Solar Panel Laws in Tennessee

With sufficient sunlight throughout the year, Tennessee has the right conditions for anyone interested in solar. And while the conditions for this type of investment are excellent, the state hasn’t done much in financial stimuli provision.

Tennessee is currently positioned in the lower tier among all states in terms of its solar network’s extensiveness. A small percentage of the state’s energy is generated through solar power. However, legislators are actively working towards enhancing the state’s use of solar energy.

The number of installations has exceeded 2,600, and with more positive provisions, the numbers will likely continue to grow.

If you want to learn more about tax credits, rebates, and other legal incentives Tennessee provides, the following guide will acquaint you with the basics.

Key Takeaways

• Tennessee ranks 31st in the US for solar energy production but has limited financial incentives for solar panel installation.
• Tennessee lacks net metering policies, requiring negotiation with utility companies for excess electricity, and is one of four states with this limitation.
• Tennessee has a federal solar investment tax credit (ITC) of 30% for solar installations between 2022 and 2032.

Net Energy Metering in Tennessee

This is where Tennessee policies still seem to be severely lacking.

Federal law requires net metering upon request. At the time being, however, solar power producers in Tennessee are deprived of such an opportunity. Tennessee is one of only four states that lack policies in this regard.

This means that net metering must be negotiated directly with utility companies if you produce more electricity than you need. The only other places in the US with the same conditions include Alabama, Georgia, and Hawaii.

Federal Tax Credit

Anyone who decides to go solar in Tennessee must learn more about the federal tax credit. This is the legislative specific bound to significantly impact the cost of switching to clean energy production.

Also known as the federal solar investment tax credit (ITC), this deduction allows you to reduce the cost of installing a solar energy system in Tennessee by 30%.

ITC applies to residential and commercial installations; the deduction is made from federal taxes.

Under recent updates, the ITC offers a 30% tax credit for systems installed between 2022 and 2032. This is an increase from the previously planned tax credit rates. Starting from 2033, the tax credit will decrease, decreasing to 26% in 2033 and further reducing to 22% in 2034. No maximum limit on the amount can be claimed under this credit.

The sooner you get started with your Tennessee solar installation, the better. In the next two years, you’ll enjoy the most attractive federal stimuli – a deduction worth taking advantage of.

Tennessee Tax Credit

Here’s another field that’s been severely underdeveloped in Tennessee.

The state doesn’t offer a local tax credit or deduction for homeowners interested in switching to solar power. However, this development isn’t surprising since the state doesn’t impose an income tax.

One more good thing to look forward to is the sales tax exemption. Anyone buying and installing a solar system will be entitled to a full exemption from sales taxes. Depending on the installation specifics, the exemption can reduce the cost by as much as 8.25%.

If you buy a solar system, you can choose for the exemption to be applied upfront or provided in the form of a sales tax rebate after the complete installation of the system.

Additional Legal Stimuli for Solar Installations in Tennessee

While Tennessee lawmakers haven’t done much to stimulate solar production in the state, there are a few alternative opportunities worth pointing out. These can reduce the project’s cost and provide a much-needed net metering option.

Tennessee Valley Authority, the state’s primary electricity utility, has a couple of incentives for those interested in solar installation.

Currently, TVA gives out a $1,000 rebate for solar panel installation. In addition, TVA has launched its Green Power Provider program that offers net metering. Under this program, the TVA buys all excess solar electricity production at the retail rate.

There’s also a possibility for the provision of premium payments under the program. It gives you two additional cents per kilowatt-hour, and the opportunity is valid for ten years.

Getting into the program, however, comes with some restrictions. There is a limited joining capacity and an application window you’ll have to meet. This is another reason why the sooner you act with your solar installation, the better.

Conclusion

A southern state with a ton of sunshine, Tennessee seems like the perfect place for setting up a solar panel system. And it is such, even though legal stimuli and tax deductions are still minimal locally.

It’s only a matter of time before lawmakers embrace alternative energy thoroughly in the sunny state. Should you wait for such changes to happen before making your move?

