Alabama

Net Metering Policy

• Statewide Policy: Alabama does not mandate net metering. Utilities may offer their own buyback programs, but compensation is typically at avoided cost rates (see below for more detail).

Key Utilities and Their Net Metering Policies

1. Alabama Power
   • Details: Offers a buyback program that credits excess energy at avoided cost rates, which are generally low.
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2. Tennessee Valley Authority (TVA)
   • Details: Provides limited solar incentive programs in Alabama, with compensation at avoided cost rates.
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State Incentives

• None Available: Alabama does not offer state-specific tax credits or incentives for solar systems.

Permitting and Interconnection

• Process: Submit system designs and interconnection applications to the utility for review.
• Timeline: 30-45 business days.
• Utility Links:
  • Alabama Power
  • TVA

Understanding Avoided Cost Rates in Alabama

In Alabama, the compensation for excess energy generated by residential solar systems is determined by the state’s net metering policies, which utilize avoided cost rates.

What Are Avoided Cost Rates?

An avoided cost rate represents the expense a utility avoids by purchasing energy from a distributed generation source, such as a residential solar system, instead of generating the electricity itself or acquiring it from another provider. This rate typically excludes costs associated with grid maintenance, transmission, and other overheads, making it lower than the retail electricity rate.

Alabama’s Net Metering Policy

Alabama does not have a statewide net metering policy. Utilities may offer their own buyback programs, but compensation is typically based on avoided cost rates.

Utility-Specific Avoided Cost Rates

Avoided cost rates can vary among utilities. Here are the details for two major utilities in Alabama:

1. Alabama Power:
   • The avoided cost rates are detailed in their Rate CPE (Contract for Purchased Energy).
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2. Tennessee Valley Authority (TVA):
   • The avoided cost rates are specified in their Dispersed Power Production Program.
   • Link

Impact on Solar Customers

• Lower Financial Returns:
  Alabama Power and TVA compensate customers at avoided cost rates, which are lower than retail electricity rates. This results in lower financial returns for excess energy exported to the grid.
• Integration Costs:
  Alabama Power introduced a Variable Integration Cost of $0.00193 per kilowatt hour for third-party energy producers, further reducing the revenue they receive for energy purchased by Alabama Power.
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