The Complete Guide to Flagstaff Solar

flagstaff-solar

Information about Solar Panels in Flagstaff, Arizona

If you’re considering going solar and you live in or around Flagstaff, Arizona, you’ve come to the right place.

Whether you are wondering about your local utility’s policy, installation costs, or financing, keep reading. We have the answers to all Flagstaff solar installations below!

This post has been developed especially about solar in Flagstaff, AZ, for residents that are served by the electric utility Arizona Public Service (APS). If that doesn’t apply to you, you can still check out the Arizona solar energy state page to learn more about solar in your state.

If you’re looking for a simple yes or no as to whether you should install solar in the Flagstaff area, the answer is definitely ‘yes’, similar to the rest of the state. The sunny weather, cost of electricity, and relatively solar-friendly policies make it no surprise that Arizona has the third-highest installed solar capacity of any state in the US. Read on to find out more!

#1 Overall Solar Grade

B
Overall Grade
9 years Avg. Payback Time (For Cash Purchase)
10.5 % Estimate IRR (Return on your investment on cash purchase over 25 years)
$28,574 Your Net Profit Over 25 Years (Cash Purchase)

* Note that these are estimated values for informational purposes only, and do not take into account the full complexity of all financial projections. They also only apply to cash purchases, which means your numbers will be different if you lease your system or pay for it with a loan (factoring in interest). Also note that we are not financial advisors, so this information should not be construed as financial advice.

#2 Options for Buying Solar Panels in Flagstaff, Arizona

Residents of Flagstaff have various options for paying for their solar installation. We look at the three available options: cash, leases, and loans.

Cash Upfront

The simplest option to purchase solar panels in Flagstaff, AZ, is with cash upfront. While this isn’t possible for all homeowners, it will allow you to utilize all tax exemptions and credits, and it offers the largest return on your investment over time. Let’s explore how much this option might cost you, and the benefits you’d see over the lifetime of the system.

Most average rooftop solar systems run about 5 kilowatts (kW) in size. At a state average installation cost of $3.26 per watt, a system of this size in Arizona will cost about $16,283 to purchase and install. If that sounds like too much money, just wait!

Factoring in the 30% Federal tax credit, you can subtract $4,885 from that total and you can also receive a $1,000 tax credit from the state. Unfortunately, you won’t find incentives provided by APS or the local Flagstaff government for solar panels like you might in some other regions (though they do have incentives for solar water heaters and other energy efficiency initiatives).

So with the tax credits factored in, the total cash upfront cost looks more like $10,398.

How long will it take for this expense to pay off? If you pay upfront, 5kW of solar panels should pay for themselves after 10 years or so. Once they pay themselves off, all of your electricity savings can be considered profit – and you could see as much as $28,574 in total income over the life of the system!

Bottom Line: Your return on the investment will come out to about 10.5%, which beats most stock market choices we make. Sounds like a good deal to us.

Leases

An alternate option to paying cash is to enter a contract to lease the panels from a solar installation company. The company will install the panels on your roof and the panels will have the same effects on your electric bill as a cash-purchased solar system, but you won’t own them outright.

This is very similar to the idea of leasing a car, where you will pay a set monthly amount for a period of years, and either purchase the system outright at the end of the lease, continue the lease on a year-by-year basis, or get rid of (uninstall) the system. If you’re worried you’ll have to move before the end of your lease, it is possible to transfer it to new homeowners, but you need to arrange the transfer with the installing company and the buyers beforehand.

Leases cost less out of pocket in the beginning, but don’t provide you with a lot of the same long-term financial rewards as a cash or loan purchase. If the terms of your lease are financed properly, you should save more money on your electric bill each month than you pay toward the lease, which would net you a small monthly profit. The amount you save on your electric bill should grow over time too, as utility rates go up but your lease rate is locked in.

If you’re interested in learning more about solar leases, APS has information and advice for homeowners under their service.

Bottom Line: A worthwhile option if you cannot afford cash upfront, a solar lease will save you money on your bill, and this saving will grow over time as utility rates increases.

