Installing solar panels in Tennessee can be a hefty investment. Fortunately, Tennessee offers multiple solar incentives and credits to make the switch more affordable, such as property tax exemptions and rebates.
Whether you’re curious about specific incentive details and eligibility criteria or just want a comprehensive breakdown, we’ve covered everything you need to know to make an informed decision when hiring one of the best solar companies.
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What Are the Available Tennessee Solar Tax Credits and Rebates?
Tennessee offers several incentives to encourage solar energy adoption. However, only a select few are available to homeowners. The state’s programs also focus more on long-term savings than lowering your initial installation costs. Here’s an overview of Tennessee’s solar incentive programs:
| Solar Incentive Name | Incentive Type | Description |
|---|---|---|
|
Green Energy Property Tax Assessment |
State |
Receive a 12.5% property value cap for solar equipment |
|
Federal Solar Tax Credit |
Federal |
Up to 30% of solar system costs returned as a federal tax credit |
|
Net metering |
State |
Earn bill credits for your excess electricity |
Green Energy Property Tax Assessment
Solar panels increase home value, which means your property taxes rise. However, the Green Energy Property Tax Assessment helps reduce these property taxes in Tennessee. The state caps taxes for added property value from solar equipment at 12.5%. The exemption is applied automatically, eliminating any additional application process.
More resources: Green Energy Property Tax Assessment
Local Energy Efficiency Rebates and Credits
Some utility companies offer additional rebates and credits for energy efficiency upgrades, such as installing solar equipment. Investing in these upgrades also improves your home’s efficiency, reducing energy costs. For example, the Knoxville Utilities Board offers up to $400 for installing a Level 2 electric vehicle (EV) charger. We recommend checking the Database of State Incentives for Renewables and Efficiency (DSIRE) website for a complete list of efficiency upgrade programs.
Solar Easement and Access Laws
Tennessee’s solar easement laws protect each homeowner’s right to direct sunlight access for solar panels. You can create an easement that prevents the construction of tall buildings or other obstructions that would block your panels’ access to the sun. These easements also include compensation clauses in case any problems arise. For example, if a developer’s construction plans will interrupt your solar access, you can negotiate for compensation. You can find a sample solar easement on Tennessee’s Department of Environment and Conservation’s website.
What Does the Federal Solar Tax Credit Cover?
Tennessee homeowners can get the best financial benefits from using tax credits to offset their solar system costs. If you install a stand-alone solar battery backup with your system (or add one to your system within one year), you can also apply the federal tax credits to your battery costs.
Homeowners receive a 30% federal solar tax credit. To qualify, you must own your solar equipment through an upfront payment or a loan. This incentive also includes solar batteries. PPAs and solar leases do not qualify for solar tax credits.
If you owe federal taxes, the solar tax credit will apply to your liability. For example, if you owe $5,900 and have a credit of $7,900, this credit will reduce your 2024 federal tax liability to zero. The remaining $2,000 credit will roll over to 2025. If you don’t owe federal taxes, the entire credit will roll over to the following year. You can’t apply to the next year’s solar credit until you fulfill your owed federal taxes for the year of your solar project.
Is Net Metering Available in Tennessee?
Although net metering programs don’t directly reduce the cost of solar panels, they offer long-term savings on energy bills. Homeowners earn electricity bill credits for returning excess energy to the power grid. These accumulated credits apply to your future electricity use, helping to reduce your monthly energy costs.
The Tennessee Public Utilities Commission (PUC) allows net metering for the state but doesn’t mandate its availability with utility companies. Only a few utility companies, such as Tennessee Valley Authority (TVA), offer these programs to their customers. Under TVA’s Dispersed Power Production Program, customers earn energy credits for several renewable energy systems, including solar, biomass, and hydropower. The company pays credits at a lower rate than what you pay for electricity.
Homeowners should check with their local utility company about net metering availability and program details.
How Much Does Solar Cost in Tennessee?
