As the sunniest state in the country, taking advantage of solar energy in Arizona only makes sense for businesses looking to hit net zero in high electricity bills. However, there is always the potential overbearing cost of setting up a solar system. The good thing is, with the various commercial solar incentives Arizona offers, you can have your solar system pay for itself within its lifetime. From state incentives, rebates, corporate tax credits, and net metering, we have covered some solar incentives available for commercial customers.

Modified Accelerated Cost-Recovery Systems (MACRS)

MACRS is a corporate depreciation tax incentive available to commercial, industrial, and agricultural customers. For Arizona businesses, the tax regulations, particularly concerning depreciation deductions for businesses, have seen significant changes over the years. The Tax Cuts and Jobs Act of 2017 introduced a 100% bonus depreciation for eligible property acquired between September 27, 2017, and January 1, 2023. This bonus depreciation gradually steps down, reducing by 20% annually.

Under the Modified Accelerated Cost-Recovery System (MACRS), various property types are classified with specific class lives for depreciation purposes. Notably, renewable energy technologies like solar are typically classified as five-year property, allowing for accelerated depreciation.

Business Investment Tax Credit (ITC)

Investment Tax Credit (ITC)

Among the multitudes of commercial solar incentives Arizona businesses can take advantage of, the ITC offers one of the most unique offerings. This incentive allows businesses to deduct a portion of their expenditures on qualifying renewable energy systems or energy-efficient equipment from taxes. Tax deductions can be up to 30% of the solar cost with its most recent extension and changes in 2022 expanding eligible technologies, extending expiration dates, and modifying credit values. 

Here’s a breakdown of the amendments and the introduction of the new Clean Electricity Investment Tax Credit:

• Projects under 1 MW (or larger projects commenced within 60 days of labor guideline issuance) before 2025 can receive a full 30% tax credit.
• Projects over 1 MW starting construction after labor guideline issuance but before January 1, 2025, qualify for a 6% base credit. However, adherence to labor standards ensures the full 30% credit.
• The Domestic Content Bonus rewards projects with domestic materials, increasing the tax credit by 10 percentage points for compliant projects. Additionally, the Energy Community Bonus grants additional credits to projects in specific energy communities, boosting the credit by 10 percentage points for compliant projects.
• The various technologies include solar, wind, fuel cells, geothermal systems, and more. The Act also allows for the monetization of tax credits, including direct payment options for eligible entities and transfers to unrelated taxpayers.
• The Clean Electricity Investment Tax Credit (48E) will replace the ITC for projects starting on January 1, 2025. The tax credit will apply to all generation facilities and energy storage systems with zero anticipated greenhouse gas emissions. The credit value is phased out as the U.S. meets emission reduction targets.

Renewable Electricity Production Tax Credit (PTC)

The federal Renewable Electricity Production Tax Credit (PTC) incentivizes electricity generation from qualified energy resources through a per-kilowatt-hour (kWh) tax credit. This commercial solar incentive is available nationwide and is powered by the IRS. Their guidelines are as follows.

• Base Credit: Projects under 1 MW or those commenced within 60 days of labor guideline issuance can receive the full tax credit without meeting new labor standards.
• Projects over 1 MW starting construction before January 1, 2025, qualify for a reduced base tax credit. However, adherence to labor standards ensures eligibility for full credit.
• Bonus Credits: The Domestic Content Bonus increases the credit for projects with domestic materials. Projects in compliance with labor standards and domestic content requirements can maximize their tax benefits.

The PTC has undergone several revisions since its establishment in 1982, with the latest being the Inflation Reduction Act of 2022 (H.R. 5376). The Inflation Reduction Act among other things introduces the Clean Energy Production Tax Credit (45Y), which replaces the PTC. This new tax credit, effective from January 1, 2025, aims to encourage clean energy production. It offers a technology-neutral tax credit, aligning with modern energy needs and sustainability goals.

USDA – High Energy Cost Grant Program

High Energy Cost Grant Program

Agriculture contributes up to $23.3 billion to the Arizona state economy according to the Arizona Department of Agriculture. This is why the USDA offers several grant awards and loan programs for clean energy generation through the Rural Energy for America Program (REAP). This program is available for commercial and agricultural customers and offers up to $500,000 for renewable energy grants. Check out the application eligibility and how to apply on the REAP website.

