Residents in Alabama who request quotes on the EnergySage Marketplace spend an average of $257 monthly on electricity. That adds up to $3,084 per year. A different way to look at it is that a typical Alabama resident uses 1,760 kWh of electricity per month and 21,120 kWh over the year.
(For what it’s worth: Alabama residents shopping for solar on EnergySage may use more electricity than a typical household.)
The easiest way to compare electricity costs across regions is to look at the electricity rate. In the U.S., residential rates generally range from 11 ¢/kWh all the way up to 34 ¢/kWh.
As of February 2026, the cost of electricity in Alabama is 15 ¢/kilowatt-hour (kWh)—roughly 26% lower than the national average cost. That number is based on real-world electric bills shared with EnergySage over the past 12 months. You can compare that number to the most recent average state electric price reported by the U.S. Energy Information Administration (EIA).
Alabama’s electricity market is regulated, which means you can’t choose which company supplies your electricity. Instead, the state determines your electric utility company based on where you live. Alabama Power is the primary electricity supplier, covering most of the state.
As an Investor Owned Utility (IOU), Alabama Power is a private for-profit company. While it covers most of the state, some towns and cities in Alabama are served by municipally-owned, not-for-profit electric companies that aren't subject to the same requirements as IOUs. These municipal utilities may offer lower rates, but may not offer net billing benefits.
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When you pay your electric bill, you’re not only covering the costs to produce that electricity, but also the costs of running and maintaining the electrical grid, as well as public benefit funds that promote things like renewable energy and energy efficiency.
Electric bill costs are rolled into fixed (monthly customer charges) and variable charges (¢/kWh that you use).
Fixed charges, like the flat fee for having a meter, generally remain the same monthly unless your utility makes a policy update.
Your variable charges will change every month and depend on your electricity rate and how much electricity you use.
Your electric bill's variable charges will include a supply (or generation) charge and a transmission and distribution (or delivery) charge. The supply charge covers the cost of electricity generation, while the transmission and distribution charges cover the cost of delivering it to your home.
Most utility customers in Alabama have the option to sign up for variable rate plans, usually demand charge plans or Alabama Power's Time Advantage Rate. Time Advantage Rate is a time-of-use (TOU) rate program, where you pay different rates per kWh depending on the time of day and season. If used with a solar or solar-plus-energy storage system, demand charge plans can help you reduce your EOM electric bills even more.
How clean is the electricity in Alabama?
Due to the complex nature of utility grids, it's not easy to pin down exact data regarding exactly where the energy that goes to your specific home comes from, but according to the U.S. Energy Information Administration, about 61% of the electricity on Alabama’s utility grid comes from fossil fuels—primarily natural gas—as of August 2025.
Only about 8% comes from renewable sources. Given that well over half of the grid’s energy comes from fossil fuels, installing a home solar panel system in Alabama will almost always shrink your carbon footprint.
Some electricity suppliers give you the option to pay a bit more so that most (or even all) of your electricity comes from renewable sources. If you’re unwilling or unable to go solar in Alabama but still want to reduce your carbon footprint, this is a great alternative. It just won’t save you any money in most cases. (Though occasionally it could if it’s through a municipal group-buy program.)
As long as you have a suitable roof, one of the surest ways to save on energy is to go solar—ideally with a vetted contractor offering a competitive price.
Solar panels will reduce or even eliminate your electric bills in the short term and protect you against rising electricity costs in the long run, too. The amount you save depends on how much you spend on electricity now and how much of your electric bill you can offset with solar energy.
Solar panels are a big investment, but Alabama homeowners who install them—and pay upfront—break even after an average of just null years. Then, the solar panels will continue to produce free electricity for years to come.
Does Alabama offer net metering?
On sunny days, you can count on your solar panels to produce more than enough electricity to meet your home's needs at any given moment.
That extra energy doesn't go to waste. While net metering isn't available in Alabama, the state's public utility offers net billing, a monetary exchange that lets you "sell" your extra energy to your utility company.
Compared to net metering, net billing typically gives you lower compensation rates. In Alabama, compensation rates change depending on the time of year, with the most favorable rates between June and September. Investing in a solar battery alongside your solar panel system can help you save more money.
How much can you save with solar?
The Yellowhammer State’s rising electricity prices mean that you can often save when you go solar in Alabama.
Just take a look at how much you'll spend on electricity over time based on your current bill. It’s easy to see how going solar can pay off quickly.
Electricity cost over time in Alabama
Current monthly electric bill | 10-year electricity cost | 20-year electricity cost | 30-year electricity cost |
|---|---|---|---|
$50 | $6,800 | $16,000 | $28,000 |
$100 | $14,000 | $32,000 | $56,000 |
$150 | $21,000 | $48,000 | $84,000 |
$200 | $27,000 | $64,000 | $110,000 |
$250 | $34,000 | $80,000 | $140,000 |
Assuming a 3% annual increase based on inflation and average annual electric rate increases in Alabama.
Let's assume you pay $257 for electricity monthly (the Alabama average) and that electricity prices increase by 3% annually. Let's also assume you buy your solar panel system upfront and that it costs you $47,000 before any available incentives.
In the first year with solar, you'll avoid spending $3,100 on electric bills. Over five years, you'll avoid $16,300; by 10 years, you'll have avoided $35,100. Solar panels are usually covered under warranty for 25 years—by then, you'll have avoided spending $110,800 on electric bills in Alabama.
The average payback period in Alabama is null years, so by this point, you've already broken even on your investment. When you subtract your upfront installation cost, you'll pocket $64,200 over 25 years with solar.
Your solar savings depend on you
How much your utility company charges for electricity is a big indicator of how much you'll save with solar. But your exact solar savings depend on your unique situation—including your energy usage, roof layout, system size, and how you pay for your system.
Here are some reasons your savings could be below average:
You don’t use much electricity, or your roof is small or has a less-than-ideal layout. You might have a relatively long payback period, so you'll save a little less over time.
You don't install enough solar panels to 100% offset your energy use. You’ll pay less up front but save less in the long run.
You finance your solar panel system with a loan or sign a lease or power purchase agreement (PPA) instead of paying up front. These types of arrangements can make a lot of sense for keeping your capital flexible and will allow you to start saving sooner. But they will cut into your long-term savings.
Choosing a high-quality solar installer is the key to getting a top-notch solar panel system that will help you save on electric bills.
We pre-screen all solar companies on EnergySage to ensure they get the job done right. Here are the highest-rated EnergySage installers in Alabama:
Advanced InstallerScreened & Verified4.6 /5.010 Reviews
Approved InstallerScreened & Verified4.8 /5.06 Reviews
Approved InstallerScreened & Verified4.5 /5.06 Reviews
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