How Much Can You Save on Solar in Alabama?
Solar rebates and incentives in provide financing options and other green incentives for Alabama residents. These programs aim to encourage the use of solar energy by residents of the state. They also help reduce the cost of entry for homeowners to adopt solar power systems.
Alabama’s solar capacity ranks it as the 34th state in the US for solar generation, up from 51st at the start of 2022. Just under 60,900 homes in Alabama use solar energy generated in the state on the back of $609 million of total solar investments.
Alabama’s energy profile will get to 1,560 MW of generated solar power in the next five years, which will lift Alabama to the 31st US state for total solar generation.
Renewable energy rebates and incentives come in handy in Alabama, where the average solar system is above the national average by about $29,000.
Alabama Solar Tax and Incentives at a Glance
|Alabama Solar Incentives||State or Federal||Program Overview|
|Federal Solar Tax Credit||Federal||Provides a reduction of your tax liability by 30% of the value of your solar energy system value|
|Net Energy Metering||Local||Allows residents of Alabama who have signed on to get credits and payments as they send excess energy from their solar panels to the grid. Note that it is not mandated legally and is not widely available in the state.|
|Alabama Property Tax Exemption||State||Prevents an increase in property tax for enrolled homeowners who improve their property by adding solar panel installations for 10 - 20 years.|
|Alabama’s Property Assessed Clean Energy (PACE) Financing||State||The program provides finance for renewable energy improvements such as solar panel installations. It is legally backed by the Property Insurance and Energy Reduction Act of 2015. Homeowners repay the financing through their property tax bill|
|State Sales Tax Exemption||State||Not available in Alabama|
How Affordable is Solar Energy in Alabama?
Solar prices in Alabama have reduced by 53% in the last ten years. The average cost of grid electricity in Alabama is $10.18/kWh, while the average cost of solar panels per watt is $2.45 before federal tax credits worth 30%.
As of 2022, there are 42 solar companies in Alabama, with 12 installers or developers, 18 manufacturers, and 12 others. These companies are responsible for 689 solar-related jobs in Alabama
|State||Number of solar Installations||MW Installed||Average cost for grid power (2021)||Average cost per watts|
A 6kw solar system in Alabama costs about $14,700. A federal tax credit of 30% brings the money down to $10,290, which means residents of Alabama get to save about $4,410.
|State||Cost of installing a 6kw system||Federal tax credit value 2023 (30%)|
Federal solar tax credits in Alabama are federal government initiatives designed to help residents transition to clean energy sources. First created in 2005, the program was extended for another ten years in August 2022.
Under the program, Alabama residents have access to a 30% federal tax credit if they install solar energy systems from 2023 through 2032. This federal tax credit rate will drop to 26% in 2033.
The table below shows the breakdown of the federal solar tax credit for Alabama from 2023 until 2035 when it will be over.
|Year||Federal Solar Tax Credit rate|
|2023 - 2032||30%|
Since the solar tax credit is percentage based, each resident benefiting from it will have a different amount of the benefit.
For example, for a 10kW system that costs $24,500, the 30% tax credit will bring the value of the credit to $7,350. The range of credit for solar systems from 3kW to 12kW is shown below.
|Solar System Capacity||Cost of solar system before Tax credit||Credit value|
For taxpayers to qualify for federal solar tax credits in Alabama:
To claim the federal solar tax credit in Alabama, it is required that you must have completed a solar installation. You must have also started using the solar system during the same tax year to qualify.
Note: The Federal Solar tax credit can only be claimed once.
Net energy metering in Alabama allows owners of solar panels to send the excess energy from their solar panels into the local electricity grid. While it is a valuable renewable energy incentive in Alabama, Alabama does not require utility companies to provide it, and the state does not regulate it. As such, not all utility providers in Alabama offer net metering.
Solar panel owners can, through net metering, get credit for the electricity they send to the grid. Residents of Alabama who use Alabama Power can sign up for a special rate purchase of alternate energy (PAE).
