Which is the most solar friendly state in America?

23/3/2016

USA is one of the leading nations which are on the drive to accelerate the growth of residential solar PV in its states. The Federal government along with the state governments have formulated many favorable policies, incentives and rebates which have made the residential solar technology, a lucrative option for the home owners.

The one such growing state in the country is Arizona; it is located in the southwestern region of the country having location coordinates of 34° north and 112° west. It's dry and sunny climate along with the growing need of the solar power has made it a one of the most favorable solar states in the country. You will appreciate that this state receives an average of 6.5 KW hours of solar energy per day which is quite a good amount of solar insolation and is well above the country’s average of 5.85 KWhr/ m²/day. This energy soaking state has some of the world’s largest solar farms supplying electricity within and outside the state. Its location advantage of soaking solar energy efficiently has given it a cutting edge among other states of the country and has made it a favorable choice for the solar rooftop technology.
The solar radiation in the different months of the year is as follows:

(1) Grid Electricity vs. Solar Electricity

It is very important to know the overall feasibility of the new technology which is going to replace the old one. The interest rises further when you pay less for the electricity while switching to the solar PV technology.

The residential electricity rate in Arizona was 8.5 cents/KWHr in 1998 and it increased to 11.29 cents/KWHr in the year 2016, a CAGR rate of 1.7% annually. The average monthly energy consumption in homes is around 1,061 KWHr or you can say that the average monthly bill is around 11.29 x 1,061 = $ 120 (http://www.electricitylocal.com/states/arizona/) while the national average of the country is $107, around 12% more than the national average.

You can fulfill your energy consumption demands through solar electricity provided it is lower than the existing grid electricity rate of 11.29 cents/ KWHr.

The average per unit cost of a grid-tied solar PV residential rooftop is $ 3.75/watt. It means that 1 KW grid tied solar system costs you around $ 3750. I am adding 1% of the total cost (although it is high) as a yearly maintenance cost of the system. Hence, the total cost becomes $3750 + $ 37.5 = $3785.5. The 1 Kwatt will produce around 52000 units in 25 years or 5.7 units per day (taking into account all the losses in the solar PV system and the degradation of the solar panel over time)

The per unit cost of solar electricity is = $ 3785.5/ 52,000 = 7.3 cents/ unit or 7.3 cents/ KWHr

Solar Electricity rate (7.3 cents/KWHr) < Grid Electricity rate (11.25 cents/KWHr) (It is without any government incentive & any rebate).

"Solar energy is a feasible option for residences in Arizona"

You can fulfil up to 100% or part of your energy demand through solar electricity, depending on your energy requirements.
The 1 KW solar PV system is going to generate around 5.7 units per day and it is going to save you 5.7 x 11.29 cents = 64 cents per day or $ 233 in a year.

(2) Arizona state regulatory policy

In an attempt to increase the use of renewable energy, a strategic plan known as Arizona Renewable Portfolio standard was created in 2001. It specifies that the utility companies must supply 15% of the total energy produced in the state through renewable by the year 2025. For this, the performance of the utility companies is tracked regularly to review their growth. The implementation of this strategy has forced and motivated them to adopt solar power and that is why you can see many solar rooftops on the residential homes of the state.

(3) Rebate by the Utilities companies

The state offers rebates to the homeowners of the residential solar rooftop through various utility companies. Each utility company has its own rebate incentive program:

Duncan valley electric co-operative under Sun watts rebate program offers rebate of $ 1.00/ installed watt for solar PV systems < or = 10 KW with maximum upper limit is 40% of the cost of the system or $10,000 whichever is less (http://programs.dsireusa.org/system/program/detail/5401).
Sulphur’s spring’s valley EC Inc. is another utility company which offers rebate under Sun watts Rebate Program. It offers $ 0.25/ installed watt and cap of $2,500 for the residential solar PV systems (http://programs.dsireusa.org/system/program/detail/186).
Mohave Electric Cooperative is offering $0.20 per installed watt with maximum incentive limit of $ 3,000 (http://programs.dsireusa.org/system/program/detail/4345).

Along with this, most of the residential solar rooftop installers offer their own unique leasing and financing arrangements, so you don’t need to take out that entire amount from your pockets.

(4) Arizona state's Tax credits

The state government offers a tax credit for the homeowners who install solar rooftop at their residences. It offers 25% of the total cost of the system with a maximum incentive limit of $1,000. This amount is deducted from the tax payable. The credit amount is claimed in the first year of the installation or the excess credit can be transferred over 5 years.

(5) Federal Tax credit

The biggest incentive one can receive is through Federal Tax credit. It offers 30% of the cost of the system with no upper limit. You can take 30% costs of the solar system off from your income tax payable. This can be claimed in the first year of the installation or the excess credit can be spread over 5 years.

The various incentive and rebate programs have further lowered the cost of the system that has made it possible and feasible option to cover up to 100% of your energy needs through solar rooftop technology.

(6) Property Tax exemptions

Although, the value of your residential property increases with the addition of solar PV system at your rooftop but there is no extra property tax on adding it in Arizona.

(7) Net Metering

This program is for those owners of the solar PV systems who feed in the extra or unused power to the grid through net metering. They can also access grid electricity when their energy demand exceeds the solar electricity production. The extra units produced are shown in the electricity bill and that amount is credited and adjusted, hence reduces the total bill.

Conclusion

Arizona is one of the sunniest states in America with very favorable and supportive solar energy programs under its renewable energy portfolio. It is true that grid prices will more likely to increase in future with the increase in demand and limited sources of production. Arizona has strike a right chord by shifting its energy portfolio gradually towards solar led technology. The government’s support by a way of its incentive programs and the increasing efficiency of the solar panels will likely to accelerate the growth of residential solar PV in the state.

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