2022 Alabama Solar Incentives, Tax Credits, Rebates (And More)
Here’s a quick look at the solar incentives in Alabama:
- Federal Solar Tax Credit
- Property Tax Exemption
- Energy-Efficiency Incentives
- Additional City & Utility Rebates
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More and more Alabama residents are turning to solar energy systems to eliminate their electric bills and reduce their carbon footprint. While renewable energy sources are becoming increasingly affordable throughout the country, the average cost of a solar panel system in Alabama is still around $28,175. This estimated total is based on an average cost per watt of $2.45 in Alabama and a typical PV system size of 11.5 kilowatts being needed to offset energy consumption in the state.
In an effort to reduce the financial burden of going solar, the federal government and state governments offer some solar incentives. Below, we’ll discuss the most substantial financial incentives available to Alabama homeowners, how each could affect your total cost of going solar, and the total estimated savings you could enjoy as a result.
Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.
Current Solar Rebates, Tax Credits and Incentive Programs in Alabama
The table below gives a brief overview of all of the solar incentives available to Alabama residents and the prospective savings offered by each.
|Alabama Solar Incentive||Description|
|Federal Solar Tax Credit||The federal solar tax credit is a credit on your federal income taxes owed. It’s one of the most substantial benefits of going solar and totals 30% of the total cost of your solar energy system.1 In Alabama, the average credit amount is $8,453.|
|Property Tax Exemption for Renewable Energy Facilities||Most home improvements that increase your property value also bump up your property taxes. While installing solar panels will increase your home value, this exemption prevents your property taxes from increasing as a result, which could save you thousands of dollars in the long run.|
|Local Efficiency Incentives||In addition to state incentives, local municipalities and certain local utility companies in Alabama offer incentives for solar and other energy-efficiency home improvements. These typically come in the form of rebates, the amount of which depends on the cost of the upgrade. More expensive improvements like installing energy-efficient windows will yield a higher rebate than installing LED lighting, for example.|
Alabama Solar Incentives
Unfortunately, Alabama provides no statewide solar tax incentives or rebates. However, the Yellowhammer State does promote energy efficiency using some rebates and incentives for efficient equipment and home improvements rather than solar in particular.
In accordance with Alabama’s general support of clean energy, many local governments and electric utility companies offer loan programs that make energy-efficient improvements more accessible to homeowners. Low-APR financing options for efficiency upgrades in AL can significantly reduce the cost of making your home more sustainable. You can check with your local municipality or utility company for financing options for electric water heaters, heat pumps, energy-efficient windows, insulation upgrades and more.
The Alabama Power Residential Heat Pump Loan Program is one example. A heat pump can significantly improve the efficiency of your home heating system, saving you money on electric bills and reducing your carbon footprint. Many solar panel installation companies offer solar heat pumps for maximum efficiency. Another example is the Dixie Electric Cooperative Residential Energy Efficiency Rebate Program, which provides enticing rebates for upgrades like mini-splits and heat pumps and financing options for other efficiency upgrades.
Other Alabama Solar Incentives
Despite most of the incentives being aimed at energy efficiency in general, there are some solar-specific incentives in Alabama as well.
Alabama Solar Tax Exemption
Alabama residents have access to the Property Tax Exemption for Renewable Energy Facilities. Most home improvements that increase your property value will also cause your property taxes to go up. This tax exemption guarantees that your property taxes won’t increase as a result of installing solar for between 10 and 20 years. This doesn’t decrease your upfront costs of converting to solar energy, but it can provide decent savings in the long run.
It’s worth noting that Alabama also had a Sales Tax Abatement for Renewable Energy Facilities up until 2018. This state tax abatement was available for commercial, industrial, agricultural and government sectors and applied to photovoltaic solar, geothermal, hydroelectric and other renewable energy systems.
Net Metering in Alabama
Net metering is a billing policy that helps solar customers eliminate their electric bills. Via interconnection, electricity can travel from your solar power system to the local power grid. Net metering reduces the cost of what you pull from the grid based on any excess energy you send to the grid.
Unfortunately, the Alabama state legislature does not mandate net metering for utility companies. However, some utilities provide their own net metering programs. One example is Alabama Power, which buys back any overproduction through credits that can be used toward your future electric bills. The downside is that each kilowatt-hour produced will be bought at an amount that’s lower than the retail rate, so it won’t be a 1:1 offset of your bill. Even still, this local policy can help significantly increase energy savings if you’re an Alabama Power customer.
Although Alabama is still in the process of fully adopting and incentivizing solar conversions, the state as a whole is a major proponent of energy efficiency. Many utility companies and individual municipalities offer rebates and loan programs for energy-efficiency upgrades. These include solar heat pumps, mini-splits, energy-efficient windows, electric vehicle chargers, and more.
Federal Solar Tax Credit
One of the most significant incentives you’ll find for going solar in Alabama is afforded to residents across the country: the federal solar investment tax credit (ITC). The ITC is a credit on your federal income taxes, which means you can reduce the amount of income taxes you owe based on the cost of your solar panel system.
The federal tax credit is in the amount of 30% of your total system cost, so you can enjoy a more substantial credit with a bigger system. In Alabama, where the average cost of going solar is $28,175, the typical federal tax credit amount is a massive $8,452.
U.S. homeowners installing solar qualify for the 30% tax credit through 2032. After that, the credit will decrease to 26% in 2033 and 22% in 2034 before expiring in 2035.
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FAQ: Alabama Solar Incentives
We’re happy to get questions about state and local solar incentives from Alabama homeowners looking to convert to clean energy. Below are some of the questions we see most frequently, along with our responses. If you have specific questions that aren’t answered here, reach out to our team of solar experts at email@example.com.
Unfortunately, Alabama does not have a solar tax credit. However, the federal solar tax credit is still available to Alabama residents, and there are a number of incentives available from local municipalities and local power providers to promote energy-efficiency upgrades. Some upgrades can be managed by solar installation companies, like solar water heaters, heat pumps and more.
At this point, we can hope that there will eventually be a state solar tax credit as solar energy continues to grow in popularity throughout the state. It’s unlikely that the credit will be available in 2022, however.
Other state incentives for energy-efficiency upgrades are currently available and will be available throughout 2022.
Alabama is a proponent of energy efficiency, but most of the rebates available in the state don’t apply to solar equipment. You can get rebates on efficiency upgrades like energy-efficient windows and insulation from some local utility companies, but there are no Alabama solar rebates presently available.
Most home improvements that increase your property value also bump up your property taxes. While installing solar panels will improve your home’s value, Alabama’s Property Tax Exemption for Renewable Energy Facilities prevents your non-educational property taxes from increasing as a result. The exemption is good for 10 years, after which it can be extended for an additional 10 years, with a maximum limit of 20 years.