Solar Incentives in Alabama
Alabama homeowners installing solar in 2026 have access to two active export-compensation programs, depending on which utility serves their property. Customers of Alabama Power can use Rate PAE (Purchase of Alternate Energy), a tariff approved by the Alabama Public Service Commission that allows owners of generating facilities up to 100 kW to sell output to the utility. Under Rate PAE, a monthly base charge applies ($0.91 for single-phase service, $1.39 for three-phase), and energy payments range roughly 3.45 to 5.47 cents per kWh depending on rate schedule — well below the retail electricity rate. In northern Alabama served by the Tennessee Valley Authority, the TVA Dispersed Power Production program allows residential customers to sell qualifying renewable generation to TVA at TVA's avoided cost, which also falls below retail and varies over time. Alabama has no statewide net metering law, so export compensation terms differ by utility and are not uniform statewide.
The federal residential Clean Energy Credit under Internal Revenue Code §25D — commonly called the 30% solar tax credit — expired for systems placed in service after December 31, 2025, under the One Big Beautiful Budget Act (Pub. L. 119-21). Homeowners installing solar in 2026 cannot claim that credit. Its absence meaningfully extends payback periods compared to prior years.
Alabama's residential electricity rate averaged approximately 17.15 cents per kWh as of March 2026, up about 0.59 cents year-on-year. Because export compensation rates under both active programs are substantially below that retail rate, self-consumption of solar generation carries more financial value than grid export under current tariff structures.
Figures here are verified as of June 2026 against official sources; programs change with each legislative session and utility rate case, and the Alabama Public Service Commission and TVA are the authoritative sources for current tariff terms.
Federal credit update. The federal residential Clean Energy Credit (the 30% “solar tax credit” under §25D) expired for systems placed in service after December 31, 2025. New 2026 residential installs do not qualify; a 2025 install can still be claimed on a 2025 return (IRS Form 5695). What this means for 2026 →
Current solar incentives in Alabama
Alabama Power Rate PAE (Purchase of Alternate Energy)
Alabama has no statewide net metering rule; in Alabama Power territory the Public Service Commission-approved Rate PAE is the mechanism for selling customer-generated power to the utility. It is available on any Alabama Power distribution line for customers with a generating facility of not more than 100 kW nameplate capacity installed for their own use who want a permanent interconnection to sell alternate energy to the company. The customer pays a small monthly base charge for two-way metering and is paid per-kWh buyback rates that vary by option (Time of Day, Time Advantage, or Residential Demand) and by season and hour, well below retail rates. Enrollment also requires satisfying Rate Rider RGB (supplementary/back-up power), which applies separate charges to self-generating customers.
| Amount | Monthly base charge $0.91 (single phase) or $1.39 (three phase). Energy payments roughly 3.45-5.47 cents per kWh depending on option, season, and time of day (e.g., Time of Day option: 5.17 cents/kWh summer weekday peak, 3.66-3.85 cents/kWh other hours; Time Advantage option: 5.47 cents/kWh summer weekday peak down to 3.45 cents/kWh in shoulder months). Forty-Seventh Revision, effective April 2026 billings. |
|---|---|
| Who qualifies | Alabama Power customers with an electric generating facility of not more than 100 kW nameplate capacity for the customer's own use; must take service under a currently available rate, meet interconnection/Special Rules requirements, and satisfy Rate Rider RGB. Systems of 100 kW or more use Rate CPE instead. |
| Administered by | Alabama Power Company (tariff approved by the Alabama Public Service Commission) |
Source: Alabama Power Rate PAE, Forty-Seventh Revision, approved by Alabama Public Service Commission order in Docket #18005, effective April 2026 billings; Special Rules for Rate PAE (APSC Docket #18005) Official source →
TVA Dispersed Power Production Program (northern Alabama)
In TVA-served northern Alabama, the Tennessee Valley Authority's Dispersed Power Production (DPP) program lets residential and business customers with qualifying renewable generation (solar, wind, hydro, biomass, waste, or geothermal, up to 80 MW) sell all or excess generation to TVA at TVA's avoided cost. Participants sign an interconnection agreement through their local power company and choose whether to sell only excess generation or all output. Enrollment is handled online through TVA's renewable program hub.
| Amount | Energy purchased at TVA's avoided cost (not retail rate); avoided-cost values are set by TVA and vary over time. |
|---|---|
| Who qualifies | Customers of TVA local power companies (northern Alabama) with qualifying renewable generation facilities up to 80 MW; interconnection agreement with the local power company required. |
| Administered by | Tennessee Valley Authority with local power companies |
Source: TVA Dispersed Power Production program page (PURPA qualifying-facility purchases at avoided cost) Official source →
Verification note. Some official source pages for this state block automated access from our servers, so one or more figures here rest on the underlying statute or an official search result pending a final browser check. The cited official source is authoritative — confirm current terms there before you rely on a figure.
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Programs verified as of June 2026 against official state and federal sources (each cited above); refreshed quarterly as legislatures and utility rate cases change the rules. How we verify this data. This page is informational only — not tax or legal advice.