Let‘s tackle the honest truth about solar panels in Tennessee – thanks to minimal state support, going solar here requires getting creative to maximize savings.
But it can pay off nicely despite the lack of local incentives. Especially if you take advantage of federal tax credits before they shrink.
Below I‘ll walk through multiple strategies you can use to cut costs if you want to go solar in Tennessee.
Solar Keeps Growing, But TN Trails Behind
First, let‘s recap the current state of solar energy in Tennessee.
The Volunteer State has added over 1,700 megawatts (MW) of solar in the past 5 years. 2022 alone saw 400 MW of new capacity – mostly from big utility projects.
So while solar expands rapidly here, only 8% of Tennessee solar powers homes.
Of approximately 1,800 MW total solar capacity today, residential accounts for just 150 MW.
Meanwhile, forward projections show utility solar booming thanks to corporate buyers and solar farms. But rooftop solar remains an afterthought.
| Year | Total TN Solar Capacity | Residential Capacity |
|---|---|---|
| 2017 | 120 MW | 15 MW |
| 2021 | 1,100 MW | 100 MW |
| Projected 2026 | 3,600 MW | 150 MW |
Projections from SEIA, January 2023
This discrepancy arises because Tennessee refuses to incentivize household solar in any meaningful way.
So while economics keep getting better, state policies fail to encourage faster rooftop adoption.
But this guide will show you how to make solar work even within the state‘s policy constraints.
First let‘s tackle how federal tax credits can help cut your costs.
Slash 30% Off With Federal Solar Tax Credits
Limited state support means leaning heavily on federal solar incentives offered nationwide.
Chief among them, the federal Investment Tax Credit (ITC) offers a whopping 26-30% return on solar installation costs through 2023.
That includes not just equipment, but also:
- Labor
- Permitting
- Sales tax
- Battery storage
And virtually anything else required to get panels on your roof.
To snag the full 30% credit, you must:
- Purchase (not lease) your solar array
- Live in the home with panels
- Buy all equipment brand new
Once you claim the credit, Uncle Sam effectively refunds 30 cents on every dollar spent.
So if you spend $15k on a 6 kW solar array, you‘d get $4,500 back.
These credits directly reduce what you owe in federal income tax.
And you can roll unused portions forward year after year. That flexibility helps if your offset exceeds what you pay the IRS annually.
Now here’s the catch…
Credits start shrinking after 2023:
- 2024: 26% tax credit
- 2025: 22% tax credit
- 2026: Permanently 10% credit
So act before December 31, 2023 to capture the full 30% ITC at nearly triple 2024‘s amount!
After that, your savings potential plunges each year.
Let’s look at what no state-level incentives means next.
Tennessee Offers Virtually No Solar Incentives
Unlike leading solar states, Tennessee refuses to incentivize household solar via:
- State tax credits
- Rebate programs
- Sales tax exemptions
- Favorable regulatory rules
Previously a meager $1,000 rebate applied for grid-connected systems through the TVA. But unfortunately regulators axed even that tiny amount.
Now Tennessee only offers a partial property tax exemption equal to 12.5% of your system‘s assessed value.
For a $15k solar array, that amounts to just $187 back annually. Better than zero extra dollars, but nowhere near enough for meaningful savings on a 5-figure investment.
The one other option comes from TVA‘s Dispersed Power Production program to sell excess energy back. But a closer look shows it fails to reward solar owners fairly, as you‘ll see next.
First though, let‘s talk through why the state lags so far behind in solar support.
Why Tennessee Trails on Solar Support
If you look across the Southeast, Tennessee stands out for lack of solar-friendly policies:
| State | Key Solar Support |
|---|---|
| Florida | Tax exemption Net metering |
| Georgia | Tax credit 4% to 35% |
| North Carolina | Tax credit 35% Rebates |
| Tennessee | No tax credits No rebates |
You might wonder…why?
Well, local monopolies like TVA don‘t face competition. So they focus less on customer savings and more on protecting revenue streams.
Those motives align poorly with rooftop solar growth. Hence the lack of programs helping residents transition to independence.
Making matters worse, many lawmakers still defend stale notions that solar harms grid stability or costs more than it returns.
So they continue blocking policy updates aligned with today‘s far more solar-friendly economics.
And while recent bipartisan bills tried expanding residential solar incentives, they died quietly without progress.
Which brings us to TVA‘s current solar compensation scheme…
TVA Offers Weak Solar Buyback Rates
Typically, solar-friendly states use "net metering" programs so you can sell extra power back to your utility.
You get credited per kilowatt-hour exported based on retail electricity rates. This directly offsets your monthly bill.
But TVA refuses to offer such a program.
Instead, through their Dispersed Power Production scheme, they buy excess generation at far lower fixed rates.
You also have to pay an annual $50 maintenance fee!
How well does it actually compensate solar owners though? Let‘s break it down:
- TVA Pays $0.02 – $0.03 per kWh
- Average Retail Electricity Rate: $0.11 per kWh
So compensation equals roughly one-quarter your normal electricity rate.
Say you overproduce 30 kWh from your panels in a month.
