Yuma Solar – Everything You Need to Know

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Information about Solar Panels in Yuma Arizona

If you’re thinking about installing solar panels in Yuma, Arizona and wondering where to start, look no further!

This city page is specifically about Solar Panels Yuma, AZ. For more general state information, see our Arizona solar energy state page, or search for other city pages that may be near you.

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Arizona is a great place to go solar, and Yuma is no exception. Arizona receives sunshine for about 85% of the year, and currently has the second-most installed solar capacity behind California. A lot of factors will impact how much you money you stand to save over time, the rules for connecting to the grid, and more, so read on to find out more about how you can install solar at home in Yuma, AZ!

#1 Overall Solar Grade

C
Overall Grade
11 years Avg. Payback Time (For Cash Purchase)
8.9 % Estimate IRR (Return on your investment on cash purchase over 25 years)
$19,571 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 Yuma, AZ

With Arizona enjoying up to 85% sunshine throughout the year, Yuma is an ideal place for solar with various purchasing options you can consider.

Cash Upfront 

Purchasing solar panels with cash is the ideal option in Yuma, AZ if you are able to pay a larger sum upfront. With a cash purchase, you can take advantage of tax credits and exemptions, lowering your initial payment significantly within the first year. Over time, your return on investment when using cash will also be higher than if you use a loan, due to avoiding interest payments.

An average 5 kilowatt (kW) system in Yuma, AZ will run about $16,283 if you pay upfront – but this number doesn’t accurately reflect the total cost to you; it’s actually a lot lower! With the 30% Federal tax credit, you could expect to get $4,885 back, assuming the average price above. You can also receive a tax credit from the state (more on that later). Unfortunately you won’t get any financial incentives from APS, Yuma’s electric utility, because their program expired. They are, however, offering incentives for solar water heaters, which are certainly worth learning about.

The other way that you will save money over time is through avoided electricity costs – a benefit that will increase in impact over time, because electricity prices in Arizona tend to rise by about 2.6% annually.

Bottom Line: 

If you pay upfront in cash, your solar panels (assuming the 5kW scenario) will pay for themselves after about 11 years. After that comes the profit – assuming a lifetime of 25 years on the panels, you should expect to see about $19,571 in total savings. If you want to compare this to a typical stock market-style investment, your rate of return on the cash investment will be about 8.9% – higher than many stocks!

Leases

If you don’t have the cash to pay upfront, you could opt to lease the panels instead (think about a car cash purchase vs. lease). This costs much less upfront, but you also don’t reap as many rewards as you would using cash or a loan. Leasing involves entering a contract for installers to put solar panels on your roof that will generate power the same as a cash purchase, in exchange for a monthly payment on the lease.

Leasing still has some benefits, or we wouldn’t be offering it as an option. If financed properly, your energy production should be high enough that the money you save on your electric bill exceeds the amount of money you pay toward the lease, saving you small amounts of money each month. Over time, this savings will add up, especially considering the 2.6% average annual utility rate increase (your lease should be locked in, or at least increase at a slower rate than electricity prices).

So, what happens when the lease term expires? You can buy the system outright or uninstall the system. What if you move before the lease expires? It is possible to transfer the lease to the new homeowners, if they are interested.

Bottom Line:

APS has more information available about leasing in their area, as well as advice specific to their consumers.

More: Solar Leases

Loans

Do you want the benefits of a cash purchase, but don’t have enough cash in your bank account to buy upfront (again, think of a car purchase)? Solar loans are a great option for you. You will still own the system, unlike with a lease, meaning you can still benefit from tax credits and exemptions and factor the system into the value of your home.

Let’s go back to the estimated average $16,283 price of the 5kW system in the cash example, and take out a 5% interest, 15-year loan. In the first year after taking out the loan to buy the system:

  • You will get $4,885 back for your federal 30% tax credit.
  • You will get $1,000 back for your state tax credit.
  • You will save about $1011 on your electric bill (about $84 a month)!
  • You will spend about $129 per month in loan payments.

In this scenario, assuming you use an average amount of electricity in your area, you’ll start off still paying about $39 a month for your solar power with your electric savings factored in. But when you remember that utility rates tend to go up 2.6% a year, you’ll be in the black soon! And once your loan is paid off, all you’ll be capturing is income for the remaining life of the system. In fact, over 25 years you’ll save around $12,126.

As you can see, your return on investment won’t be as high as if you just used cash upfront, due to interest, but it’s still a great way to spend your money.

Bottom Line:

In short, loans are a great way to get into solar without a lot of cash on hand! You can calculate some different terms and interest rates for yourself to see.

More: Solar Loans

#3 Yuma Solar Policy Information

While you’ve read a lot about the federal tax credit to install renewables, most of the incentives and policies around solar power are driven at the state level. Arizona’s government legislates the interconnection rules, renewable energy requirements and mandates, and how utilities must manage excess solar energy flowing into their grid from rooftops like yours.

downtown-yuma

Overall, Arizona has created policies that are friendly to rooftop solar, but in recent years they have come up against resistance from utility companies – especially APS. For example, Arizona recently had to compromise on an electricity rate increase agreement.

Now, for more on Arizona’s current policies:

Renewable Energy Standard

In order to drive renewable energy construction in the state, Arizona started off by drafting a renewable portfolio standard (RPS) in 2006 that outlines what percentage of energy production in the state has to come from renewable sources (solar, wind, hydroelectric, etc.). This isn’t uncommon – as of 2013, 16 states and Washington, D.C. had RPSs that incorporated solar. Writing an RPS is a way for the state to force utilities to invest in utility-scale solar arrays or wind farms, and also a way to encourage rooftop solar incentives.

