Your 2019 guide to getting solar panels for your home 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 2019 **
From the southern Bay to the northern Mountains, Alabama has a whole lot of intact natural areas to protect. In fact, about 23 million acres –an astounding 68% of Alabama’s total land area is still forested. If that were not enough motivation to adopt a solar friendly path, Alabama gets a fair bit of sun across the entire state. Put those two together and you get a state that should be at the forefront of solar power usage for homeowners.
Sadly, that has not been the case; the state legislature has done very little to encourage 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 incentive program.
Recently, the state's utility companies have been getting into the solar game, but there has still been very little help for homeowners who want to go solar. 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!
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 $1,558 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 $950 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 $3.35 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:
- Installing a typical 5.9-kW solar system should start at about $20,000. 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 $6,000 (30% of $20,000) for a new price of $14,000.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be about $950. That brings your cost after the first year to $13,050.
- 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 $20,000 through 2041.
- And don't forget... your home's value just increased by close to $14,000, too (your exact 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 123 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 $20,000, 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 30% 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 $75/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 $20,000. That will be the amount of your HELOC.
- The electricity you'll save in the first year of operation would have cost $950. 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 30% tax credit based on the cost of your system after the rebate. That's $6,000 you won't be paying in taxes. You can take the credit over as many years as you need if you don't owe $6,000 in federal taxes this year.
- Your loan payments will total a little over $1,800, 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 $5,000 in your pocket.
- When your loan’s paid off in year 12, you’ll start see over $1,400 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 $12,500 with a solar loan in Alabama.
- And don't forget... your solar panels are offsetting so much dirty electricity, it's like planting 123 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:
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.
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner. Read more about Renewable Portfolio Standards.
RPS solar carve out
Unfortunately, no RPS means no solar carve out.
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
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.
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
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.
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
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.
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Solar Incentives in Alabama
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 30% of your 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:
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.
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
Alabama Solar Power 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 30% 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!
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Solar Power Performance Payments
Once again, Alabama’s left in the dark when it comes to solar incentives. If you’re lucky enough to be a TVA customer, your solar power system is eligible for the Green Power Providers Program, which ensures you'll get paid retail rates for the electricity your system produces. Sadly, this program used to pay a bonus of $.02/kWh for that electricity, but those performance payments have gone the way of the dodo.
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
We've got a great article if you like to read more about what SRECs are and how to earn them.
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.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Some argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing). Other studies seem to indicate a home price premium about equal to the cost of installing the system, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
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%.
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
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.