- Net metering value: $3.30 (30 kWh * $0.11)
- TVA buyback value: $0.90 (30 kWh * $0.03)
While the extra income helps offset panel costs over 20+ years, clearly TVA underpays significantly.
Just another area where Tennessee solar owners lose out compared to better-incentivized states.
Now let‘s examine true solar payback potential here.
Typical Payback Periods: 9-11 Years
Given Tennessee‘s economics and policies, how long would solar panels take to "pay you back" through electricity savings?
Assuming average solar panel costs and utility rates, payback timeframes often land around 9-11 years.
For example, let‘s look at cost recovery on a common 6,000 Watt (6kW) rooftop system:
| System Size | Gross Price | 30% Federal Credit | Out-of-Pocket Cost | Est. Yearly Savings | Payback Period |
|---|---|---|---|---|---|
| 6 kW | $14,940 | $4,482 | $10,458 | $1,106/year | 9.5 years |
Accounting for the 30% ITC, you‘d spend $10,458 upfront after credits.
Dividing that by $1,106 in annual utility bill offsets, you‘d recoup costs in 9.5 years.
Extend the timeframe out 25 years (the lifespan of solar panels), and this system would save you $27,650 lifetime.
That‘s cash going directly back in your pocket rather than to utilities!
We can model other system sizes too:
| System Size | Gross Price | 30% Federal Credit | Out-of-Pocket Cost | Est. Yearly Savings | Payback Period |
|---|---|---|---|---|---|
| 4 kW | $9,960 | $2,988 | $6,972 | $738 | 9.5 years |
| 8 kW | $19,920 | $5,976 | $13,944 | $1,476 | 9.5 years |
| 10 kW | $24,900 | $7,470 | $17,430 | $1,845 | 9.5 years |
Bigger systems cost more upfront, but accelerate bill reduction to recoup expenses quicker.
Now let‘s examine one last cost-saving lever for solar owners…
Slash Your Property Taxes
Beyond federal tax credits, solar panels qualify you for property tax reductions in Tennessee too.
Normally, home improvements like solar add value that gets taxed annually at ~1% of assessed value.
But Tennessee offers a 12.5% valuation exemption for green energy assets like solar panels.
So if you install a $15,000 array, you‘d report only $13,125 as the value ($15k * 0.875).
With average property tax rates at 1%, that solar exemption would save roughly $150 per year.
Let‘s say your annual property tax bill equaled $3,000 before going solar. Adding panels might have raised it to $3,150.
But with the solar exemption, you‘d pay only $3,000 still – zero extra tax.
So while 12.5% proves far smaller than some states‘ 100% property tax exemptions, every bit of savings counts.
Getting Creative: 4 More Ways To Save
Because Tennessee lacks robust policy support, you‘ve gotta dig deeper as a solar shopper to maximize savings.
On top of federal & property tax breaks, also consider:
1. Securing low-interest solar loans to minimize finance charges
2. Joining community solar groups to access bulk pricing
3. Supporting advocacy efforts lobbying for better pro-solar policies
4. Waiting for further panel price drops before installing to save more
For example, say you need an $15,000 system but lack cash to buy outright.
Financing at 6% over 10 years would cost $2,300 extra in interest payments. That sinks your ROI.
But securing a 2.99% solar loan would only add $961 in total interest – cutting financing costs by 58%!
Creative strategies like this help chip away at solar costs when broader incentives remain weak.
Every dollar counts when aiming to optimize payback periods.
Key Takeaways
- Tennessee trails far behind leading solar states for residential incentives and policy support
- Leveraging the 30% federal Investment Tax Credit before it drops makes solar much more affordable
- Creative financing and community solar lower costs further in lieu of robust state programs
- Solar panels still pay for themselves within 9-11 years in Tennessee thanks to electricity savings
- Property tax exemptions, selling excess power back to TVA, and federal credits help maximize solar ROI
Got questions? Check the FAQs below. Otherwise, I hope this guide spelled out clearly how to slash expenses when going solar in TN!
Frequently Asked Questions
How much do solar panels in Tennessee cost?
The average price per Watt for solar panels in Tennessee lands around $2.49 according to the most recent data. That means a 6,000 Watt (6kW) rooftop system would cost roughly $14,940 before accounting for incentives.
What incentives exist for installing solar in Tennessee?
Unfortunately Tennessee has no state-level tax credits, rebates or other incentives to directly reduce the cost of residential solar panels. Homeowners must rely on the federal Investment Tax Credit (ITC) and more limited policy supports like partial property tax exemptions.
How long does a solar system take to pay off in Tennessee?
Given Tennessee‘s average solar panel system costs and electricity rates, a typical payback timeframe lands between 9-11 years. This represents the period it takes your upfront investment to get repaid through electricity bill savings. Across a total 25 year lifespan, a 6 kW rooftop array can save homeowners over $25,000.
Can I sell excess solar energy back to the grid in Tennessee?
Yes – through TVA‘s Dispersed Power Production program, Tennessee solar owners can sell unused solar generation back. However the compensation rates paid prove far below retail electric prices. So earnings tend to be minimal compared to what homeowners might receive from a fair net metering policy.
I hope this guide gave you clarity on how to save money going solar in Tennessee! Let me know if you have any other questions.
