Local property tax abatements
Some Alabama cities and counties may offer a property tax break for qualifying solar projects. It only applies to the noneducational portion of the added property value and typically lasts up to 10 years, though local officials may extend it.
These abatements are much more common for commercial projects and solar farms than for home solar systems. Check with your local tax assessor before installing panels, since approval is required in advance and residential programs may not be available in every area.
What to know about solar buyback in Alabama
Alabama does not have a statewide net metering policy. Instead, Alabama Power customers with solar systems of 100 kW or less may sell excess electricity to the utility through its Rate Purchase of Alternative Energy (PAE) solar buyback program.
The power you send to the grid is credited at a relatively low rate based on the time of day, season and electric plan. These export rates are generally much lower than the price you pay for electricity from the grid.
Current Alabama Power export rates
As of April 2026, Rate PAE offers three payment schedules:
- Time of Day: 3.66 to 5.17 cents per kWh
- Time Advantage: 3.45 to 5.47 cents per kWh
- Residential Demand: 3.83 to 4.64 cents per kWh
Your eligibility depends on the Alabama Power rate plan you use. Credits can carry forward, and you may request a check if the value of your exported electricity exceeds your bill charges.
Watch for the monthly capacity charge
Alabama Power also charges many residential solar customers a monthly capacity reservation fee of $5.41 per kilowatt of installed generation. For example, a 6-kW solar system would add about $32.46 per month to the bill.
A federal judge upheld the charge on March 25, 2026, allowing Alabama Power to continue collecting it. Even if solar greatly reduces your electricity use, the capacity charge and other fixed fees can limit your overall savings.
Pro tip
Include Alabama Power’s export rate and monthly capacity charge when calculating how long your solar system will take to pay for itself.
How much do solar panels cost in Alabama?
A typical solar panel system in Alabama costs $16,994. Your system size greatly affects how much you pay overall. The typical system size for solar systems in Alabama is 5.8 kW. You might need a larger or smaller system, depending on your average household energy usage.
Solar panel costs by system size in Alabama
| 5 kW | 6 kW | 7 kW | 8 kW | 9 kW | 10 kW | |
|---|---|---|---|---|---|---|
| Statewide average | $14,672 | $17,606 | $20,540 | $23,474 | $26,409 | $29,343 |
How can I pay for solar panels?
Many homeowners pay for solar panels in cash or with a solar loan. Loans are offered by banks and specialized lenders, and work similarly to other financing options, with an approval process and interest charges. Solar leases typically lower upfront costs but do not qualify for tax credits.
Federal mortgage options for solar panels
Some federal mortgage programs let eligible borrowers include solar panels or other energy upgrades in a home purchase or refinance loan. Rules vary by lender.
- FHA Energy Efficient Mortgage: Finance cost-effective energy upgrades through an FHA-insured mortgage. A home energy assessment is required, and expected savings must cover the upgrade cost. Separate FHA rules apply to solar and wind systems.
- VA Energy Efficient Mortgage: Eligible VA borrowers can add up to $6,000 for approved energy upgrades. For costs over $3,000, projected monthly savings must exceed the added mortgage payment.
Solar resources in Alabama
Below are some additional resources that can help you go solar in Alabama.
FAQ
Can I get free solar panels in Alabama?
No, there is no program that fully covers the purchase of solar panels in Alabama. Some companies offer leasing arrangements with lower upfront costs, but you’ll still have monthly payments.
Are solar panels worth it in Alabama?
Yes, solar panels can be worth it in Alabama for homeowners with a sunny roof who plan to stay in their home long term. Even if you don’t generate 100% of your energy needs, you can still save a lot of money versus paying traditional utility bills. In Alabama, solar panels usually pay for themselves within 13.9 years.
» MORE: Is solar worth it in Alabama?
How much can I save with solar panels in Alabama?
On average, Alabama homeowners with solar panels avoid $48,933 in utility costs over 25 years.
What has Alabama’s investment in solar been so far?
Total solar investments in the state amount to $1.2 billion, according to the Solar Energy Industries Association.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- DSIRE, "Alabama Programs." Accessed July 20, 2026.
- Alabama Department of Revenue, "Applicability of Alabama Sales and Use Tax on a solar renewable energy generation facility." Accessed July 20, 2026.
- Alabama Power, "Rate PAE Purchase of Alternative Energy." Accessed July 20, 2026.
- Solar Energy Industries Association, "Alabama Solar." Accessed July 20, 2026.
- Canary Media, "Why Alabama still lags the rest of the Southeast on solar." Accessed July 20, 2026.