The average cost for a 5-kilowatt solar panel system in Tennessee is $16,701, according to EnergySage. However, this price doesn’t account for financial incentives. For example, by applying the federal solar tax credit, you can deduct 30% of your final installation cost from your taxes. If your system costs $14,000, this incentive can save you $4,200. Your system’s final cost will depend on the following factors:
- Energy needs: Systems that produce less electricity cost less money. However, they can increase your electric bill in the long run.
- Installer: Some providers offer better deals than others, so compare estimates from at least three companies.
- Location: Local area and municipality requirements can affect installation costs.
- System size: Larger systems often cost more but have a lower cost per watt.
- Solar panel quality: Premium panels with higher efficiency have a higher price tag but may help you save more in the long run.
Your choice of solar financing also plays into your long-term costs. Here’s a breakdown of typical payment methods:
- Cash purchase: Paying for the system upfront avoids interest costs and maximizes long-term savings.
- Solar loans: Financing your system through a loan allows you to own it immediately, spreading payments over several years.
- Solar leases: With a solar lease, you pay a fixed monthly amount but don’t own the system, making you ineligible for tax credits.
- Power Purchase Agreements (PPAs): Similar to a lease, PPAs allow you to pay for the power generated rather than the system itself.
Is Going Solar in Tennessee Worth It?
Although Tennessee offers limited solar incentives, investing in a solar energy system is worth it. Tennessee receives an abundant 207 sunny days annually, making it an ideal environment for solar panels. Most homeowners reach their solar payback period in six to 10 years. Considering many solar panels last about 25 years, you’ll benefit from 15–19 years of energy savings. You’ll also receive savings on monthly utility bills if your utility company offers net metering.
The Process of Going Solar in Tennessee
Here’s a quick look at the solar installation process in Tennessee:
1. Consultation
The first step is to consult a few solar companies to assess your home’s sunlight exposure and determine how many solar panels and other required components you need. Companies will use online calculator tools to assess your property’s solar potential and then send out an expert to survey your property in person. This process usually takes a few days.
2. Design
Once the survey is complete, your installer will custom-design a system based on your roof space, energy needs, and budget. You’ll likely receive a panel of design options that balance cost and performance, including hardware recommendations for your solar inverters and battery storage. This takes roughly 1–2 weeks and includes emails or calls with installers to finalize your choices.
3. Permitting and Approvals
After design approval, the company factors in local zoning rules, HOA guidelines, and utility policies before filing the necessary applications. Once permitting is submitted, the approval process takes 1–2 months for utility and local approval, with variation based on your location and utility provider.
4. Installation
After permitting approvals, panel installation follows. Most companies complete installation in one day, typically within 1–3 months of your initial consultation.
5. Final Inspection
Your installer will send your solar output to see your production in action before educating you on system operations. Some installers monitor performance via apps, while others require you to check your inverter box manually. If you have solar batteries installed, you’ll need to understand how your system switches from grid power to off-grid power in case of an outage. They may also highlight any changes to your energy bill now that net-metering credits should help reduce it.
Our Conclusion
We recommend using solar incentives to lower your investment costs when going solar in Tennessee. Our team researched the best solar companies in Tennessee and chose Freedom Solar as our top pick. Freedom offers an excellent selection of top-quality solar panels and energy storage plus robust warranty coverage.
We recommend getting quotes from multiple local installers to find the right solar panel system for your home.
FAQs About Solar Tax Incentives in Tennessee
Is a state solar tax credit available in Tennessee?
No, Tennessee doesn’t offer a state solar tax credit. Instead, homeowners should apply for the federal solar tax credit to earn up to 30% back on installation costs.
Does Tennessee charge sales tax for residential systems?
Yes, Tennessee charges sales tax on residential solar systems. It does not have a sales tax exemption for home solar systems.
How many solar installers are there in Tennessee?
According to the Solar Energy Industries Association (SEIA), there are 51 solar installers in Tennessee.
How can I get free solar panels in Tennessee?
Unfortunately, free solar panels aren’t available in Tennessee. However, you can apply for federal and state solar incentives to help reduce your installation costs.
Our Rating Methodology
We are committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
