What the charge is and how it is assessed
Alabama Power levies a monthly Capacity Reservation Charge of $5.41 per kW of installed capacity on customers who generate their own electricity. It is among the highest such charges in the country.
It is assessed on the basis of the maximum power a solar customer might need from the grid if their system failed, which is why it scales with the size of your array rather than with how much electricity you actually buy.
That is the feature that makes it unusual. Most utility charges vary with consumption; this one varies with the capacity you install and is otherwise fixed.
A federal district court ruled in March 2026 that Alabama Power may continue to charge it, so it is a settled feature of the market rather than a proposal to wait out.
What it does to the arithmetic
Close to $470 a year is a large recurring cost set against the savings a residential system produces. It does not reduce over time, it does not fall if you use less, and it continues for as long as the system is connected.
The right way to see it is as a reduction in annual savings rather than as an addition to the purchase price, because that is how it behaves. It extends payback by lengthening every year of the projection.
So any Alabama Power quote that does not show the Capacity Reservation Charge as an explicit annual line is incomplete, and a savings figure that omits it is overstated by roughly $470 a year.
Ask directly whether the charge appears in the projection, at what rate, and calculated on what installed capacity. Then check the arithmetic yourself: $5.41 multiplied by your system kW multiplied by twelve.
What follows for the design
Because the charge scales with installed capacity, a larger system costs more every month for as long as you own it. That is a penalty on size that most states do not impose in any form.
And because exported electricity is bought at roughly 3 to 5 cents per kWh against a retail rate closer to 16, the extra output a larger system sends to the grid earns very little to offset that penalty.
So a larger system in Alabama Power territory is penalised twice: higher fixed charges and low-value exports. The design should be built tightly around what your household consumes during daylight.
Ask what percentage of your annual usage the design covers, what share of generation the model expects you to consume directly, and for a smaller system modelled alongside with the capacity charge recalculated for it.
Costing it out with the recurring charge included
The 30 percent federal Residential Clean Energy Credit under Section 25D expired for property placed in service after December 31, 2025, so a cash or loan purchase in Birmingham receives no federal tax credit, and Alabama has no state solar tax credit.
Section 48E survives at 30 percent for third-party owners under leases and power purchase agreements, so ask what a provider claims and what reaches you in the rate.
What exists is retail value for electricity consumed as it is generated, roughly 3 to 5 cents per kWh for exports, and the Capacity Reservation Charge as a recurring annual cost against all of it.
Ask for the projection with the charge shown as its own line in dollars per year, calculated from the actual installed capacity, and with a smaller system shown beside it.