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A 2023 Guide to Solar incentives in Tennessee

Tennessee is rated “good” for going solar. The sunlight is plentiful, and the costs of solar installations are about $2.2/watt (after the Federal solar incentive), which is below our national average.

Thanks to the 52% drop in prices in Tennessee over the last ten years, more households are shifting to solar power. This is evident from the fact that in 2021, Tennessee ranked 43rd on the list of states with the most solar power.

But as per the third quarter of 2022, Tennessee has quickly jumped up 12 positions, standing at 31 now.

This rapid growth has much to do with Tennessee’s nice weather. But there are also some solar incentives in Tennessee that, we presume, have encouraged solar adoption.

Solar incentives in Tennessee

In terms of solar incentives, Tennessee is not too kind.

But the Volunteer State is not alone—some other states, such as Texas, also do not offer many incentives for going solar.

That said, if you live in Tennessee, there are a few solar incentives you may qualify for, which significantly reduce the cost of your solar system.

Let’s start off with the most impactful of all solar incentives!

Federal Solar Investment Tax Credit (ITC)

Mandated by the federal government, this is the biggest of all solar incentives in Tennessee.

Once you install a solar system on your property, you can apply for the federal tax credit. Eligible expenses for the ITC include:

  • solar panels
  • solar inverters
  • wiring
  • solar installation
  • permitting and interconnection fees
  • inspection costs
  • solar batteries
  • solar water heaters, etc.

At the moment, its value stands at 30%.

For instance, if your solar system costs you $20,000, deduct 30% from the cost, and it will become $14,000. The 30% credit will expire in 2032, after which it will drop to 26%.

To see eligibility criteria, how to apply, and what’s covered by the federal tax credit, read our detailed ITC guide here.

Green Energy Property Tax Assessment

After installing a solar system on your property, the property’s value increases by up to 4%. But a property tax exemption means the added value will be excluded from your tax assessment. Many states offer property tax exemptions on solar systems, including Tennessee, which offers a partial property tax relief.

The Green Energy Property Tax Assessment in Tennessee limits the taxable amount of the value your property gains due to solar installation. It stipulates that the assessed property value of your property may not exceed 12.5% of installed costs for solar. Not a total exemption, but it is still worth it.

Sales tax exemption

There is a sales tax exemption on solar system installations in Tennessee. But unfortunately, the exemption (7% sales tax waiver) does not apply to residential solar power but only commercial and industrial solar.

Net metering in Tennessee (Dispersed Power Production Program)

Net metering allows homeowners to sell the excess electricity their solar systems generate to the grid, which is netted against their electricity bills.

As a state policy, net metering is not available in Tennessee. But that doesn’t mean that your excess electricity is going to waste. On the contrary, the Tennessee Valley Authority (TVA) has announced a new program called Dispersed Power Production Program (DPPP). It allows homeowners to send the extra electricity their systems produce to the TVA. Since the TVA services most of the area in Tennessee, a majority of homeowners are eligible for the program.

DPPP is almost the same as net metering, though its scope is a little bit restricted compared to net metering in other states, say Florida. For one thing, the credits you send to TVA are set annually. Secondly, they buy the electricity not at retail rates but at avoided costs*.

The retail rate includes all costs associated with producing energy, operating and maintaining the grid and other utility expenses. Avoided costs, on the other hand, primarily reflect the utility’s cost of producing electricity.

Did you know?

Elora Solar in Elora was developed by NextEra and came online in 2022. This 191 MW project produces enough electricity to power 19,760 homes.

Solar rebates

States, utility companies, or solar manufacturers often offer solar rebates. In Tennessee, for example, LG Solar offers a $600 rebate which your installer can help you claim over the next year. Similarly, some utility companies may also offer some sort of solar rebates.

Solar rebates are usually available for a limited time only. Once the target is achieved, the rebate policy is shelved. If you are a resident of Tennessee and want to go solar, let us know. We will send a detailed and up-to-date list of the incentives you may qualify for.

That was all about solar incentives in Tennessee. Granted that Tennessee is not very generous in terms of solar incentives, or for that matter, other renewable incentives. There have been attempts by solar advocates to nudge lawmakers to do more for solar adoption in the state.

But while incentives will come and go, we do not want you to miss the train. You can still go solar at costs well below the national average. At the moment, over 60,000 homes are saving up to $2,000 on their electricity bills every year simply by going solar. What is stopping you?

How much does a solar system cost in Tennessee?

On average, the cost of solar panels in Tennessee is around $2.98/watt before deducting the Federal Solar Investment Tax Credit (ITC). After the ITC, the cost per watt for solar installations comes down to roughly $2.2/watt.

This means that a 5 kW solar system would cost almost $11,000 in Tennessee, while a 6 kW would have a price range between $13-14,000. These prices are ITC-adjusted.

But note that these prices are for grid-tied systems, which don’t require any batteries. If we include the cost of batteries, it will go north of $20,000, depending on how much energy you want to offset through solar batteries.

You may want to read: How much does an off-grid solar system cost?

Besides batteries, there are other factors that may influence the overall cost of your system. For example, is your roof flat or pitched? The costs will be a bit higher if it is flat, as additional racking and mounting equipment will be required for installation.

Lastly, other solar incentives available at the time of your installation. Sometimes, an incentive comes for a limited time, which may reduce your solar installation costs.

If you want to go solar in Tennessee, look no further. Next Earth Solar is a family-owned solar company with a goal to help homeowners go solar hassle-free at affordable rates. 

You can own an affordable solar energy system.

We'll put together a solar installation package that won't break your budget.

Whatever the size of your project, you save with Next Earth Solar.

Call us today to get a quote on solar panels, inverters, and battery packs. We're sure we can beat any other quote you have!.

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