How Much Can You Save on Solar in Tennessee?
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
|Tennessee Solar Incentives||State or Federal||Program Overview|
|Federal solar investment tax credit||Federal||A tax credit of up to 30% of the system's cost may be available to qualified homeowners who put solar power in their homes.|
|Tennessee state property tax exemption||State||Some parts of renewable energy systems are exempt from state property taxes up to a certain amount.|
|Tennessee state sales tax exemption||State||Tennessee exempts solar installations from sales tax, but only for business and industrial applicants.|
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.
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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.
|State||Number of solar Installations||MW Installed||Average cost for grip power (2021)||Average cost per watts|
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.
|State||Cost of installing a 6kw system||Federal tax credit value 2023 (30%)|
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:
To be eligible for the federal solar tax credit, you must fulfill the following requirements.
Residents can apply for the federal tax credit for solar energy in Tennessee by following several quick steps:
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.
Tennessee homeowners can follow these steps to submit an application for net metering.
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.
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.
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 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.
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.