Tennessee Solar Rebates and Incentives

How Much Can You Save on Solar in Tennessee?

Key Details

• Solar panels average $2.49 per watt with a 6kw system
• Net energy metering allows for significant savings for customers who generate their own electricity and send excess to the grid.
• Tennessee provides an ad valorem property tax exemption on certified renewable energy properties
• The average retail cost of grid electricity is 9.78 cents/kWh

Tennessee Energy Profile

Tennessee receives about 4,000 kilojoules of sunlight per square meter. In 2022, solar installations in the state produced a total of 609 megawatts of solar energy, enough to power 61,108 homes. As of 2022, Tennessee had 141 solar companies, 89 of which where solar manufacturers and installers.

Federal and State Solar Incentives available in Tennessee

Southwest Tennessee is home to the vast majority of the state's utility-scale solar PV generating plants. The state had a solar power generating capacity of almost 400 megawatts by the beginning of 2022.

In March 2022, the biggest solar plant in the state went online, generating 150 megawatts of power from 500,000 solar panels. As of 2023, a larger 254-megawatt solar complex is planned to start operations.

How Cheap or Affordable is Solar Energy in Delaware?

In 2022, the average retail cost of grid electricity in Tennessee was 9.78 cents/kWh, while the average cost of solar panels in Tennessee was $2.49 per watt.

Solar energy systems in Tennessee are relatively affordable with 6kW systems costing just under $14,000. Residents can save a little over $3,000 on the solar system they purchase with the federal solar tax credit.

In Tennessee, solar photovoltaic (PV) installations generated about 3% of the state's renewable energy in 2021. Nearly 45% of solar energy was produced at utility-scale facilities with a 1 megawatt or greater capability. The remainder was generated by smaller, customer-sited generating systems. These are primarily solar panels set up on the roofs of homes and businesses.

Federal Solar Tax Credit in Tennessee

Availalble to residents in Tennessee, the federal solar tax credit, also known as the Investment Tax Credit (ITC), allows homeowners to deduct 30% of the cost of installing a solar energy system from their federal taxes.

The solar tax credit is said to continue until 2033, after which it will decrease to 26%. It is also applicable to both residential and commercial systems. The Energy Policy Act of 2005 originally introduced the ITC.

The ITC was extended in August 2022 as part of the Inflation Reduction Act, which extended the 30% tax credit rate for another 10 years. Below is the Investment Tax Credit timeline:

• 2016 – 2019: the solar tax credit was set at 30% of the system's expense.
• 2020 – 2021: new residential and commercial solar systems owners could remove 26% of their system's total cost from their federal income tax.
• 2022 – 2032: homeowners who purchase solar energy systems are eligible to deduct 30% of the system's cost from their taxes.
• 2025: the U.S. Department of Treasury will decide in 2025 whether the ITC will continue for commercial systems. However, commercial solar systems will still be qualified for 30 per cent until then.
• 2033: individuals who own residential solar systems owners will be able to deduct 26% of the system's installation expenses from their taxes.
• 2034: individuals who own residential solar systems will be able to deduct 22% of the system's installation expenses from their taxes.
• 2035: there will no longer be a federal solar tax credit for residential solar energy installations.

Eligibility

To be eligible for the federal solar tax credit, you must fulfill the following requirements.

• Your solar system must be brand new or have been used for the first time between January 1, 2006, and December 31, 2023.
• Your entire method must be yours. Due to this, it shouldn't be leased.
• Your solar energy device must be installed in the US.
• Either at your primary residence or secondary residence in the United States or at an off-site community solar initiative, the system must be installed.

How do I claim the Federal Solar Tax Credit in Tennessee?

Residents can apply for the federal tax credit for solar energy in Tennessee by following several quick steps:

• Print the IRS form 5695 by visiting the Internal Revenue Service website.
• Fill out all the required details about your solar energy system, your house, and your provider.
• You have two choices for filing the paperwork: you can mail it to your accountant or do it yourself.

Net Energy Metering in Tennessee

As of 2023, net metering is not mandated in Tennessee. However, the state has several utilities that offer such programs. For instance, Appalachian Power offers a net of one-kilowatt hour each month. Any excess electricity exported to the grid is banked for use during the billing year. Additionally, any credits that are still available at the customer's anniversary date are lost without a refund.

