Tennessee doesn’t have a lot going for it in terms of solar incentives, but it can still be a good idea to install solar at home in the Volunteer State. Why? Because most households use more than average amounts of electricity, meaning more to save by generating your own energy from the sun.
Reader note: Our top rated solar installer in TN is currently SunPower.
Tennessee isn’t completely lacking incentives to install residential solar. It has a special property tax assessment program for renewable energy systems, which saves homeowners from paying too much extra for adding value to their homes. There’s also the federal solar tax credit and the potential for net metering, plus 205 sunny days per year, making Tennessee solar panels a solid bet for many homeowners.
|TN state property tax exemption||Some parts of renewable energy systems are exempt from state property taxes up to a certain amount.|
|TN state sales tax exemption||Tennessee offers an exemption from sales tax for solar installations but only for commercial and industrial applicants|
|Net metering in TN||Net metering is not mandated but at least one utility offers a program|
State sales tax exemptions in Tennessee
Tennessee offers an exemption on sales tax for solar energy equipment, but only for commercial and industrial applicants.
For homeowners installing solar energy equipment, the standard 7% state sales tax applies.
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State property tax exemptions in Tennessee
Tennessee has a separate policy on property tax assessment for certified green energy systems. This includes solar energy systems but does not include solar battery storage value.
The tax incentive for solar means that a home solar energy system is only considered to add value up to 12.5% of the initial installed cost. This means that if you installed a solar array (minus the battery) for $20,000 in Tennessee, it would only be considered to add $2,500 to your home’s property value. When it comes to tax time, you would only then pay additional taxes on that $2,500, not on the full $20,000 that it cost you to install the array.
Net metering in Tennessee
Tennessee does not mandate net metering and few utilities currently offer such programs in the state.
One utility, the Tennessee Valley Authority (TVA), used to offer a net metering program and there have been rumors it may rekindle it in the future. This program was offered as a dual-metering option for participants in its Green Power Providers program.
Appalachian Power currently offers net metering to residents of Tennessee, though it has little information about how to sign up. What information there is suggests one for one netting of kilowatt hours each month, with excess exported energy banked for use within the billing year. At the customers’ anniversary date, any remaining credits are forfeited without compensation.
Tennessee state law does appear to prohibit utilities charging residential solar customers more than non-solar customers, however.
Final thoughts on state solar incentives in Tennessee
Tennessee offers very few incentives to homeowners wanting to go solar. The state has enacted solar easement laws, protecting homeowners’ access to sunlight, and has a somewhat generous property tax exemption for home solar too.
Other than that, net metering is lackluster in Tennessee, there are no solar rebates or state tax credits, and the biggest financial incentive continues to be the federal tax credit.
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Despite low electricity costs in Tennessee, it can still make financial sense for homeowners to go solar here. Energy use in Tennessee is about twice the national average, meaning higher overall utility bills each month. Installing enough solar to meet those electricity needs can help save thousands of dollars each year. By our calculations, savings could amount to around $20,000 in 10 years. Factor in the federal tax credit and this could mean a solar payback period of less than a decade even in Tennessee.