Arizona’s RPS called for the generation of 15% of the state’s energy from renewable energy sources by 2025. They put an additional focus on ‘distributed energy’ (energy that is generated at your home or business as opposed to a plant or large-scale solar farm), saying that 30% of the renewables should come from distributed sources. Of that 30%, half was mandated to be residential (as opposed to at the location of a business). What that divides down to is Arizona wanting 2.25% of the total energy produced across the state to come from houses like yours.

More: Renewable Portfolio Standard (RPS)

Electricity Prices

Utility rates are a key factor in your decision to go solar, because the money you save by generating electricity is equal to what you’d pay your utility for that same amount of electricity. So, the higher your electricity prices, the more it makes sense to generate your own electricity!

The average price per kW-hour in Arizona is 12.7 cents, with Yuma coming in at a slightly lower 11.96 cents (right around the national average). Assuming those prices, your 5 kW system would save you about $1,010 a year to start, and as we already stated, your utility rate is likely to increase by 2.6% annually. The earlier you install, the earlier you start saving money and remain mostly independent of price swings driven by APS.

Net Metering

Think of a solar panel system on your roof as your own personal little power plant. It generates the energy that you need for your home – but when there is excess (usually during the day, when the sun is shining and the panels produce even more than you can use), where does it go? The interconnection from your house to the utility grid allows the excess energy to flow out into the grid that everyone else is using for their power in a system called net metering. It gets this name because electricity runs into your house through a meter, and your solar excess can also run back out through that same meter – hence, net metering!

Net metering laws are set by the state, and Arizona drafted theirs in 2009. The initial law required utility companies to pay you the ‘retail rate’ for any excess electricity (meaning the amount you pay to use grid energy and the amount you are paid when you ‘sell’ energy back to the grid are the same). The money that you make from that transaction is typically incorporated into your final yearly bill as an avoided cost payment.

However, in December 2016 Arizona voted to end net metering methods as they currently exist (“retail rate”) in favor of a “Resource Comparison Proxy” (RCP) export price, which experts believe will be lower than the retail rate – as of March 2017, no rates have been released, so it is still unknown how significant the difference will be. The RCP price initially calculated can be guaranteed to you for the first 10 years after your solar panel installation, and will be updated every 5 years.

This does not mean that investing in solar won’t be feasible, but the calculations for Arizona residents will change. Keep an eye out for the release of the RCP rates to see how it would affect your investment.

More: Net Metering

Interconnection Rules

There can be a common misconception that most people using rooftop solar are going ‘off the grid’ – in the majority of cases, this isn’t true! Your rooftop solar still needs to be connected to the utility’s local grid in order to take advantage of net metering, and more importantly, comply with local law.

Rules and legal status vary by state, and Arizona still has not drafted any official legislation on interconnection rules. Instead, they drafted a guidance document to be used by state utilities, who are ultimately in charge of deciding their own rules. So for Yuma residents, APS is in charge of setting the interconnection rules. These rules can be found in detail on their website, along with a list of recommended installers who should be aware of the requirements: Be sure to talk to your installer about interconnection rules before starting your project.

#4 Financial Incentives, Rebates, and Tax Credits 

Unfortunately, APS and Yuma don’t offer any rebates or incentives for going solar, but there are still national and state-wide benefits to consider.

Yuma residents have four great advantages: a Federal Tax Credit, a State Tax Credit, Property Tax Exmeption, plus an increase in your home value.

yuma-bridge

Federal Tax Credit

The residential renewable tax credit was passed in 2008, and offers a credit on your federal taxes to the tune of 30% of any money you spend to purchase or install solar. So when you look at an initial quote from an installer, mentally subtract 30%, because you’ll get that money back the next time you file your taxes! Remember, this isn’t a writeoff, it is a full credit that you’ll see when you get your tax refund. However, the amount of money you can get will start phasing down in 2019; all the more reason to purchase now.

More: Solar Federal Tax Credit

Arizona Tax Credit

Arizona’s Solar Energy Credit is a 25% credit on your Arizona state income taxes, and is available to any tax-paying homeowners that install solar (the maximum allowable limit is $1,000). You claim the credit the year you install the system. This can take another $1,000 off your costs, on top of the more than $4,000 you’ve likely already saved with the federal credit! Once again, this credit is not available for leased options.  

Property Tax Exemption

The Energy Equipment Property Tax Exemption policy is another state-level tax incentive to install solar in Arizona. Under this policy, any equipment that provides energy to a home through renewable means is exempt, or is not assessed, when your home is appraised for property tax-purposes. If you are worried that increasing the value of your home through solar will also raise your property taxes, don’t! The state law has that covered.

General Increase in Home Value

So, solar’s ability to increase your home value may not count for property tax appraisal, but it definitely counts when you’re putting your home on the market! Solar panel installation on your home can drive a $4 per watt premium over a similar home that doesn’t have solar – and since your system is measured in kilowatts, that means $4,000 per kW.

If you remember the 5 kW system we’ve been using as an example, the panels could add $20,000 to the value of your home. This just adds to the shorter-term financial benefits of solar (your electric bill), bringing you a great long-term financial opportunity to sell your house at a higher price.

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?

If you live in or around Yuma, AZ under APS and are interested in installing rooftop solar, you should start looking! Arizona is a good state to go solar in – at least right now. It is important to stay abreast of the ongoing policy changes around net metering, varying levels of incentives, and future phasing-out of tax credits.

APS has more information for people thinking about solar in Yuma for your reading pleasure. In short, if you want to install solar in Yuma, AZ, the best time is probably right now! Get in touch with multiple solar installers today to discuss your options, and let us know if you have any questions below.

Image Credits under CC License via Flickr: 1, 2, 3

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