Alabama Power will pay enrollees of this program a special rate of about $0.025 - $0.03 per kWh for the excess. These credits help to reduce their energy costs when they use power from the grid. NetMetering 3.0, the latest version of net metering, goes into effect on April 14, 2023.
To enroll for net energy metering in Alabama, you can use the steps listed below:
Note that most utility companies in Alabama do not offer net energy metering. Alabama Power and the Tennessee Valley Authority (TVA) are two utilities in the state that offer net metering.
Alabama provides property tax exemptions, through the Alabama tax code (Section 40-9B-1), for qualifying renewable energy facilities such as solar panels. This exemption exempts the additional tax due to increased property value due to solar panels for 10 years.
With this exemption, a solar panel project, which could add an average of 4% to your home value, is not considered when your home is assessed. Homeowners can apply for an additional 10 years to make a total of 20 years for the exemption.
Persons interested in claiming this exemption need to apply through their county or municipal tax authority. Their application will be reviewed by the Alabama Department of Revenue. Applications are required before your solar power system becomes operational. Claiming this exemption is easy as your tax assessor will just ignore the additional value the solar panels add to your home while calculating your taxes.
Alabama’s Property Assessed Clean Energy program (PACE) provides finance for energy efficiency and renewable energy improvements. This energy efficiency and renewable improvements include solar projects.
PACE is a finance program provided in Alabama by local governments for commercial and residential property as Commercial Property Assessed Clean Energy (C-PACE) and Residential Property Assessed Clean Energy (R-PACE).
It is backed legally by the Property Insurance and Energy Reduction Act (PIERA) of 2015. Alabama’s PACE is a long-term and low-cost financing system. Municipal bonds or third-party capital sources provide financing for the program. Property owners provide repayment for PACE through voluntary property tax assessment through local governments.
Homeowners are required to repay the loan through their property tax bill. Repayment responsibility is transferred to the new owner if the property owner sells the house to a new owner. The Alabama Department of Economic and Community Affairs (ADECA) provides regulatory oversight for C-PACE in Alabama.
The advantages of the C-PACE in Alabama include the following:
The C-PACE program in Alabama does not apply to:
Property owners who seek to qualify for C-PACE in Alabama need to:
Solar sales tax exemptions generally provide exemptions from the state sales tax when solar energy systems are purchased. These exemptions assist with the upfront reduction of the cost of solar panels and associated solar devices. However, Alabama does not provide sales tax exemptions for the purchase of solar energy systems. Residents of Alabama have to pay the state required tax rate of 4% for solar panel systems and installation labor.
Alabama has an average annual sunlight of 4,660 kilojoules per meter square (kJ/m2). It is the 16th sunniest state in the United States. Alabama has an installed capacity of 578 megawatts (MW) from 233 solar installations. This installed capacity amounts to 0.62% of the total electricity generation of Alabama.
Alabama has 11 % of the state’s energy from renewable sources as of 2021. Of this percentage, solar accounts for 3% of renewable generation. Hydroelectric power generation accounts for most of the renewable energy generation with 75% of the total.
The largest source of electricity generation in Alabama as of 2021 is natural gas at 38%. Alabama’s many rivers provide the state with twenty-three hydroelectric dams. There is no utility-scale offshore wind generation in Alabama and only some parts of the state have modest wind resources.
Residents of Alabama can purchase 100% of their energy use from renewable sources by purchasing renewable energy certificates (REC). These certificates allow residents to use 100% renewable energy from biomass, wind, low-impact hydroelectric facilities, or solar.
Alabama's total per capita energy consumption of 366 million British thermal units (Btu) as of 2020. This consumption ranks fifth in the US while per capita residential electrical consumption is third in the US. These figures are influenced by the high air conditioning demand in the hot summers and the widespread use of electricity for home heating during the winter. Energy consumption for residents of Alabama was 366 million Btu as of 2020, while commercial consumption was 236 trillion Btu.