If you live in Alabama, you might not be able to save money with a solar system due to the state's solar policies.
The good news: You can install solar panels on your home in Alabama.
The bad news: You might not be able to save on your utility bills.
That doesn't mean solar panels aren't worthwhile, though. Solar panels can still provide you with backup power during outages and the knowledge that you're reducing fossil fuel emissions.
Alabama is 33rd nationwide in terms of installed solar capacity, according to the Solar Energy Industries Association, but the prospects for homeowners installing panels are dimmed by net metering policies that limit their savings and discourage connecting to the grid.
"Solar is a totally viable and mature technology, and the main thing holding back its growth and use in Alabama is our policies," said Daniel Tait, executive director of Energy Alabama, a clean energy advocacy group.
Depending on where you live, a solar system could be beneficial. Alabamians face some of the highest average electric bills in the country, according to data from SaveOnEnergy, a CNET sister website that covers the consumer energy industry. The state has the fourth highest average bills nationwide, at $173 a month -- the highest among southern states.
Whether a solar system makes financial sense depends a lot on whether you plan to connect it to the grid -- and on your utility company. Here's what you need to know.
The cost to install a solar system at your home depends on a lot of factors, including the size, type of solar panels and whether you get a battery system. Without a more mature solar industry in Alabama, state-level data on how much a typical system costs in Alabama is hard to come by. But Tait said prices tend to be in line with the national average, if not a little cheaper.
Here's a look at national average pricing so Alabama residents can get an idea.
|System size (kW)||Price per watt||Installed cost|
Nationwide, the median price per watt for a solar system is $3.67, with the median system costing $31,558, according to the Lawrence Berkeley National Laboratory's Tracking the Sun report. Keep in mind your potential savings may be limited by your utility's net metering policy. Depending on your utility company, you might have to pay an extra fee to connect your system to the grid.
Regardless of the size of the system you get, solar panels require a sizable financial investment. Fortunately, you can save quite a bit, thanks in large part to a major federal tax credit.
The main incentive is the federal residential clean energy credit, through which you can get 30% of the cost of a solar system back if you buy solar panels. It was increased from 26% and extended through 2034 by the Inflation Reduction Act, which Congress passed in 2022, and there is no cap on the size of the credit.
Note that the federal tax credit isn't like a discount code or an instant rebate – you won't get the money back until after you file your tax return the next year, and the actual amount you get back will be limited by how much federal income tax you paid. You can apply by filling out IRS form 5695 (PDF), and by following instructions from the Internal Revenue Service.
When comparing Alabama to other solar-friendly states, Alabama has limited solar incentives for homeowners. Check with your installer to see if any programs are available in your area.
|Property tax abatement||Your local government can authorize an abatement of property taxes for qualifying renewable energy projects -- saving you from having to pay more in property taxes after adding solar panels. The abatement must be in place before the project is completed.|
|Rural Energy for America Program||This initiative, administered by the US Department of Agriculture, provides guaranteed loan financing and grants to farmers and rural small businesses for renewable energy systems or energy efficiency improvements.|
Like any major purchase, you'll want to have a plan to cover the costs of solar panels. Some methods require preparation or take longer for you to recoup the cost. Here are some options:
Cash: Nothing beats cold, hard cash, but a project in excess of $10,000 requires a lot of it. If you see solar power in your future, but not tomorrow, consider saving money now. Regular contributions to a high-yield savings account can add up quickly.
Solar loan: Many solar companies will offer financing, often from a third party. Shop around with different lenders, because your solar company's third party choice might not have the best terms or interest rate.
Home equity loan or HELOC: You can also consider a home equity loan or line of credit, which could save you on interest, although your home is at risk if you fail to repay.
Mortgage: Another way to get the cash for solar panels is to refinance your mortgage. You can tap into your home's equity and still just have a single payment. Some products, like Fannie Mae's HomeStyle energy mortgage, are specifically designed to fund energy efficiency projects.
Through issues like fees and net metering -- the process by which you sell power to the grid -- Alabama's utility companies play a major role in determining whether or not a residential solar system will make sense. "That really determines, unfortunately in many cases, what you can and cannot do," Tait said.
In North Alabama, most homeowners get their power from municipal utilities that buy power from the Tennessee Valley Authority. In this area, where solar development is more common than in the rest of the state, interconnection agreements and net metering are fairly simple, Tait said. TVA will buy excess energy, but not at a high rate, meaning many systems are built around batteries that store power for the homeowner's use rather than selling excess power to the grid.
In much of the rest of the state, people who want to connect a solar system to the grid face the prospect of a fee charged by the utility Alabama Power based on the size of the system -- $5.41 per kilowatt per month. That fee essentially wipes out the potential cost savings of going solar, and the policy is the subject of a federal lawsuit. An Alabama Power spokesperson declined to comment, citing the pending litigation.
"No one does solar in Birmingham thinking it's going to be a smart financial move on a home," Tait said.
People in Birmingham, Montgomery and other areas served by Alabama Power do have options, including systems specifically designed to not connect the solar to the grid itself and avoid net metering entirely, Tait said. That includes hybrid solar systems or even separate electrical systems -- one connected to the solar array and one to the grid. Others, if they can generate enough electricity, can be entirely off the grid.
Other customers in Alabama are served by local electric cooperatives, which have a range of policies around solar, Tait said. If you're served by one, contact your co-op to find out what your options are. The details may vary widely from one to another and some smaller co-ops may not have any concrete policies about connecting solar systems.
The Yellowhammer State has eight solar installers and developers, according to the Solar Energy Industries Association. While you have just a handful of choices, here are some that stand out, including some top national solar panel companies.
Based in Birmingham, Eagle Solar & Light was founded in 2016. It can install solar panels for residential and commercial systems, and is a licensed contractor in Alabama, North Carolina, Georgia, Mississippi and South Carolina.
Eagle Solar & Light says it offers a complimentary on-site visit to review your property and determine the best choice for you.
Our top pick for a national solar company, SunPower, has industry-leading efficiency of 22.8% and a warranty that guarantees at least 92% production after 25 years. It also has an A+ rating from the Better Business Bureau.
You can buy or lease panels from SunPower, which operates in all 50 states.
In North Alabama, Huntsville-based Southern Solar Systems offers residential and commercial solar systems alongside other energy efficiency products, such as geothermal heat pumps and solar hot water systems.
Founded in 2007, Southern Solar Systems operates throughout the Southeast.
Birmingham-based Vulcan Solar Power also offers free consultations and site surveys, along with a free system design and quote. The company has built commercial and residential solar systems across the Southeast.
Vulcan Solar Power also installs solar systems for farms or rural businesses, for which consumers can use grants from the US Department of Agriculture to offset up to 25% of the cost.
There's more to a successful solar installation than just buying the panels and screwing them into the roof. Here are some things you should think about before making a decision:
While Alabama may not be on the cutting edge of solar power, the state isn't stopping homeowners from making this choice for themselves. Alabama's lack of incentives and limited availability may make things a little more difficult, but if the decision adds up for you, it can still be worth it.
As with any contractor, do your research before hiring someone for a solar panel installation. Find a reputable contractor who's licensed, bonded and insured, and get multiple quotes. Don't go with the first offer that comes to your door. "Don't let those things slip just because it's renewable energy," Tait said.