The complete list of Alabama solar incentives and tax credits for 2023, plus how to take advantage.
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For Alabamans, the federal solar investment tax credit (ITC) is by far the biggest single tax incentive for going solar. Sadly, the 22nd state doesn’t offer any rebates for installing solar equipment at home, and Alabama is one of the few hold-out states not to have adopted a statewide policy on net metering.
In fact, the state’s largest utility, Alabama Power, charges homeowners with solar a monthly fee for connecting to the grid. This Capacity Reservation Charge (CRR) amounts to around $20-$32 per month for homeowners with a standard-sized rooftop solar array. Thanks to the CRR, it’s hard for most homeowners to break even on going solar at home in the state.
Solar advocates have long fought the CRR and are mounting a case in federal court to challenge the legality of the Capacity Reservation Charge. If they win, going solar would be much more cost-effective in Alabama and the state could see a surge of rooftop solar installations. Precedents for this kind of court case (and victory!) have been set in Kansas and Arizona, where lawmakers ruled that utilities could not discriminate against solar homeowners and charge them more than non-solar customers.
For now, the greatest tax breaks and financial incentives in Alabama for solar are the federal ITC and the state’s property tax exemption.
Alabama State Incentives
| Incentive | Description |
|---|---|
| State property tax exemption | Alabama offers a 10-year property tax exemption for value added by solar, renewable for up to 20 years total |
| Net metering | Alabama does not mandate net metering. The main utility, Alabama Power, offers a Rate PAE, or “Purchase of Alternate Energy,” where the utility pays customers a lower rate than retail for exported energy. Homeowners are also charged a monthly fee for installing solar |
Solar Property Tax Exemption in Alabama
The Alabama tax code (Section 40-9B-1, with definitions in Section 40-9B-3) provides a property tax exemption for the value added to a home by a solar installation. This exemption is only for the increase in an assessed property’s value associated with a solar array. The tax exemption typically lasts for 10 years, but homeowners can apply for an additional 10 years, up to a maximum of 20 years per installation.
The availability and ease of applying for this property tax exemption depend on where you live in Alabama. To take advantage of the tax exemption for solar in Alabama, homeowners apply through their municipal or county tax authority. As the law stands, you have to get your application in prior to your solar energy system becoming operational.
Net metering in Alabama
Net metering is not mandated by law in Alabama, meaning homeowners must negotiate any agreements with their utility. Alabama Power is the main electric utility in the state and offers a Rate PAE, or “Purchase of Alternate Energy.” This is where the utility buys excess electricity produced by your home solar array, albeit at a much lower cost than it charges you for drawing from the grid.
Unfortunately, Alabama Power also charges homeowners with solar a monthly Rate Rider RGB or “Capacity Reservation Charge” of $5.41/kW. This amounts to about $30 per month for a typical rooftop solar array, which pretty much offsets any savings homeowners might expect on their utility bill.
As such, there’s little financial incentive right now to go solar in Alabama. Unless, that is, you want to go off-grid and use solar plus backup battery storage and, perhaps, a generator, wind turbine, or other energy source for when the sun isn’t shining.
If you live in North Alabama, you may know some folks with solar panels who currently get a feed-in-tariff through the Green Power Providers (GPP) program from the Tennessee Valley Authority (TVA). There are currently around 20 local utility companies signed up for the TVA’s GPP program in Alabama. Applications to this program closed in 2019, however, and TVA shows no signs of opening the program up to new customers.
Final thoughts on state solar incentives in Alabama
Alabama may get a good amount of sun, but the state isn’t very friendly for homeowners wanting to install solar. This doesn’t mean solar isn’t a good idea in the state, though, especially as the cost of energy is relatively high in Alabama.
For Alabamans who want to go solar for environmental reasons, or who aren’t phased by the lack of current state incentives, the best time to install solar is now. That way, you can start producing clean energy and reduce your utility bills while also claiming the newly increased 30% federal solar tax incentive.