How to Save Money on Solar Panels In Tennessee

Key Points

• Tennessee installed over 400MW of solar energy in 2022, mostly in the utility sector.
• Homeowners in Tennessee can save money on solar panel installation through the federal solar tax credit and property tax return.
• Tennessee lacks state-level financial incentives such as tax credits, but the Dispersed Power Production program allows solar energy users to sell their unused energy to the local utility company.
• Tennessee does not offer solar leasing options for residents.

In 2022, Tennessee installed over 400MW of solar energy. However, virtually all of it was in the utility sector. This has homeowners wondering if solar panels in Tennessee can work for them too.

There’s almost no state-level support for residents in the Volunteer State to afford an array. However, this doesn’t mean that solar panels don’t work; with access to a federal credit and a property tax return, you can save money on an installation. Keep reading to learn more.

How to Save Money on Solar Panels in Tennessee: Overview

With some of the lowest equipment rates and decent sunlight, solar panels in Tennessee make a lot of sense. Those that install a 6kW array could save as much as $25,000 or more on electricity.

However, because state lawmakers refuse to offer any support, solar panels aren’t as popular as they should be. The Volunteer State provides what feels like a consolation prize while subtly terminating one of the few worthwhile incentives.

Don’t let this information sway your decision, however. Solar panels are at their most affordable price in history, and the federal government offers a sizeable incentive to help out with installation costs. Let’s take a look at the available programs in Tennessee.

Solar Panels in Tennessee: Federal Incentive

If you’re considering solar panels in the Volunteer State, you absolutely must take advantage of the federal solar tax credit. This program offers a 30% return on all purchases made toward a solar array. This includes equipment, labor, and sales tax.

To qualify for the federal return, you need to own your system outright. This means you’ll have to either pay for the system or receive a loan. Additionally, you must live at the home where the system is installed and all the equipment must be new.

You have plenty of time to take advantage of the federal return, but don’t sleep on it. The incentive drops in value starting in 2033 and terminates two years later unless it’s extended.

Tennessee’s State Credits and Rebates

When states want to promote solar panels, one of the most effective tactics is financial incentives. Programs such as tax credits and equipment rebates significantly cut the cost of installations, making systems more accessible to residents. However, you won’t find these in Tennessee.

Years ago, however, the Tennessee Valley Authority (TVA) used to offer a $1,000 rebate so long as the array was connected to the grid. Unfortunately, the utility company ended the program, opting for a performance payment program called Dispersed Power Production.

It’s strange because it copies a similar incentive that typically comes default in most states: net metering. With net metering, you have the opportunity to sell excess solar energy to your utility company for an extra price. It usually comes in the form of a tax credit, reducing your next month’s power bill.

TVA’s Dispersed Power Production program operates in a similar fashion; you sell your unused solar energy to the utility company, and they cut you a check. However, they get to set their rates, and it costs to participate. So when all the dust settles, you come out with no benefit.

Solar Panels in Tennessee: Government Regulations

A lot of Tennessee’s solar incentives are dictated by the TVA. Therefore, the Volunteer State lacks any sort of renewable portfolio standards (RPS). We use a state’s RPS to determine its intention to invest in future renewable infrastructure. And because Tennessee doesn’t have any, there’s virtually no hope that homeowners will receive incentives to install solar panels.

You might find some sources online stating that the Volunteer State offers a sales tax exemption. This regulation helps residents with equipment costs in a simple and specific manner. While Tennessee does have a sales tax exemption, it’s only available for commercial and industrial sectors. Here’s the program overview that describes that.

However, Tennessee does have a property tax regulation that helps a little. For new solar panel systems, the Volunteer State offers a property assessment that results in a small return. You’ll receive a credit worth 12.5% of your array’s deemed value. This could be worth $500 or more. It’s not the $1,000 rebate that TVA offered in the past, but at least it’s something.

Should Tennesseeans Lease Solar?

In many states, homeowners can lease a solar panel system if they can’t purchase one for any number of reasons. While this option disqualifies the array from incentives (including the federal solar tax credit), it still offers a clean energy alternative that can help reduce utility payments.

Unfortunately, Tennessee does not offer solar leasing. This makes renewable energy less available to residents. Hopefully, lawmakers in the Volunteer State realize the value of solar energy and make changes in the near future. 

Solar Panels in Tennessee: Incentive Summary

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