Alabama Solar Power: Check Your Savings, Costs, Tax Breaks, Incentives and Rebates
Alabama receives a lot of sunshine throughout the year, especially to the south of the state. Consider the state capital of Montgomery, for example, which gets five daily peak sun-hours on average and up to six in the hottest months of summer.
All of that sunlight can be transformed into solar savings every year if you invest in a residential PV system for your Alabama home.
If you get your energy from the Tennessee Valley Authority (TVA), which serves roughly one-sixth of Alabama, you have even more reasons to go solar: They offer you a rebate of $1,000 when you purchase your PV system, and then you can agree to sell them all the energy you produce at the full retail price plus $0.02/kWh.
Return on Investment for Residential Solar Power in Alabama
The ideal installed capacity of a residential PV system depends on energy consumption habits and the available area to accommodate solar panels. However, most households can get great results with a 5-kW PV system, which offers a nice balance between upfront cost and return on investment.
- You can expect to pay $20,000 upfront, equivalent to $4000 per kilowatt of capacity.
- However, you are allowed to deduct 30% of your investment as a federal tax credit, which brings down the net outlay to $14,000.
- On top of that, you will save around $750 during the first year of solar PV system operation, which means the net cash out of your pocket for the first year is around $13,250. The net installed price of each kilowatt is reduced from $4000 to $2650.
- The expected payback period is 15 years, but consider that solar panels typically come with 25-year warranties. This means that you are assured to get a full decade of free energy, accumulating net savings of around $15,000 at the end of the 25-year period.
- The property value of your solar home will also be driven up by approximately the same amount.
- The investment you make will also benefit the environment: operating your 5-kW solar PV system in Alabama provides an environmental benefit comparable to planting over 100 trees per year.
The above analysis is for a 5-kilowatt PV system operating under the average sunlight conditions in the state of Alabama.
Remember every home is unique and the specific project financials for every case are different, if you want a more accurate evaluation please go to our solar calculation page here.
However, the analysis presented can give you a general idea of what you can expect.
- Locations to the south of Alabama get slightly more sunlight that those to the north.
- South-facing rooftops get more average sunshine throughout the year.
- If there are no significant obstacles blocking sunlight reaching your property, your PV system will be more productive.
Don’t worry if you don’t meet all three of these conditions: they are meant to illustrate an ideal site for solar power in Alabama. Unless you have severe shading issues, you can still get a lot of energy from a PV system.
If you have the exact coordinates of your home, you can check out the NASA Atmospheric Science Data Centersite. There, you can input your coordinates and generate all types of weather data for the exact location of your property.
There is a section dedicated to solar power, and you can break down solar radiation rates by month and by rooftop tilt angle.
Alabama Solar Power Incentives, Tax Breaks and Rebates
The only electric utility in Alabama offering solar rebates and a feed-in tariff is TVA, which serves around 17% of the state.
There is also the 30% federal tax credit, which applies anywhere in the USA and takes away a huge portion of the initial investment.
Alabama unfortunately does not have a Renewable Portfolio Standard, so utilities are not required to meet a minimum renewable energy percentage, and this is the main reason why there are no incentives from utilities other than TVA.
Alabama Tax Credit
There are no state tax credits for solar power in Alabama, but the 30% federal tax credit is already a great benefit on its own accord. On a $20,000 solar PV system, this means getting back $6,000 as tax deductions within one year…
and if you are not taxed that high you can split the benefit and apply it over two consecutive years.
If you are planning to go solar, the best advice we can give you is to make haste: the 30% ITC is currently set to expire in 2020, when it will be reduced to a more modest value of 10%. You will get an extra 20% tax deduction if you purchase a solar PV system before the full benefit expires!
Are There Any Rebates for Solar Power in Alabama?
There is a simple rule of thumb for solar power rebates: if a state has no RPS, local utilities have no reason to incentive residential solar power and finding rebates is unlikely.
There is an environmental benefit, but rememberelectric utilities are businesses driven by profit.
The only utility offering rebates in Alabama is TVA, who will give you $1,000 if you install a solar PV system.
Alabama Electricity Rates
With electricity prices of around $0.12/kWh, Alabama is around one cent below the national average. In addition to the lack of rebates and local tax benefits, this is a factor that increases the payback period of solar power.
