How to Save Money on Solar Panels in Arkansas

Overview of Solar Power in Arkansas

Known as "The Natural State" for its abundant forests, rivers and wildlife, Arkansas would seem a natural fit for solar power. But while it ranks 16th among states for solar potential, it languishes behind in solar adoption.

Key facts about solar power in Arkansas:

  • 0.9% of AR electricity from solar, compared to 14.5% average nationally
  • AR has no Renewable Portfolio Standard (RPS) requiring utilities to procure renewable energy
  • Electricity prices are 9.44 cents per kWh, lower than neighboring states
  • High solar potential with average solar irradiation of 4.5-5.0 kWh/M2/Day

So Arkansas lags behind in solar energy adoption despite having a decent solar resource. And without a RPS or competitive electricity rates, current economics alone won‘t drive growth. Thus state incentives are needed to make the solar value proposition work better, which Arkansas sorely lacks.

But all is not lost. For savvy homeowners who understand the opportunities (and limitations), going solar in Arkansas can still pay off.

Leveraging Federal Tax Credits for Maximum Arkansas Solar Savings

The federal Investment Tax Credit (ITC) remains the shining light for solar power in Arkansas by lopping 30% off installation costs. Enacted in 2006, it has catalyzed solar adoption nationally, despite the scheduled phase down:

  • 30% credit from 2019-2032
  • 26% credit in 2033
  • 22% credit in 2034
  • Expires 2035

Projected Value of Federal ITC for Solar Installations in Arkansas

YearCredit Amount
2023-203230% of system cost
203326% of system cost
203422% of system cost

For a $15,000 solar system installed over the next decade, Arkansas homeowners can save $4,500 off the bat. And claiming that 30% federal tax credit also gives the solar investment an effective "interest rate" of over 10% by capitalizing on bonus depreciation.

To maximize ITC savings potential for your Arkansas solar panels:

  • Purchase system outright rather than leasing
  • System must be installed at your residence
  • Credit based on total investment amount including equipment, labor and fees

Bottom line – Leverage this dollar-for-dollar tax reduction while it lasts over the next 10+ years.

Solar Payback Period Analysis for Arkansas Home Installations

To determine how quickly an Arkansas solar system pays for itself, let‘s analyze cost data and payback periods across a range of system sizes:

Key Assumptions

  • Installation Cost: $3.00 per Watt
  • Average Solar Irradiation: 4.7 kWH/M2/Day
  • Electricity Rate: $0.09 per kWh
  • Payback Threshold: 10 Years

Economics by System Size

SizeEst. OutputGross CostNet Cost (after ITC)Annual SavingsPayback Period
2 kW3,400 kWh$6,000$4,200$30613 years
4 kW6,800 kWh$12,000$8,400$61213 years
6 kW10,200 kWh$18,000$12,600$91813 years
8 kW13,600 kWh$24,000$16,800$1,22413 years
10 kW17,000 kWh$30,000$21,000$1,53013 years

Key Takeaways

  • Payback period holds steady around 13-14 years across most system sizes
  • Breakeven timeline shorter than battery storage or leased solar options
  • Maximize system size to increase annual savings but payback period remains similar

While the payback analysis is fairly consistent regardless of your system size, installed solar capacity should be determined based your home‘s annual electricity consumption. Most homeowners fall into the 4-8 kW range for an appropriately-sized system.

Buying vs. Leasing Solar Panels in Arkansas

With longer payback timelines than sunnier states, should you lease solar panels instead in Arkansas? Here‘s an overview of the pros and cons:

Buy Outright

Claim 30% federal tax creditHigher upfront cost
Own panels to sell laterResponsible for maintenance
Payback period of 13 years


Little/no upfront costForfeit tax credits
Solar company handles maintenanceLong payback period of 20-25 years
Low monthly paymentsTypically cost more lifetime

With buying outright, the advantage lies in maximizing tax credit savings that cut nearly 3 years off the payback timeline. This benefit outweighs the con of higher upfront costs.

Leasing appeals if you lack funds to buy panels outright. But the longer payback period due to forfeiting tax credits results in leasing costing you thousands more over a 20 year period – making buying the better option financially.

Current Status of Solar Incentives in Arkansas

How does Arkansas compare regionally and nationally in terms of solar incentives? This map tells the story:

Solar Policy Map

With no state tax rebates, performance incentives, or renewable energy standards, Arkansas lacks the policy drivers that expand solar power elsewhere.

And with under 500 MW of installed solar capacity as of 2022, cumulative adoption figures trail far behind other states opening their doors to solar:

  • Arkansas – 457 MW
  • Oklahoma – 981 MW
  • Missouri – 564 MW
  • Texas – 16,100 MW
  • U.S. total – 126,000 MW

So in the absence of supportive state-level policies and programs beyond net metering, solar growth in Arkansas continues falling behind.

Future Outlook for Solar Energy in Arkansas

The good news looking ahead is that panel costs continue falling, improving solar economics over time. National solar experts predict this trend will continue:

"We expect the overall cost of solar projects to drop another 40% by 2035" – Abigail Ross Hopper, Solar Energy Industries Association

And as neighboring states continue expanding incentives and renewable energy standards, Arkansas will feel mounting pressure to follow suit.

Already, solar installations are rising annually as savvy homeowners capitalize on improving economics:

  • 2021 solar installations in AR – 102 MW
  • 2020 solar installations in AR – 75 MW
  • 2019 solar installations in AR – 48 MW

Should this growth trend continue, Arkansas may reach over 1 gigawatt of solar power by 2030.

So while Arkansas lacks robust solar incentives now, economics are slowly tipping directionally favorable as prices fall and momentum builds. Homeowners willing to adopt early can still profit over the long run.

Further Reading on Solar Power & Renewable Energy

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