Alabama Solar Incentives, Tax Credits & Rebates (2024 Guide)
Written by
According to the Solar Energy Industries Association (SEIA), Alabama has enough solar panels installed to power over 91,000 homes across the state. That number increased until many of the state’s solar incentive programs recently expired, and new programs didn’t take their place.
The state doesn’t currently provide many solar incentives to Alabama residents, but we did find a few homeowners should know about. See our guide for available solar tax credits and rebates below as well as our best solar companies in Alabama.
What Are the Available Alabama Solar Tax Credits and Rebates?
These Alabama solar incentives can help you save money on installing a solar panel system or ongoing electricity expenses:
Property Tax Exemption
Installing solar panels can increase your property value by an average of 4.1%, according to a Zillow report. That increase would typically mean your property taxes go up, but not in Alabama. The state has a solar property tax exemption, meaning your tax rate will remain the same as if you hadn’t installed solar equipment. The amount the exemption can save you depends on your system’s cost and county tax rate.
More resources:
Local Utility Incentives
Alabama used to offer more incentives to support residents switching to renewable energy sources, but most state-level programs have expired. Luckily, several local incentives through utility companies and small organizations can cut some costs for you when installing home energy efficiency upgrades.
Programs include:
- Alabama Power energy efficiency rebates: Customers can get $200 in rebates for installing smart thermostats and up to $650 for installing hybrid or heat pump water heaters.
- Central Alabama Electric Cooperative residential energy efficiency loan program: You can get a low-interest loan when improving your home’s energy efficiency. Financing is available up to $10,000 for weatherization and $20,000 if you also install a heat pump system.
- Central Alabama Electric Cooperative residential energy efficiency rebate program: Get rebates between $235 and $700 for installing a water heater or heat pump.
- Dixie Electric Cooperative residential energy efficiency rebate program: Enjoy a free energy audit and cash-back incentives for installing heat pumps.
- Dixie Electric Cooperative residential energy efficiency loan program: Dixie Electric partners with Regions Bank to provide low-interest loans for improving home energy efficiency.
- South Alabama Electric Cooperative residential energy efficiency loan program: Customers can get affordable financing for energy-efficient heat pumps, insulation, doors, and windows.
- Wiregrass Electric Cooperative H20 Plus program: Get cash back for installing heat pumps and other geothermal equipment.
See other Alabama clean energy incentives
How Does the Federal Solar Tax Credit Work?
The best way to put more money in your pocket when going solar is to apply for and learn about the federal solar investment tax credit (ITC). This nationwide federal government tax credit lets you recoup up to 30% of your total solar investment by lowering your tax bill the year after your solar installation.
Say your total solar investment was $20,000. The 30% credit comes to $6,000. You or your accountant will deduct that amount from what you owe on your federal taxes the following tax season. If you don’t owe that much, the credit rolls over for four consecutive years.
You must own your solar energy system to qualify, so it’s only for those who paid for their system up-front or through a solar loan. Those with a solar lease or power purchase agreement (PPA) aren’t eligible. You can claim the federal ITC by filing IRS form 5695.
Is Net Metering Available for Alabama Homeowners?
Net metering doesn’t save you money on your system, but it does save you money on electricity. It allows homeowners to sell excess energy to their local utility company for energy credits.
Most solar system owners remain connected to the local power grid as a backup energy source when there isn’t enough sun to power their homes, such as at night or during heavy cloud coverage. Therefore, they can use those credits to pay for any electricity they use from the grid instead of paying out of pocket when the electricity bill comes.
Contact your utility provider to see if it has a net metering program. If it does, it’ll ask if you have a bidirectional meter. If you don’t, the provider will give you one for free. From there, you just need to submit an application to your power company. Most solar panel installation companies will handle this for you.
How Much Do Solar Panels Cost in Alabama?
We found that a 9-kilowatt (kW) system averages $22,050* in Alabama. This price is before applying the federal tax credit, which would lower it to $15,435. This is comparable to the national average cost for a system this size.
*Cost data via EcoWatch
Is Going Solar in Alabama Worth It?
Going solar in Alabama can be worth it because of its higher-than-average electricity usage and utility bills. An Energy Information Administration report from 2021 shows that the national average monthly energy consumption is 886 kilowatt-hours, leading to an average monthly electric bill of $121.01. Alabama’s average monthly consumption is 1,140 kilowatt-hours (kWh), with an average monthly bill of $147.75. This level of energy usage by residents and the amount many homeowners are paying for monthly utility service means big potential for savings if they get a good enough price on their solar power system.
Our Conclusion
Alabama doesn’t help residents cut solar costs the way many surrounding states do, but there are still incentives you can apply for to shave off some expenses. We suggest looking into the federal solar tax credit and discussing opportunities with your utility provider.
You can also talk to a local solar installer in Alabama about programs that can help you save. We recommend reading customer reviews and getting quotes from at least three companies before deciding which to hire.
FAQ About Solar Tax Incentives in Alabama
Does Alabama have solar incentives?
Alabama doesn’t have as many solar incentives as most other states. Residents can enjoy a property tax exemption that prevents them from being charged additional tax if installing solar panels increases their home value. Alabama homeowners can also use the federal solar tax credit, net metering programs, and local incentives.
Can I get free solar panels in Alabama?
No, Alabama doesn’t have programs that help low-income residents get free solar installation as some states do. However, you can finance your solar system through a solar lease or PPA. These options allow you to get the system installed for free and pay the installer for the electricity you use.
Is solar power worth it in Alabama?
Yes, solar is worth it in Alabama for many homeowners. Alabama has higher-than-average energy usage rates and electricity rates, so you can save quite a bit if you pay low enough on your solar system to have a short payback period. Whether solar power is worth it for you depends on how much energy you use and how much you spend on a system. The more energy you use and the less you pay for solar panels, the more you’ll save.
Does Alabama have a solar program?
Alabama doesn’t have state-specific solar programs aside from waiving related property taxes. There are local net metering and loan programs you can look into, as well as the federal solar tax credit.
Our Rating Methodology
We are committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
To share feedback or ask a question about this article, send a note to our Reviews team at reviews@thisoldhousereviews.com.