However, consider that energy is cheap thanks to fossil fuels, and governments across the world are committing to reducing their emissions. The regulations on fossil fuels, particularly coal, could get tougher over the following years and energy prices can be expected to rise.
For homeowners who get all of their energy from the grid, this is bad news because their electric bills will increase proportionally.
Is There Net Metering in Alabama?
Alabama has neither net metering standards nor interconnection standards for solar power, which means that PV system interconnection rules are left completely to the discretion of local utility companies.
Of course, if you are a TVA customer you get a favorable feed-in tariff, which is better than net metering (read on to learn why).
Lack of regulation complicates the process of plugging in a PV system to the grid in Alabama, so the best advice we can give you is to hire a trusted solar contractor with experience in going through the process.
Is There a Feed-In Tariff in Alabama?
TVA is the only utility company in Alabama that offers a feed-in tariff for solar power. If you sign up for their Green Power Providers Program, they purchase 100% of the energy produced from your PV system at retail price, plus $0.02/kWh.
This is great news because you are actually saving $0.14/kWh; it is a better option than net metering, where you only save $0.12/kWh.
TVA deserves recognition for offering both a rebate and a feed-in tariff, even though Alabama has no renewable energy goals.
Are There $0 Down Payment Financing Options in Alabama?
Alabama does not have a legal framework for solar leases and Power Purchase Agreements, which means the only option to go solar for $0 down is to take a loan. Ideally, it should be a low-interest loan such as a HELOC (home equity line of credits) in order to maximize the return on investment.
Purchasing a solar PV system through a loan is a smart financial move that allows you to get the benefits of solar power while most of the cash stays in your pocket!
If you get a HELOC, you can expect an interest rate of around 5% and a repayment period of 15 years.
You purchase your PV system with borrowed money, but claim a 30% tax credit as soon as you file your next declaration. The tax money that is freed up is used to start paying the loan.
The yearly savings generated by the PV system also contribute to loan payments.
You will still have to pay some cash, but it is much less than if you purchase the PV system upfront, and the expense is spread over many years. The tax credit and savings pay off a huge portion of the loan for you!
However, it is a great deal considering that you can go solar for $0 down.
Cash Purchase VS Loan: What’s Best for Alabama Homeowners?
The best option depends on your cash availability, your home equity, and of course your personal preference.
Purchasing a PV system in Alabama in cash
Purchasing a PV system in Alabama in cash is recommended if you have the necessary capital and prefer to maximize total dollar savings. This option yields around $15,000 over a 25-year period.
Purchasing a PV system in Alabama through a loan
Purchasing a PV system in Alabama through a loan is recommended if you own enough home equity for the loan and are willing to minimize the ownership cost of solar power. The total savings over 25 years are reduced to $7,000, but you don’t have to pay any cash out of your pocket upfront.
In short, a cash purchase maximizes total dollar savings, but a loan yields the highest percentage return on investment and is easier to pay.
What is the Solar Power Installation Process in Alabama?
With no standards regulating net metering and interconnection, the process to install a PV system in Alabama can become very complex.
This is why we strongly recommend you hire a reliable contractor, making sure the process goes by smoothly. You can also rest assured that your PV system will be properly installed and connected.
1. Fill our solar installation form, providing basic information on your property. 2. Talk with trusted solar contractors near you to get accurate quotes. 3. Compare quotes (we recommend you get at least three) and choose the best option for you. 4. Have your contractor install the PV system, and enjoy clean power while helping the planet.
1. Fill our solar installation form, providing basic information on your property.
2. Talk with trusted solar contractors near you to get accurate quotes.
3. Compare quotes (we recommend you get at least three) and choose the best option for you.
4. Have your contractor install the PV system, and enjoy clean power while helping the planet.
The installation should only take from three to four days, after you sign the agreement.
Keep in mind all examples in this article are for a 5-kW photovoltaic system, assuming the average sunlight conditions for the state of Alabama. You will get a personalized assessment and quote once you get in touch with a trusted contractor near you.
The top incentive for going solar in Alabama comes from nature: the state gets a lot of sunlight! There is also a $1,000 rebate and a favorable feed-in tariff if you happen to be a TVA customer. Also, don’t forget the 30% federal tax credit, available anywhere inside the USA.
Local authorities could really do a lot more for solar power, by introducing a Renewable Portfolio Standard and easing up the tax burden for photovoltaic systems.
In spite of that, solar power in Alabama is a solid long-term investment.