How to Enrol for Net Energy metering in Tennessee

Tennessee homeowners can follow these steps to submit an application for net metering.

• Step 1: Inquire with your energy provider if a bidirectional meter has been installed. If not, your provider must install one without extra charges.
• Step 2: Find out if net metering is an option by communicating with your energy supplier.
• Step 3: If net energy metering is an option, get in touch with a reliable solar expert in your area. Ask the salesperson to confirm that the business will handle the application procedure. If not, speak with your energy provider to learn how.
• Step 4: You can start installing your solar energy system.
• Step 5: For a few months after installation, it is recommended that you audit your energy costs. This will help confirm that your system is generating points as intended.

Tennessee Property Tax Exemption

Tennessee provides certified renewable energy production sites with a special ad valorem property tax assessment. The value of alternative renewable energy properties at the time of their original appraisal is specified under the Tennessee Code Annotated 67-5-601(e)-(f).

The assessed property values of all certified solar energy production facilities may not exceed more than 12.5% of the cost of installing the solar system. According to the Tennessee Department of Environment and Conservation (TDEC), solar energy facilities must generate electricity using solar energy technology for both on-site and off-site use.

Tennessee Property-Assessed Clean Energy (PACE) Financing

Commercial Property Assessed Clean Energy (C-PACE) is a project-financing tool that enables resident and commercial owners to pay for energy efficiency and renewable energy upgrades using property taxes.

Qualified energy improvements are repaid through a voluntary property tax assessment collected by local governments. Municipal bonds or outside money backed by property assessment payments may be used to finance PACE projects. If the property is sold, the next owner assumes accountability for payment.

State Sales Tax Exemptions in Tennessee

Residents in Tennessee may claim tax-exemptions for purchases of machinery and equipment used to generate electricity in a licensed renewable energy production facility under Tennessee Code Annotated Section 67-6-346.

A licensed renewable energy facility is a facility using renewable energy resources to generate electricity. It must also have received certification from the Department of Environment and Conservation.

When installing machinery and equipment for renewable energy, a contractor must submit an application to the department and include a copy of the contract. A department application must also be submitted by the taxpayer who employs the contractor.

If both applications are accepted, the contractor will be given permission to make tax-exempt purchases for the certified green energy production facility project mentioned in the applications. The approved application will be used to support a refund or credit given to the taxpayer immediately if taxes have already been paid.

Tennessee Household Profile

Tennessee generally consumes more considerable amounts of energy than most states in the US. The state ranks 19th in the total amount of energy consumed annually, standing at 294.7 million BTUs per capita when measured on an annual basis.

The state also consumes 72.2 million BTUs of residential energy per capita, which places it 19th out of all the states. The state's commercial sector, on the other hand, ranks 11th in the US for energy consumption. The sector consumes over 48 million BTUs per year.

6,859,497 people are living in Tennessee. The state also has a relatively young population with a median age of 38.8. There are 3,011,124 housing units in Tennessee, with 1985 serving as the median year they were constructed.

Additionally, there are 2,664,791 inhabited dwelling units in Tennessee. 66.92% of these housing units are owner-occupied while 33.08% are rent-owned. The following renewable energy incentives are available to Tennessee residents who go solar.

Renewable Energy in Tennessee

About 17% of Tennessee's total net in-state energy generation in 2021 came from renewable energy. Most of the renewable energy generated was hydropower. Tennessee ranks fifth in hydroelectric electricity production in the US.

In addition to a large pumped storage hydroelectric facility, Tennessee is home to 26 operational hydroelectric power facilities. Hydroelectric makes up 90% of the state’s renewable energy. It also generates 16% of the state’s overall electricity.

Biomass makes up the second-largest portion of renewable production in Tennessee. Almost 1% of Tennessee’s total energy generation was produced by its seven utility-scale biomass facilities in 2021.

The facilities also produced about 5% of the state's net renewable production. Tennessee also has three wood pellet manufacturing facilities. These facilities have a yearly production capacity of about 175,000 tons of pellets. These wood pellets are burned to produce energy and provide heating for buildings.