More: Solar Leases

Loans

If you don’t have enough cash on hand to purchase upfront, but don’t like the idea of a lease, the third option – taking out a loan for solar – may be the right one for you! Using a loan to purchase a solar system will still allow you to take advantage of tax credits and tax exemptions, while not requiring you to pull too much money out of your bank account at once.

How would the finances of a solar loan compare to the finances of a cash purchase? What would this actually look like for your bank account? Let’s revisit the sample purchase from the ‘cash’ section, where a 5kW system would run you $16,283. If you take out a loan for that much money at 5% interest on a 15-year term (you can calculate some different terms and interest rates too, if you want), in the first year of owning the system:

  • You will get $4,884 back for your federal 30% tax credit.
  • You will get $1,000 back for your state tax credit.
  • You will save about $1,011 on utilities ($84 a month!) your first year (and over $2,000 annually by 22nd year!)
  • You will spend $129 per month paying your loan.

As utility rates go up each year, your savings also increase and at the end of 25 years, you’ll see a net profit of $21,679.

Bottom Line: The return on your investment won’t be quite as large as it would be in a cash upfront scenario, but you are still looking at a very healthy long-term investment!

More: Solar Loans

#3 Flagstaff Solar Policy Information

While you might hear a lot about the Department of Energy and Environmental Protection Agency when it comes to energy and utilities, the reality is most of the policy is driven by the states. And Arizona has adopted some great solar policies.

downtown-flagstaff

Different states have different climates (weather and politics), energy prices, and varying levels of solar feasibility, so Arizona designed its state policy around these realities. The state government develops rules around interconnection, the quantity of energy that utilities must get from renewable sources, and how households can send energy back to the grid.

You’ll read about several policies created in the past decade, but very recently, state policy has taken a turn. The state has been in conflict with utilities – yes, that includes APS – and recently compromised to allow for new increases in electricity rates (you can read more information from Greentech Media and Utility Dive, if you’re interested). This is something you’ll need to keep an eye out for in the coming months and years, but read on for an assessment of current policy!

Renewable Portfolio Standard

One way that states encourage utilities (and businesses and residents!) to utilize renewable energy sources is with a Renewable Portfolio Standard (RPS). This document, common across the country, mandates the amount of energy produced in the state that has to come from sources like wind, solar, biomass, hydroelectricity, or other renewable forms of energy.

The Arizona RPS breaks down renewable energy requirements like this (with a target date of 2025): 15% of the state’s total energy must be renewable, 30% of THAT should come from ‘distributed’ sources like homes or businesses, and half of THAT should come from residential energy sources (like solar on your roof!). That essentially means that Arizona is looking to get at least 2.25% of its electricity from residential solar or wind.

More: Renewable Portfolio Standard (RPS)

Electricity Prices

Let’s not kid around – electricity prices are a major reason many people start thinking about solar, especially as those costs get higher and higher. Having solar at home helps you avoid those costs, which will only increase as time goes on! As we mentioned, you can expect rates to rise at a rate of about 3% per year.

The average price per kilowatt hour (kWh) (if you’re wondering what the difference between kW and kWh is, check out this explanation) through APS in Flagstaff is about 11.96 cents. At that price, according to the National Renewable Energy Lab’s online solar calculator, a 5 kW solar system would save you $1,015 on your electric bill in its first year!

Net Metering

One of the most complicated and least understood parts of solar policy is ‘net metering’. This term comes from the way that electricity feeds in and out of your home to the grid – it flows into your home from the grid when you need it, and excess flows out of your home to the grid if your panels are producing more energy than you need to use! With solar, you’ll typically export energy during the day when it is sunny, and use energy in the evening or at night when your panels aren’t producing any.

What net metering policy usually governs is how much money (if any) the utility will pay you for the electricity that you produce and export from your home. Arizona drafted their policy in 2009, and it required companies like APS to pay you the ‘retail rate’ for that energy, which was pretty simple: if you paid 10 cents per kWh for electricity, you would also GET paid 10 cents per kWh for electricity you sold back. This money is seen annually on your final yearly bill.

