Is Solar Worth It in Alabama? (2024 Homeowner's Guide)

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How Can You Figure Out if Solar Panels Are Worth It In Alabama?

Alabama presents a great opportunity for most homeowners to save some money and reduce their carbon footprint, but the financial benefit won’t be there for every homeowner. Below are some things you’ll need to consider to decide if going solar is right for your home and your financial situation.

• Your home’s energy use
• Cost of going solar in Alabama
• Average payback period in Alabama
• Average buy-back rates in Alabama
• Your roof’s exposure to the sun
• Solar outlook in Alabama

Your Home’s Electricity Consumption

Solar panel systems vary wildly in size, and the number of kilowatts you’ll need to have installed is largely based on your monthly energy needs. Your panels are typically sized to cover your electricity consumption, and, ultimately, your return on investment (ROI) will come primarily from the energy savings you’ll enjoy from an appropriately-sized system.

Generally speaking, homes that use fewer than 500 kWh aren’t great candidates for solar conversion. Luckily, the average monthly energy consumption in Alabama is 1,145, so most homeowners won’t need to worry from a consumption standpoint if panels are a good investment.

Still, it’s best to confirm that you have qualifying energy needs by checking your billing history on your electric bill.

Cost of Solar in Alabama

The price of solar panels in Alabama averages around $3.72 per watt, which is significantly higher than the national average of $3.33.

Most homeowners need around an 11.5-kW system to eliminate their energy bills, which equates to a total investment of $42,780, or $29,946 after the federal tax credit is considered. Although per-watt prices higher than most states, Alabama is still a great state for going solar and keeping upfront prices down.

Additionally, solar panels provide more value where they can offset high electricity rates or high energy consumption. Alabama has below-average power prices, but the energy usage is well above the national average, meaning solar will be worthwhile for most Alabama residents.

Average Solar Payback Period in Alabama

Solar equipment is expensive, but the majority of purchased or financed solar systems pay for themselves over time by saving you money on electric bills. The time it takes for the payoff to occur is called the solar panel payback period, and it’s a crucial factor in determining how valuable panels will be for your home.

You can use a solar calculator or contact a reputable solar panel installation company in your area to find out your estimated payback period. The typical homeowner in Alabama will find that their panels pay for themselves within 13 years, which is just above the national average of 12 years. That means going solar is generally slightly less worthwhile in Alabama than in the rest of the US.

A decent payback period in Alabama is between 9 and 15 years, so if yours is longer, your ROI will be lower than the average.

Average Solar Buy-Back Rates in Alabama

Most states offer solar customers net metering or an energy buy-back program where you get compensated for any excess energy you produce with your panels. These policies help offset electric rates, shortening your payback period and increasing your total ROI.

Unfortunately, the Alabama Public Service Commission does not mandate net metering, so most local utility companies won’t offer it. In fact, regulators have tacked on a monthly fee for solar customers that ends up disincentivizing solar.

In order to eliminate your electric bills, you’ll have to add a solar battery to your home solar project. Energy storage will prevent you from having to pull energy from the grid and pay for each kWh when you use electricity at night or on cloudy days.

Your Roof’s Exposure to the Sun

Solar panels use sunlight to produce energy, so the more direct sunlight your roof receives, the more efficient your panels will be and the more electricity they will generate.

Alabama residents as a whole enjoy around 213 sunny days per year, which is just above the national average of 205 days. As such, photovoltaic equipment will typically be worth it in AL.

However, there are some individual factors to consider for your home, like the direction your roof faces. In the US, south- and west-facing roofs receive the most sun and are best for solar conversions.

Additionally, you’ll want to consider any shading on your property from trees, buildings or other obstructions, as these will impede sunlight and reduce the overall value provided by your system.

Solar Outlook in Alabama?

Alabama ranks 30th overall in the country for solar energy installations, and that’s almost entirely due to utility-scale solar installations. Unfortunately, residential solar conversions haven’t quite gained the popularity they have in most other states. T

his is partially because there are so few statewide incentives available and because Alabama is one of the few states that doesn’t have a Renewable Portfolio Standard (RPS). Some optimists will look at the minimal hold the solar industry has in Alabama and say there’s only room for improvement. While this is true, it’s very possible that the state will be slow to adopt and incentivize residential solar, if it does at any point.

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What Are the 4 Main Benefits of Going Solar in Alabama?

Despite the State of Alabama not providing much incentive to go solar, there are some significant benefits you can enjoy when you make the switch to this renewable energy source. We’ll discuss the most substantial upsides of installing solar panels below.

1. Electricity bill savings
2. Lower taxes and access to other incentives
3. Increased home value
4. Eco-friendly

Electricity Bill Savings

Even though there is no net metering mandate in Alabama, residents will still enjoy savings on their electric bills when they convert to solar energy. Solar panels produce energy that you would otherwise pull from the grid and pay for.

Given the high energy needs of Alabamans, the reductions on monthly utility bills can be substantial. The average savings for solar customers throughout the state is around $30,270, and that’s after the panels pay for themselves!

Additionally, your savings could end up being even higher, as electricity rates have gone up year-over-year in the past and are likely to increase in the future. Installing solar panels effectively lets you secure a lower electricity rate for the estimated 25+ years of panel life.

Lower Taxes & Access to Other Incentives

Although Alabama isn’t the best state for solar tax credits and rebates, there are some incentives afforded by the state and federal governments to make solar more affordable and accessible.

Most notable in Alabama is the federal solar investment tax credit (ITC). The ITC is for 26% of your total system expense, which is an average of $12,834 in Alabama. This amount gets credited to your federal income tax liability for the year your equipment is installed and turned on.

