Tennessee solar incentives, tax credits and rebates
Resources to make solar panels more affordable in 2024
After the federal solar tax credit, a typical residential solar panel system costs $11,410 to $22,820 in Tennessee. A statewide property tax reduction and (depending on where you live) net metering can also help justify the cost of going solar.
Here’s everything you need to know about how state and federal solar incentives can make installing panels more affordable in the Volunteer State.
The federal solar investment tax credit (ITC) is the best financial incentive for most Tennessee homeowners to buy solar panels.
Jump to insightBefore any incentives, a typical residential solar panel system costs $16,300 to $32,600, depending on the size of your system and what financial incentives you qualify for.
Jump to insightThe Tennessee Public Utility Commission doesn’t require utility companies to offer net metering programs.
Jump to insightResidential solar panel incentives in Tennessee
You can get the federal solar investment tax credit (ITC) if you install a residential solar panel system by the end of 2032. The ITC is equal to 30% of the system's total cost, including equipment, labor and permits.
The ITC drops to 26% in 2033 and then 22% in 2034.
Don’t get confused: The ITC is not a rebate or a refund. It is a credit that goes toward what you owe on federal income taxes. For example, if you spend $10,000 installing a solar panel system, the ITC is worth $3,000. If, in the year your system becomes operational, you owe $15,000 in taxes, the ITC reduces what you owe to $12,000.
Green Energy Property Tax Assessment
In Tennessee, instead of your property taxes increasing based on the full value of the solar installation, the state caps the taxable increase at 12.5% of the total installation costs. For example, if your solar installation costs $10,000, your property taxes could only increase by $1,250 (12.5% of $10,000).
Essentially, your property tax bill won’t dramatically increase just because your solar panels increase the market value of your home.
More statewide solar panel incentives
Check the DSIRE for the most comprehensive source of information about solar incentives and policies in Tennessee.
| Incentive type | Amount | Eligible solar equipment | Applicable sectors | Administrator | |
|---|---|---|---|---|---|
| Sales Tax Credit for Clean Energy Technology | Sales tax credit | 100% of sales and use tax | Solar panels, geothermal electric | Commercial, industrial | Tennessee Department of Revenue |
| Green Energy Production Facility Tax Credit | Industry recruitment/support | $1,500,000/tax year for $250 million in capital investment | Solar panels, geothermal electric, solar thermal electric | Industrial | Tennessee Department of Revenue |
| Pathway Energy Efficiency Loan Program | Loan | Up to $5 million | Solar panels, combined heat and power | Commercial, industrial, local government, nonprofit, schools | Pathway Lending Community Development Financial Institution |
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 access power from the grid when your panels don’t generate enough electricity. Net metering also lets you earn credits for sending any excess solar energy to the grid.
There’s no statewide net metering policy in Tennessee. Consequently, most utility providers in the state do not have net metering options.
The Tennessee Valley Authority (TVA) offers a solar incentive program that allows homeowners to sell excess energy back to the grid, albeit at lower rates than traditional net metering. Residents are typically credited at the retail rate. However, excess credits are cashed out annually at the lower avoided-cost rate.
» GREENEST STATES: Tennessee ranked 25th in 2024
How much are solar panels in Tennessee?
After considering the federal solar tax credit, solar panel costs in Tennessee typically range from $11,410 to $22,820.
Leasing is often cheaper upfront, but you won’t be eligible for the federal solar tax credit and other financial incentives.
Your system size greatly affects your overall solar costs. The typical system size for solar systems in Tennessee is 12 kW (kilowatts). You might need a larger or smaller system, depending on your average household energy usage.
Average solar cost by system size in Tennessee
| 5 kW | 6 kW | 7 kW | 8 kW | 9 kW | 10 kW | |
|---|---|---|---|---|---|---|
| Before federal tax credit | $16,300 | $19,560 | $22,820 | $26,080 | $29,340 | $32,600 |
| After federal tax credit | $11,410 | $13,692 | $15,974 | $18,256 | $20,538 | $22,820 |
Solar resources in Tennessee
Below are some additional resources that can help you go solar in Tennessee.
