers a tax credit for sales tax paid on renewable energy generation equipment, so you can install your solar electricity system tax free!

EXAMPLE 3KW SYSTEM – HOME INSTALLATION COST
Arizona has a “Great” solar rating. That’s a good thing, because it means you’ll be able to generate lots of solar energy. The total cost for a 3kW system is about $45,000. State, local, and utility company incentives (check them out above) could bring that cost down to around $30,000. Even better, installing a solar electricity system could add $12-25,000 or more to your property value, and that’s exempt from property tax! With all those savings, a system like this could pay for itself in as little as a year (check out the estimate below though since it would more likely take a bit longer).

Building Type: Residential
State & County: AZ - Maricopa
Utility: APS
Utility Type: Investor-Owned Utility
Assumed Average Electric Rate:Please check against your bill $0.0935/kWh
Assumed Average Monthly Electricity Usage: Please check against your bill 1,300 kWh/Month
Your Average Monthly Electricity Bill: (Assumed rate x average monthly usage) $122 / Month
Tiered Rates Apply:Yes
Time-of-Use Metering Offered: Yes
Net-Metering Available: Yes

ESTIMATED SYSTEM SIZE
The system size best for your situation will vary based upon product, building, geographic and other variables. We encourage you to work with a Solar Pro who can better estimate the system size best for your situation. We estimate your building will need a system sized between 4.00 kW and 6.00 kW of peak power. This estimate assumes the mid-point of this range.
Solar Rating: Great (6.328 kWh/sq-m/day)
Solar System Capacity Required: 5.00 kW of peak power (DC watts)
Roof Area Needed: 500 sq-ft

ESTIMATED SYSTEM COST
This is only an estimate based upon many assumptions. Installation costs can vary considerably. We encourage you to work with a Solar Pro who can provide you with a more detailed cost estimate. We estimate that a 5.00 kW peak power system will cost between $36,000 and $54,000. This estimate assumes the mid-point of this cost range.
Assumed Installation cost: (before rebates, incentives or tax credits). $45,000 assuming $9 /watt
Expected APS Utility Rebate: ($3/watt installed) (Limited to 100% of cost) ($12,150)
Expected AZ State Rebate:State incentive does not apply to this utility ($0)
AZ State Tax Credit/Deduction (25% of net system cost) (Maximum of $1000) ($1,000)
Federal Tax Credit: (Installation type: Residential ) ($2,000)
Income Tax on Tax Credit: $280

YOUR ESTIMATED NET COST: $30,130
Monthly Payment (6.5% apr, 30 years): $190

SAVINGS & BENEFITS
Increase in Property Value: $12,680 to $25,301
Exempt from Property Tax: Yes
Accelerated (5 yr) Depreciation:(Installation type: Residential ) No
First-year Utility Savings: Since this is not a business application, these savings are in after tax dollars. So, your realized savings may actually be higher! $634 to $1,265
Average Monthly Utility Savings:(over 25-year expected life of system) $89 to $177
Average Annual Utility Savings:(over 25-year expected life of system) $1,064 to $2,123
25-year Utility Savings: $26,604 to $53,083
Return on Investment (ROI):(with Solar System ave. cost set as asset value) 220%
Return on Investment (ROI):(with Property appreciation set as asset value) 524% to 262%
Years to Break even:(Includes property value appreciation) 1 to 10 years
Years to Break even:(Assuming no property value appreciation) 9 to 17 years
Greenhouse Gas (CO2) Saved:over 25-year system life 160.0 tons (320,000 auto miles)

CONSENSUS
Arizona is taking baby steps in the renewable energy market, but everyone has to start somewhere. If the legislature could just agree on some regulations for net-metering and interconnection, the state could start to become a more friendly place for solar energy. We’ll have to stay tuned to see if they really do rise from the ashes.