Alabama solar rebates and tax credits calculator

Summary of Alabama solar incentives 2026

The phrase “Alabama solar incentives” is a bit of an oxymoron, because the state legislature and public utilities commission here have done basically nothing to help homeowners add solar panels to their home. Instead, they allow the state’s largest utility, Alabama Power, to pay pennies on the dollar for excess energy generated by solar installations, leaving solar panel payback times at nearly the worst in the nation.

If you’re a truly committed environmentalist or a staunch DIY-loving off-gridder, you might find an investment in home solar well worth your money in Alabama. All others will likely not find a solar investment very favorable here.

Federal solar investment tax credit

The federal solar investment tax credit will have the biggest impact on the cost you will face to go solar in Alabama

If you install your photovoltaic system before the end of 2032, the federal tax credit is 30% of the cost of your solar panel system. This is 30% off the entire cost of the system including equipment, labor, and permitting.

Example: If your solar energy system costs $20,000, your federal solar tax credit would be $20,000 x 30% = $6,000.

The federal tax credit falls to 26% starting in 2033.

Net energy metering in Alabama

With net metering in some states, you get full retail rate credit for the amount of electricity you send back into the grid with your solar panels.

If you get electricity service from Alabama Power, you can sign up for their special Rate PAE, which stands for “Purchase of Alternate Energy.” This isn’t exactly an “incentive,” per se, but does qualify as a way a solar installation saves its owner money over the long term.

Under rate PAE, your solar panels will reduce your bill in two ways. First, your panels will meet your home’s needs during the day while the sun is shining, which will reduce your bill by the full amount of any kilowatt-hours (kWh) you would have used. Second, if your panels produce more energy than you can use at any given time, Alabama Power will pay you a special sub-retail rate for the excess.

The most recent rates can be found here, but they are generally around $.03/kWh during peak times and $.025/kWh during off-peak times. As your panels produce more than you use during the day, that is the per-kWh credit you’ll get for each excess kWh. The credit you earn during each month will be subtracted from the amount you owe Alabama Power on your monthly bill.

Considering you pay about $.12/kWh of electricity from Alabama Power, it is not financially advantageous to be forced to sell excess energy back to the company for around 25% of that price. Rate PAE alone is enough to discourage people who want to go solar based on the potential financial return, but unfortunately, the deal gets worse when you consider Alabama Power’s Rate Rider RGB, which they also require you to accept when you go solar here.

Rate Rider RGB imposes a “Capacity Reservation Charge” of $5.00/kW on all solar owners. That means people with average-sized solar installations of around 6 kW will pay an extra $30 on their monthly bills. Considering the average monthly savings of a 6-kW system in Alabama are around $90 per month, the $30 fee reduces your net benefit from solar by one third.

At the current rates, the Alabama Power rate PAE and rate rider RGB mean a solar purchase in Alabama won’t pay back its initial investment until after 15 years. Not much of an incentive at all.

Alabama solar rebates

Unfortunately, Alabama does not offer any cash rebates for solar panels. The state does have one fairly decent solar incentive, however...

Alabama’s solar property tax exemption

Alabama tax code (Section 40-9B-1) provides a property tax abatement for owners of qualifying renewable energy facilities. The abatement can exempt property tax on the additional value added to a home by a solar installation, for periods of 10 or 20 years, depending on the jurisdiction in which the request is made.

People interested in claiming the exemption must apply with their municipal or county tax authority, which will go through the review process outlined by the Alabama Department of Revenue.

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