Alabama residents can claim solar incentives such as the federal solar tax credit and a property tax exemption. The Solar Energy Industries Association (SEIA) places Alabama at No. 38 for installed solar capacity, which is not an overly high ranking. While Alabama doesn’t offer as many incentives as top-ranking states such as California or Texas, its available savings can still help offset the cost of installing solar panels.
Keep reading to find out more about Alabama’s solar incentives and how much you can save when installing solar panels in the state.
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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.
Several utility companies in Alabama also offer incentives and rebates for other energy efficiency upgrades. You can find information about available opportunities using the Database of State Incentives for Renewables and Efficiency (DSIRE).
Local Utility Incentives
Alabama used to offer more incentives to support residents switching to renewable energy sources, but most state-level programs have expired. However, several local incentives through utility companies and small organizations can cut some costs for you when installing home energy efficiency upgrades.
Available programs in the state 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.
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 the federal solar tax credit, officially called the 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.
Pro Tip
- Be sure to keep a certification statement from the manufacturer or installer on file along with your receipts and proof of installation. If you’re audited by the IRS, you’ll need to produce this documentation to support your claim on Form 5695.
Is Net Metering Available for Alabama Homeowners?
Net metering is a billing program that allows you to send excess solar energy back to the grid in exchange for billing credits, which you can use to purchase grid power at night or during sub-optimal conditions. Alabama doesn’t have a statewide net metering program. This means your utility company may or may not support grid interconnection.
However, the state’s largest utility company, Alabama Power, offers a net-billing program to its customers. Unlike net metering, net billing does not offer direct energy credits in exchange for your energy, but pays you for the energy at a decided rate per kilowatt-hour (kWh). Currently, the rate for Alabama Power’s purchase of alternate energy (PAE) is less than half the retail rate of grid power.
Pro Tip
- It’s also worth understanding the broader financial picture. In most of the United States, it can take 9 to 12 years for your energy savings to pay back the cost of a solar system; after that, your panels should provide essentially free power for as long as two decades more. The payback period depends on your latitude, the direction your roof faces, tree cover, the cost of electricity in your area, and your utility’s net metering policies. For an instant estimate, plug in your address and average monthly electricity cost at Google’s Project Sunroof (sunroof.withgoogle.com).
How Much Do Solar Panels Cost in Alabama?
We took a closer look at the data from our 2025 survey of 1,000 solar panel owners and found that the average cost of installing solar panels in Alabama is about $1,516 per panel. This is slightly higher than the national average, which stands around $1,200 per solar panel.
Considering a two-bedroom house would need around 15 solar panels to cover an average energy consumption, you could expect to pay $22,742 for an entire system. To better estimate your system cost, you can determine the number of solar panels you might need based on how much power your home typically uses. Keep in mind that this is the cost before applying any incentives. The federal tax credit alone would reduce your cost by 30%, bring the net price to around $15,920. You can lower costs even more by seeing if your utility company offers any rebates.
Pro Tip
- Kevin Price, a solar installer featured on This Old House, explains why solar costs keep trending down: “It is now cheaper to make electricity from the sun than the utility can make from the big power plant.” He attributes this to three key factors: the free cost of fuel from the sun, government incentives, and the dramatic drop in equipment prices. As he puts it, “Cheaper panels, more expensive electricity from the grid”—a trend that makes the investment increasingly worthwhile for Alabama homeowners.
Is Going Solar in Alabama Worth It?
Our team found that going solar is worth it in Alabama because of the state’s higher-than-average electricity usage and utility bills. An Energy Information Administration (EIA) report from 2023 showed that the national average monthly electric bill cost $137, whereas Alabama’s average monthly monthly bill was over $162. This higher-than-average monthly cost can result in power bill savings for Alabama residents, while also providing clean energy for their homes.
Ultimately, 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. We recommend talking with a solar installer in your area to determine if solar makes sense for your budget and your home.
Pro Tip
- In a recent This Old House project, homeowner Michael reported that a modest 2.5-kilowatt solar system covered about 63% of his household’s electricity—even after the home was expanded by 50% and the family grew from one person to four. As This Old House host Kevin O’Connor noted, “That’s a pretty big number.” For Alabama homeowners with higher-than-average energy consumption, a properly sized system could deliver even greater savings.
Our Conclusion
Alabama doesn’t help residents cut solar costs in as many ways as some other 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 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.
FAQs 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 like some other states. However, you can finance your solar system through a solar lease or power purchase agreement (PPA). These options allow you to get the system installed for free and pay the installer for the electricity you use.
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.
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