Why Getting Solar Panels in Alabama Is Complicated

If you live in Alabama, you might not be able to save money with a solar system due to the state's solar policies.


Connecting solar panels to the grid can be tricky in Alabama, depending on where you live.

Sarah Tew

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.

Can solar panels save you money?

Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.

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.

Can solar panels save you money?

Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.

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.

Alabama solar panel costs

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. 

Nationwide average solar panel costs

System size (kW)Price per wattInstalled cost
8 kW $2.99$23,920

Nationwide, the median price per watt for a solar system in 2022 is $2.99, with the median system costing $23,920, according to consulting firm Wood Mackenzie. 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.

Solar panel incentives and rebates

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. 

Alabama solar incentives

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.

How to pay for solar panels in Alabama

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.

Read more: Just looking for an emergency backup? Check out portable solar panels and solar generators.  

Why connecting to the grid is complicated in Alabama

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. 

Alabama solar panel companies

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.

Eagle Solar & Light

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. 

SunPower Solar

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.

Southern Solar Systems

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.

Vulcan Solar Power

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.

Installation factors to keep in mind

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:

  • Your roof: Whether solar makes sense for you depends a lot on your roof -- its size, shape, slope and which way it slopes. The Department of Energy says solar panels are most efficient on roofs that slope between 15 and 40 degrees, and in the northern hemisphere, they're best placed on south-facing roofs. You also might need to repair or replace your roof before it's ready for panels.
  • Your neighborhood: Make sure you don't have any restrictions from a homeowners association or local regulations that prevent you from having solar panels.
  • Insurance: Add the panels to your homeowner's insurance policy after they're installed. You should check in advance to make sure your policy will cover them.
  • Your location: Solar power systems work best in places where they get plenty of sun all day. If your property has a lot of shade, it might not be the best fit for a solar system. Talk with reputable installers to make sure the project is worth it.
  • If you're a renter: Before installing solar on a rental home, check with your landlord or rental management company. 

Alabama solar power FAQs

Updated on April 20, 2023

Written by  Jon Reed
CNET staff -- not advertisers, partners or business interests -- determine how we review the products and services we cover. If you buy through our links, we may get paid. Reviews ethics statement
Jon Reed Editor
Jon Reed is an editor for CNET covering home energy, including solar panels and energy efficiency. Jon has spent more than a decade making a living by asking other people questions. He previously worked as an editor at NextAdvisor, focused on home loans and the housing market; as a statehouse reporter in Columbus, Ohio; and as a reporter in Birmingham, Alabama. When not asking people questions, he can usually be found half asleep trying to read a long history book while surrounded by cats.
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