Tennessee Solar Incentives, Tax Credits and Rebates

Are there any solar panel incentives in Tennessee?

Tennessee does offer some solar incentives, but they’re a bit more limited compared to other states. Homeowners can still save through things like property tax breaks, while many of the bigger financial perks are aimed at businesses.

Since traditional net metering isn’t widely available, getting the most out of your solar setup often comes down to how you use your energy day to day.

Green Energy Property Tax Assessment

This program helps lower your property taxes if you install solar or other clean energy systems. Instead of your system being taxed at its full value, the state limits how much of that value counts toward your property taxes.

For solar, only about 12.5% of the system’s cost is included in your property value, which can significantly reduce how much your taxes go up after installing it.

To qualify, your system has to be officially certified as a clean energy system by the state.

Commercial solar incentives in Tennessee

A clean energy sales tax exemption lets certain businesses avoid paying sales tax on solar and other clean energy equipment, which can significantly lower project costs.

The tax break can cover 100% of sales tax on things like solar panels, batteries and related equipment — but only if the system is part of a state-certified energy project.

However, this incentive is only available to commercial and industrial properties. It’s a big cost saver for businesses going solar, but most homeowners won’t qualify for it.

Pathway Energy Efficiency Loan Program

Similarly, the Pathway Lending Energy Efficiency Loan Program (EELP) offers low-interest loans to help businesses, nonprofits and public entities pay for solar or energy upgrades, covering up to 100% of project costs.

What to know about net metering in Tennessee

Net metering is a system of give-and-take between you and your utility company. It lets you use power from the grid when your panels aren’t producing enough, and earn credits for any extra energy your system sends back.

A solar storage battery costs $7,000 to $18,000.

Tennessee does not have a statewide net metering policy, and most utilities follow the Tennessee Valley Authority (TVA) guidelines instead.

Under TVA’s program, homeowners can sell excess solar energy back to the grid, but not at the full retail rate. Instead, you’re paid a much lower avoided cost rate (around 4 to 5 cents per kWh), which is far less than what you pay for electricity (typically around 12 to 14 cents per kWh).

Because of this gap, sending power to the grid is less valuable than using it yourself. Many homeowners add a battery system to store extra energy and use it later, which can significantly increase savings.

Solar panel costs in Tennessee

Average solar panel costs in Tennessee generally start between $15,231 and $30,462.

System size is a major cost factor when going solar. A typical Tennessee household needs about a 6.7 kW system, which costs $20,435 on average. Depending on your energy needs, you might need a smaller or larger system.

Your total price also depends on whether you add battery storage to your system. Solar batteries cost $7,000 to $18,000, which can nearly double the total system price.

Average solar panel costs by system size in Tennessee

How can I pay for solar panels?

You can pay cash, but most people finance solar panels. A solar loan works like any other type of loan. There’s an application and approval process, and you pay it back over time (with interest). Alternatively, you also have the option of leasing solar equipment.

» SOLAR PANELS: Lease vs. buy

PACE financing

Most PACE opportunities are for commercial properties.

Property Assessed Clean Energy (PACE) financing is a way to pay for energy upgrades like solar panels without taking out a traditional loan. Instead, the cost is added to your property tax bill, and you pay it back over time.

The payments stay tied to the property, not you, so if you sell your home, the next owner may take over the remaining balance.

However, this type of financing is mostly for commercial properties. In many states, including Tennessee, it’s not available for typical single-family homes.

Federal mortgage financing options

Energy Efficient Mortgages allow homeowners to finance energy-saving upgrades, including solar systems, as part of their mortgage, often with support from federal programs like FHA or VA.

• FHA Energy Efficient Mortgages are available to many homebuyers. This lets you add money to your mortgage for energy upgrades. The upgrade cost must be less than the expected energy savings, and a home energy assessment is required first.
• VA Energy Efficient Mortgages are available to military members, veterans and reservists. Eligible borrowers may be able to add up to $6,000 in energy improvements if the projected savings justify the cost.
• Conventional Energy Efficient Mortgages are offered by private lenders (not government-backed). You can borrow up to 15% of a home’s value for energy upgrades. This may help borrowers qualify by adjusting debt-to-income rules.

Compare solar companies in Tennessee

Working with a local Tennessee solar company can make it easier to understand utility rules, permitting and available incentives.

» RELATED: Top solar companies in Nashville

FAQ

Bottom line

The ConsumerAffairs Research Team conducted an in-depth analysis to determine the average costs of going solar and incentives in other states. Turns out, it’s worth it for many homeowners, particularly in Tennessee.

Solar costs vs. savings: Tennessee and nearby states