Welcome to the Ultimate Guide to Solar Panels in Alabama
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Alabama home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2020 **
We wish we had a sunnier update to report, but the Alabama state legislature has done very little to encourage home solar power development, continuing to miss golden opportunities to harness natural solar resources and team with existing utility programs to create a strong statewide solar incentives.
In a faint glimmer of improvement, because of our addition of insolation as a ranking factor, Alabama is no longer the worst state in the nation for home solar. Now it’s 49th best! We’d really like to see some improvement here, but for solar lovers in Alabama, DIY might be your only choice for now. There are still ways to make solar work for you in Alabama, so read on to get our best advice!
Questions? Our network of solar experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page. You can get discounted on-grid pricing as low as $4,500/kW!
What you'll find on this page:
The Solar Strategy section is focused on the 3 ways of paying for solar in Alabama, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in Alabama. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in Alabama.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Alabama Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Alabama|
|Solar Loans in Alabama|
|Solar PPAs in Alabama|
|Solar Purchase Payback Time in Alabama|
|Alabama Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Alabama
Figuring out the best way to go solar in Alabama can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
How to pay for solar panels in Alabama
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan. As you can see, the purchase option leads to the highest dollar-amount returns over time, but it also requires a big up-front investment. If you take a home equity line of credit (HELOC), though, your payments over 15 years will be a little more than your savings, but you'll still come out ahead in the end.
The average homeowner in Alabama spends $1,774 on electricity bill every year, despite the state having some very low prices per kilowatt-hour (kWh) of electricity. With a 5.9-kW solar system, consisting of 26 325-watt panels, you can make enough electricity to save about $966 of that bill every year. You wouldn't want to go much bigger than that, because Alabama doesn't offer net metering.
Our calculations below assume this 5.9-kW solar system will cost $3.15 per watt, which isn't as cheap as it would be in a state with better policies that led to a more robust solar industry, but them's the breaks. Read on to find out more about each of the two options for payng for solar in Alabama.
Option 1: Paying cash for solar
So you’ve got some cash and you’re ready to buy. An outright purchase returns the most money over time, because you own the system from day one and reap all the benefits. That 30% Federal tax credit and electricity savings bring your first-year cost way down.
In our example, your intial cost is $20,000, but by the end of year 1, incentives and energy savings will erase a bunch of it. Over 25 years, your system will produce big returns. But also loook into the solar loan option below, because you'll end up ahead in year one from the solar tax credit, and taking a loan to buy an income-generating asset is just a really smart move.
Here’s how the numbers pencil out for an Alabama solar purchase with average-sized 5.9-kW rooftop solar system:
- The cost of solar in Alabama should be about $18,585 for an average-sized 5.9-kW system. Don’t worry – even without state incentives, you can still knock a big chunk off the price right off the bat.
- Since the feds calculate their incentive based on actual out of pocket costs, no state incentives means a bigger federal solar tax credit. Subtract $4,832 (26% of $18,585) for a new price of $13,753.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be about $966. That brings your cost after the first year to $12,786.
- With a conservative estimate for the future rise of electricity prices (increasing at a rate of 3.5%), you can expect your new solar power system to pay for itself in about 12 years. Even with that slower (than other states) payback time frame, you can still expect to get about 13 years of profits (yes, profits) out of your solar power system. We estimate those profits to be in excess of $21,500 through 2044.
- And don't forget... your home's value just increased by close to $13,750, too (your cost after the tax credit)!
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil-fuels. In fact, the energy you’re not using has the carbon equivalent of planting 127 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Alabama. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 2: Using a loan to pay for solar
This is without a doubt the best option when it comes to percentage return on investment. That’s because it relies on using someone else’s money for the purchase price, which is paid back over time. The cost is similar to a new car loan, but because solar makes you money, it's a tremendous investment. A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can get a home-equity line of credit (HELOC) for $18,585, with a fixed rate of 4.5% or lower and a 15-year repayment period.
- You love making money without much risk
The reason this works so well is that you don’t have to put any money down, but you still get all of the incentives that go along with buying solar. You'll get the 26% federal tax credit and the energy bill savings will start right away. The bad news is your loan payments will be higher than those energy bill savings, so you'll end up spending about $62/month for solar in the first year. That difference will come down each year as electricity prices rise, but your system will keep on producing about the same amount of electricity.
Here’s how the numbers pencil out for an Alabama solar purchase with a loan:
- Installing a typical 5.9-kW solar system should start at about $18,585. That will be the amount of your HELOC.
- The electricity you'll save in the first year of operation would have cost $966. That's enough to pay for a family-sized pizza every week!