A general rule of thumb is that being a pioneer in a promising field gives you many opportunities that wouldn’t be available to those who arrive late at the party.

Installing a solar system in Tennessee today doesn’t have to be complicated or expensive. You have a federal tax credit, a local rebate, and additional stimuli to explore. TVA’s programs are also worth looking into.

For best results, do your homework in advance. Calculating the cost of installation and timing the process right will give you access to excellent money-saving opportunities.

Not only will you contribute to more environmentally friendly energy production, but you’ll also be reaping some excellent financial rewards (that could potentially increase in size and scale very shortly).

Case Study: Solar Panel Installation in Knoxville, Tennessee

Background

At Solar Panels Network USA, we aim to help homeowners leverage available incentives to make solar energy a viable option. Recently, we undertook a residential solar panel installation in Knoxville, Tennessee, navigating the state’s unique regulatory landscape to maximize financial benefits for the homeowner.

Project Overview

Our client in Knoxville sought to reduce their reliance on traditional energy sources and lower their electricity bills through a solar panel installation. Given Tennessee’s limited local incentives, we focused on optimizing federal benefits and available utility programs.

Implementation

We began with a detailed site assessment to determine the best configuration for the solar panels, ensuring maximum efficiency and energy production.

Federal Tax Credit Utilization

The total installation cost for the 7 kW solar panel system was $25,000. Leveraging the Federal Solar Investment Tax Credit (ITC), the homeowner was eligible for a 30% tax credit, reducing the cost by $7,500. This significant reduction made the upfront investment more manageable.

Tennessee Valley Authority (TVA) Incentives

While Tennessee lacks state-mandated net metering policies, the TVA offers a $1,000 rebate for solar panel installations. Additionally, we enrolled the homeowner in TVA’s Green Power Provider program, which purchases excess energy produced by the solar panels at the retail rate. This one-to-one credit system ensures that any surplus energy sent to the grid provides ongoing financial returns.

Sales Tax Exemption

Tennessee offers a full sales tax exemption on solar panel installations. This exemption reduced the effective cost of the system by approximately 8.25%, translating to savings of around $2,062.50 on the installation.

Results

The solar panel installation was completed efficiently, with the system now fully operational and generating clean energy. The homeowner’s electricity bills were significantly reduced, and they began accumulating credits through the TVA program for excess energy produced.

Financial Savings Breakdown

• Initial system cost: $25,000
• Federal Tax Credit (30%): $7,500
• TVA rebate: $1,000
• Sales tax exemption (8.25%): $2,062.50
• Net metering credits: ongoing savings and future bill reductions

The combined federal and utility incentives provided substantial financial relief, making the investment highly cost-effective and environmentally beneficial.

Summary

This case study demonstrates how residents in Knoxville, Tennessee, can effectively utilize federal tax credits and utility programs to make solar panel installations financially viable. By leveraging the Federal Solar Investment Tax Credit, TVA incentives, and the sales tax exemption, homeowners can achieve significant savings while contributing to a cleaner environment. At Solar Panels Network USA, we are dedicated to helping our clients navigate these opportunities, ensuring their solar investments are both environmentally and financially rewarding.

Expert Insights From Our Solar Panel Installers About Solar Panel Laws in Tennessee

Despite Tennessee’s limited financial incentives for solar energy, the federal solar investment tax credit (ITC) remains a significant benefit. By taking advantage of the 30% ITC, homeowners can significantly reduce their installation costs.

Senior Solar Installer

The lack of state-mandated net metering policies means that negotiating directly with utility companies is essential. Programs like TVA’s Green Power Provider can offer valuable incentives for excess energy production.

Lead Solar Technician

While Tennessee doesn’t offer a local tax credit, the sales tax exemption and TVA’s rebates make solar installations more affordable. These incentives, combined with the federal tax credit, provide a compelling case for going solar in Tennessee.

Solar Installation Expert

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Map image by Wikimedia Commons User: TUBS / CC-BY-SA-3.0