Some other Alabama solar incentives are listed below:

• Property Tax Exemption for Renewable Energy Facilities: This property tax exemption prevents your property taxes from being affected by your solar conversion. Your panels will increase your home value but won’t cause a spike in your taxes.
• Local Efficiency Incentives: There are no solar-specific rebates for solar equipment in Alabama, but there are some rebates for related energy-efficiency upgrades. You might be eligible for these incentives depending on your power company. Alabama Power and the Tennessee Valley Authority (TVA) are two companies that provide such incentives.

Home Resale Value Increase

One of the most significant benefits to going solar in Alabama, where there are so few statewide perks, is the bump in home value your panels will provide.

Research done by Zillow suggests that solar panel installation will increase your property value by around 4.1%, on average.³ Given the typical home value of $221,428, that’s an average value increase of $9,078.⁴ In areas like Birmingham and Montgomery, this value bump could be even higher.

Coupled with the property tax exemption in Alabama, this is a wonderful benefit. Although solar leases sometimes seem appealing because of low upfront fees, this is one benefit that you’ll miss out on if you lease your panels or sign a power purchase agreement (PPA), which we recommend against.

Clean, Renewable Energy

Aside from the financial benefits of going solar, you’ll also be reducing your reliance on fossil fuels that are detrimental to the environment. Installing solar panels will reduce your carbon footprint and contribution to pollution, and you’ll be helping to reduce the progression of global warming as well.

Plus, going solar makes you less dependent on your electricity provider, meaning you won’t have to deal with electricity rate increases that have been occurring nationwide over the past few decades.

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What Should Alabama Homeowners Look Out For When Considering Solar?

Figuring out that going solar is a worthwhile investment for your home is the first step to enjoying massive energy savings and becoming more energy independent. However, that’s just the first step in the process. Below are some additional things you need to consider throughout the whole process.

• Upfront fees
• Payback periods
• Net metering policies
• Outlook on solar policies and incentives
• Weather and climate
• Companies that push financing options that don’t help you maximize your ROI

Upfront Fees

No matter what incentives and benefits are available, the upfront fee of solar panels will always be a point of contention. Thankfully, in Alabama, the price is less of an issue, thanks to the low per-watt rate.

You can reduce your upfront fees by choosing a no-money-down solar loan, installing more affordable solar panel brands and limiting your equipment to panels and inverters and avoiding add-on products like electric vehicle chargers.

Payback Period

Every homeowner should calculate their solar panel payback period or have a reputable solar panel installation company estimate it for them before going solar. The time it takes you to pay back your panels using energy savings is a good indicator of overall solar value for your home, and it also determines when you’ll recuperate your upfront fees and start saving money.

Net Metering Policies in Alabama

Net metering is a great solar incentive in many states that helps reduce energy bills, pay back the solar energy system installation fees sooner and provide a greater ROI in the long run. Unfortunately, Alabama doesn’t mandate net metering. As such, most customers opt to install solar batteries alongside their panels. This will add to your upfront fees substantially but almost always saves you more than panels alone in Alabama over time.

Pending Policies & Changes to Incentives

As mentioned above, the solar market in Alabama is far smaller than in most other states in the country. It follows that the incentives and solar policies aren’t as beneficial as they could be, which only means that there is room for growth.

It will likely take quite some time for incentives and rebate programs to be introduced for residents, but it’s worth checking for updates before going solar, as any budding industry is subject to change rapidly.

Weather & Climate in Alabama

The weather in Alabama is generally conducive to solar panel efficiency, with an above-average number of sunny days for energy production.

However, residents are also well-acquainted with tornadoes and other extreme weather, so some worry about the safety of their panels. In most cases, a robust physical protection warranty provides all the peace of mind you need when going solar in Alabama.

The state also receives around 56-inches of precipitation annually, which is well above the national average. While rainy and cloudy days will lead to reduced panel efficiency, the sun throughout most of the year is enough to make panels worth the investment. Additionally, the rain will help keep your rooftop solar equipment free of dirt and debris that can reduce efficiency even when it’s sunny.

Companies Pushing Solar Leases or PPAs

Finally, you should take some time to research which solar installer is right for you and understand that not all solar panel installation companies are created equal.

Generally speaking, companies that advertise “free panels,” solar leases, or power purchase agreements (PPAs) probably don’t have your best interest at heart.

Solar leases often appear like a good deal, but they’re often not much more affordable than no-money-down financing. Plus, they don’t increase your home value like a cash purchase or solar loan would, they don’t let you take advantage of the federal tax credit and they take far longer to pay off, reducing your ROI significantly in most cases.

So, Will Solar Be Worth it for Your Alabama Home?

Solar panels are a worthwhile investment for most Alabamans, but that doesn’t mean they’re a good fit for everyone.

Determining if solar is right for you will require you to consider the direction your roof faces, your monthly energy needs, the size of the system you’d need to install, and much more. You’ll also want to estimate your panel payback period to estimate your long-term savings and your break-even point.

Even once you determine that panels are a good option for your home, you’ll want to think about your upfront fees in relation to your budget, your financing options, and which solar installer is right for your solar project. We strongly recommend contacting a reputable and vetted solar panel installation company to help you each step of the way.

See also: Calculate the costs and savings you can get from installing solar panels

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Read More About Going Solar

• What Are the Best Solar Companies in AL?
• What Alabama Solar Incentives Are There?
• Find Cost Savings on Solar in Alabama
• Homeowner’s Guide to Solar Panels in Alabama

The cost information presented in this article is derived from a comprehensive analysis, incorporating data from multiple industry sources. The average cost per watt per state was calculated based on figures from Consumer Affairs, Energy Sage, and Berkeley Lab’s Electricity Markets & Policy Department. Additionally, monthly energy consumption and the average monthly cost of electricity were sourced from the U.S. Energy Information Administration, ensuring a well-rounded and accurate representation of the information presented.