- At the end of the year, the federal government will give you a 26% tax credit based on the cost of your system after the rebate. That's $13,750 you won't be paying in taxes. You can take the credit over as many years as you need if you don't owe that much in federal taxes this year.
- Your loan payments will total a little over $1,706, which means even though you're paying for a loan, those savings and incentives mean you’ll actually come out way ahead after the first year. You’ll have solar on your roof and an extra $4,092 in your pocket.
- When your loan’s paid off in year 15, you’ll start see over $1,500 per year in savings until the end of your system’s life.
- For our 25-year estimate, you'll see a total savings of nearly $15,000 with a solar loan in Alabama.
- And don't forget... your solar panels are offsetting so much dirty electricity, it's like planting 127 trees per year!
Keep in mind, the numbers above are based on an average home in Alabama. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
Alabama does not offer solar Power Purchase Agreements or leases. Perhaps it would be a good idea to contact a solar advocacy organization and ask them to fight for solar in your state!
Alabama Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in Alabama:
Alabama's Renewable Portfolio Standard
A Renewable Portfolio Standard (RPS) basically requires utilities in the state to source a percentage of energy from renewable sources by a given date. A strong RPS is important because it forces utility companies to promote conversion to renewable energy. That generally means free money for you in the form of solar power rebates and performance payments when you switch to solar.
Alabama currently has no state or local Renewable Portfolio Standards. As we’ve seen in other states, the lack of an RPS has translated to an unfortunate lack of incentives to support solar power.
Alabama's Solar carve-out and SRECs
Unfortunately, no RPS means no solar carve out.
Alabama Electricity Prices
Alabama pays an average of 13 cents per kilowatt-hour of electricity. That’s a bit below the national average of 13.6 cents/kWh. We know you hate that monthly electric bill, but here at SPR, we actually think that energy is too cheap right now. That’s right, too cheap. Most electricity is currently produced by burning fossil fuels. All that earth-killing oil and coal may be cheap, but the long-term costs associated with fossil fuels far outweigh those monthly bill savings. When all those long-term costs really start to kick in, monthly electricity bills are going to inevitably rise as well and you’ll be patting yourself on the back for having already switched over to clean, efficient solar energy.
Alabama Net Metering
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume, and make sure you get credit for any surplus. Alabama is one of only six states in the nation without statewide net metering standards in place. Net metering remains completely at the discretion of the utility.
Alabama Interconnection Rules
Likewise, Alabama is one of fifteen states lacking statewide standards for interconnection. Utility companies have full discretion not only on whether to offer net metering, but also over what is required for you to get your solar power system connected to the grid in the first place. That can spell a logistical nightmare for attempting to connect your solar panels to the grid.
Alabama Solar Incentives
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 26% of your total system costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how Alabama measures up:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
Alabama Solar Power Rebates
2016 was the year the solar rebate died in Alabama. TVA used to have a nice program where they'd buy your solar electricity and even give you $1,000 up front, but sadly, it no longer exists. With no RPS in place, politicians and utility companies have no incentive to help promote solar power. They’re happy to leave all the costs to you … until they face stiff penalties for failing to satisfy an RPS, that is. Given all of Alabama’s sunshine, legislators have a great opportunity to secure cheap and plentiful energy, but they need to start pushing statewide incentives to make use of all those solar resources.
Alabama Solar Tax Credits
While Alabama does not have any policies currently to provide renewable energy tax credits, due largely to the lack of a Renewable Portfolio Standard, you Alabamians will benefit from the 26% Federal Solar Tax Credit nonetheless! There's no cap on the federal tax credit and you'll deduct that right off the bat. Sample calculations follow below -- keep scrolling!
Property Tax Exemption
There’s no property tax exemption for solar panels installations in Alabama, but there certainly should be. It’s a simple way to encourage solar growth, especially since solar homes appreciate by a multiple of twenty times annual electricity bill savings. That property value increase should be tax exempt, because you’re doing a lot of good for the community, economy, and environment.
Sales Tax Exemption
One of the simplest ways for the Alabama state legislature to encourage small scale clean energy adoption is to declare solar panel equipment exempt from state sales taxes as many other progressive states have done. Sadly, there is no such declaration. Luckily for you, however, Alabama has one of the lowest statewide sales tax rates, collecting only 4%.
Low-income Solar Programs
Alabama has no low-income solar programs.
The consensus on Alabama solar power rebates and incentives
Unfortunately the Alabama legislature is currently squandering the state’s solar power potential. Without any incentives in place, costs after year 1 remain higher than most other states, and the payback time frame here is a sub-par 12 years. That’s not the slowest time to payback we’ve seen, but given the total absence of state policy supporting solar power, we have no choice but to award Alabama with a big, ugly “F” for homeowners who want to go solar.