Solar Potential in Arizona: Incentives and Savings

Arizona is the sunniest state in the US with an average sunlight of 5,755 kJ/m² according to Datapandas. As a state with such high solar potential, the state offers some incentives that can save you up to 100% of your solar system cost. 

However, while the state has the highest solar potential, it offers conservatively less commercial solar incentive in comparison to the other states. With the loss of net metering and several public debates on solar policies, you can expect to save less when setting up your system. However, through its renewable energy standard (RES) in 2006, the state is working on achieving a robust 16% renewable energy within its energy mix by 2025 and it is currently in the top 5 states with the highest cumulative solar energy generation.

Understanding the Electric Utility Landscape and Rates in Arizona

Arizona currently generates 10% of its energy from solar and is the fifth-highest cumulative solar energy generator in the US according to SEIA Q4 2023 report. Today, The Grand Canyon State currently generates a total of 17% of its state energy from renewable energy, meeting its renewable energy goals set for 2025. This is part of the reasons Arizonians pay lower than the national average in electricity bills.

Also, according to the ACC, the Commission’s Renewable Energy Standards encourage utilities to use solar, wind, biomass, biogas, geothermal, and other similar technologies to generate clean energy to power Arizona’s future, while demanding utility companies file annual implementation plans describing how they will comply with the REST rules which includes incentives for customers.

Impact on Solar Energy Decisions

Businesses in Arizona are qualified to receive most of the state and federal commercial solar incentives Arizona offers. Furthermore, you can also take advantage of the state’s net billing. Considering the average lifespan of a solar system is 25 years, in Arizona, you can recoup your solar system cost in only 7 years. 

In essence, while there are not as many incentives and rebates for a state like Arizona with such high solar potential, you can still save the entirety of your solar cost and earn thousands of dollars from your solar system within its lifespan.

Are Solar Panels Worth It in Arizona?

With peak sun hours averaging 7-8 hours, a 47% reduction in solar panel cost, incentives that ensure your solar system can pay for itself in 7 years and save you on high upfront costs. With solar panels in Arizona, you can enjoy free electricity with solar for up to 10 years. Let’s not forget the various federal corporate tax credits and 100% tax breaks you get on solar equipment. However, setting up a solar system can be rigorous, and solar companies like  commercial-solar.org can help alleviate the burden. From interconnections, permits, and licensing that would be an otherwise rigorous endeavor, commercial-solar lets you sit back and let you enjoy all the rewards. Speak with our experts today to get started.

Why Choose Commercial-Solar.org Solar Company in Arizona?

Embark on a sustainable journey with Commercial-Solar.org, where decades of expertise merge with state-of-the-art solar solutions. We’re not just another solar provider; we’re your trusted ally in harnessing the full potential of Arizona’s abundant solar incentives. Here’s why partnering with us is the ideal choice for your business:

• Effortless Transition: From initial consultation to final installation, we ensure a seamless and hassle-free process, ensuring a smooth transition to solar power.
• Maximize Arizona Incentives: With our in-depth knowledge of Arizona’s commercial solar landscape, we adeptly navigate and optimize state-specific incentives to deliver unparalleled financial benefits to your business.
• Zero Upfront Costs: Take the plunge into solar energy without any initial financial burden. Our strategic approach covers installation expenses through Arizona’s generous incentives, making solar accessible to all businesses.
• Long-Term Savings: Harness solar energy to substantially lower your electricity bills, ensuring sustainable cost savings and profitability for your business in the long run.
• No Capital Investment Required: Make the switch to solar without dipping into your capital reserves. Our tailored solutions allow you to invest in your business’s growth while we handle the solar transition.
• Covered Construction Costs: Bid farewell to the worry of construction expenses. We shoulder the financial burden, allowing you to focus on reaping the benefits of solar energy.
• Full Ownership Benefits: Enjoy complete control over your solar system with 100% ownership, freeing yourself from the constraints of traditional power purchase agreements (PPAs).

At Commercial-Solar.org, we’re committed to revolutionizing businesses in Arizona through solar energy, offering bespoke solutions tailored to your specific requirements. Whether you’re a small local enterprise or a large corporation, our team of experts is here to guide you every step of the way toward a brighter, more sustainable future today.