» GUIDE: Solar panel installation
Find solar companies in Tennessee
A good solar company helps you navigate local incentives, permitting and net metering policies. Compare our picks for Tennessee’s top solar companies to learn more.
| Company | Customer rating | Pro install | Payment options | Year founded | |
|---|---|---|---|---|---|
 | 1.2 | Yes | Cash, loan, lease and PPA | 2012 | Learn more |
 | 2.1 | Yes | Cash and loan | 2015 | Learn more |
 | 4.8 | Optional | Cash, loan | 2016 | Learn more |
 | 4.7 | No | Cash, loan | 2018 | Learn more |
FAQ
Can I get free solar panels in Tennessee?
No. You can enter a solar lease with little to no upfront costs, but it’s not totally free. Solar leases generally require a flat monthly fee.
» FREE SOLAR PANELS: Are they really free?
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). Some homeowners use a home equity loan or line of credit to pay for a solar panel installation. Alternatively, you also have the option of leasing solar equipment.
In Tennessee, Property Assessed Clean Energy (PACE) programs help property owners pay for energy efficiency and renewable energy upgrades like solar panels. Currently, the state does not have active PACE programs for single-family homes. Most PACE opportunities are for commercial properties.
» SOLAR PANELS: Lease vs. buy
How much can I save with solar panels in Tennessee?
On average, Tennessee homeowners with solar panels avoid $51,774 in utility costs over 25 years. Even if you don’t generate 100% of your energy needs, you can still save a lot of money versus paying traditional utility bills. In Tennessee, solar panels usually pay for themselves within 12.5 years.
» EXPLORE: Where your solar savings go the furthest
What has Tennessee’s investment in solar been so far?
Total solar investments in the state amount to $1.2 billion, according to the Solar Energy Industries Association.
How do I know if my house is a good candidate for solar?
It’s best to have plenty of unshaded roof space that faces south or west for optimal sun exposure. It’s also smart to upgrade any old, inefficient appliances first. Reducing your electrical loads now means you can get a smaller system, which will be cheaper.
The condition of your roof matters too — if it needs replacement soon, do that before installing solar panels. Installing solar panels on an old roof might mean you have to remove the panels, replace your roof and then reinstall the panels again. This will cost around $5,000 for a 19-panel setup.
Solar photovoltaic (PV) technologies, more commonly known as solar panels, absorb sunlight and convert it into usable electricity. If you have a lot of shading around your house, they might not get enough sun to power your home.
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
| 6-kW system cost (before incentives) | 10-kW system cost (before incentives) | Typical system size needed* | Average cost per watt | Total utility power cost savings** | |
|---|---|---|---|---|---|
| Alabama | $20,040 | $33,400 | 11.22 kW | $3.34 | $65,922 |
| Arkansas | $16,020 | $26,700 | 11.19 kW | $2.67 | $67,139 |
| Georgia | $16,380 | $27,300 | 11.17 kW | $2.73 | $57,429 |
| Kentucky | $16,380 | $27,300 | 11.47 kW | $2.73 | $54,204 |
| Mississippi | $18,840 | $31,400 | 11.5 kW | $3.14 | $59,530 |
| Missouri | $17,400 | $29,000 | 10.98 kW | $2.90 | $55,374 |
| North Carolina | $15,360 | $25,600 | 10.48 kW | $2.56 | $62,935 |
| Tennessee | $19,560 | $32,600 | 12 kW | $3.26 | $51,774 |
| Virginia | $17,220 | $28,700 | 10.95 kW | $2.87 | $60,802 |
Article sources
- DSIRE, "Tennessee Programs." Accessed March 29, 2024.
- EnergySage, "The cost of solar panels in Tennessee." Accessed March 29, 2024.
- Solar Energy Industries Association, "Tennessee Solar." Accessed March 29, 2024.
- SolarReviews, "How much do solar panels cost in Tennessee?" Accessed March 29, 2024.
- Department of Environment & Conservation, “Certified Green Energy Production Facilities.” Accessed Aug. 20, 2024.
- Pathway Lending, “Transformative Solutions For Energy Efficiency.” Accessed Aug. 20, 2024.
- Tennessee PACE Financing, “PACE Financing Comes to Tennessee!” Accessed Aug. 20, 2024.
- Appalachian Power, “Tennessee Net Metering.” Accessed Aug. 20, 2024.
- Department of Environment & Conservation, “Clean Energy Financing and Funding.” Accessed Aug. 20, 2024.
- WPLN News, “Nashville is getting a new rooftop solar program. Here’s what we know so far.” Accessed Aug. 20, 2024.