But, like other renewable energy laws in the state, this policy also came under fire from utility companies and recently resulted in a vote to end the current net metering pricing. Utilities are moving to replace the retail rate with a new ‘Resource Comparison Proxy’ price, which will be lower than the retail rate. As of March 2017, we still don’t know what those rates will be, so keep an eye out! The initial new price should be guaranteed to you for the first 10 years after you install solar panels, so we can make new calculations soon.

Regardless of these changes, solar will still be a good call in Arizona, but some calculations will change, like the number of years it takes to fully pay off the panels.

More: Net Metering

Interconnection Rules

Using rooftop solar doesn’t mean ‘going off the grid’ – in many places you legally must connect your system to the utility grid to comply with law. Plus, you can’t take advantage of net metering if you aren’t hooked up!

Interconnection in Arizona is not officially set by the state, but by utilities. The state created a guidance document, but APS sets the rules, which can be read on their website. Your installer should be familiar with these rules, but make sure to do a bit of research and talk to your installer about interconnection rules before starting your project.

#4 Financial Incentives, Rebates, and Tax Credits for Going Solar

While some utilities in Arizona and across the country offer incentives or rebates for solar systems, APS no longer does. The City of Flagstaff does have some energy efficiency rebates, but none are solar-related. However, there are still great incentives at the national and state level that will decrease the upfront cost of solar panels on your roof.

Federal Tax Credit

Your federal tax credit for residential solar will net you a credit for 30% of the money you spent to buy and install a system at your home (remember that upfront cost of about $16K? You can subtract almost $5K from that!). This was passed in 2008, but the amount is set to start phasing down in 2019, so you should make sure to use it while it is still this great of a deal!

This credit, and the state credit mentioned below, are not tax write-offs or exemptions, they are a cash credit you’ll get when you file your taxes. This is a straightforward way for the federal government to incentivize you to go solar, but it can only be used if you purchase the system with cash upfront or via a loan.

More: Solar Federal Tax Credit

State Tax Credit

Arizona has a similarly structured credit specifically for solar, that runs to the tune of a 25% credit on the cost of installations on your state income taxes. This credit is available to any household that installs solar, and maxes out at $1,000. So when you add this credit to the amount you get back from the federal government, it makes the upfront cost a lot less intimidating.

Property Tax Exemption

Are you worried that installing solar panels will make you subject to higher property taxes when your house is appraised? Arizona took care of that with their Energy Equipment Property Tax Exemption, which states that renewable energy equipment (your solar panels!) is not factored into home appraisals when calculating property tax.

So, when it comes to taxation, you get a pretty good deal when you install solar!

General Increase in Home Value

Despite not being factored into appraisals, researchers at the Lawrence Berkeley National Laboratory found that solar installations increase home value in the states they studied, including Oregon, California, North Carolina, Florida, Pennsylvania and Maryland (they didn’t look at Arizona unfortunately, though chances are the results would be very similar). If you take your house with solar and an identical house without solar, your house should have an approximately $4 per watt advantage (since we’ve been talking in kW, that is $4K per kW).

So using 5 kW as an average example, installing solar panels can help you sell your home for $20,000 more than you would otherwise!

When you look at all of the financial factors, you can drop your total cost to go solar through awesome rebates, save incremental amounts of money every month through lower electricity bills, and make a lot of money on the other end when selling your home.

More: Buyers Will Pay More for Solar Homes

If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.

What to Do Next?

Now that you’ve learned all about solar in Flagstaff, AZ, you should start looking around and contacting installers! We recommend always talking to multiple installers to make sure you get a good understanding of all of your options. You can also get more information from APS, and check out any installers that they recommend.

Let us know if you have any more questions, and come back and let us know if this information helps you to go solar in Flagstaff, AZ!

Image Credits from Flickr under CC License - 1, 2

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