Your 2019 guide to getting solar panels for your home in Tennessee
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Tennessee home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2019 **
Tennessee has some truly spectacular environments; from the Great Smoky Mountains to Cherokee National Forest and the high points of the Appalachian Trail, we have some special places to protect. You may already know that switching to solar power can help safeguard those places by reducing greenhouse gas emissions. The real question is, how good of a job is the state legislature and utilities doing to help make that switch to solar easy for you?
In Tennessee that answer is split like night and day. Tennessee Valley Authority (“TVA”) provides electricity for virtually the entire state. Your local electric distributor buys electricity from TVA, distributes the electricity to your home, and connects solar systems to their electric grid. TVA is doing a pretty sweet job encouraging solar power with a strong performance payment program. The legislature, on the other hand, has given us less reason to cheer. The lack of a Renewable Portfolio Standard or state rebates to help offset the initial costs of solar power installation, in particular, present obvious areas for improvement. Let’s take a look at the details.
Questions? Our network of solar experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page. You can get discounted on-grid pricing as low as $4,000/kW! This is paired with the Tennessee solar incentives you see below.
The Solar Strategy section is focused on the 3 ways of paying for solar in Tennessee, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in Tennessee. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in Tennessee.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Tennessee Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Tennessee|
|Solar Loans in Tennessee|
|Solar PPAs in Tennessee|
|Solar Purchase Payback Time in Tennessee|
|Tennessee Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Tennessee
Figuring out the best way to go solar in Tennessee can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
How to pay for solar panels in Tennessee
The chart above shows the 25-year returns for an investment in solar in Tennessee. We look at two system sizes: 5-kW and 2-kW, and outline what happens whether you choose to purchase a system with cash or pay over time with a loan. Let's be honest here: none of thes options is great. Tennessee does very little to help people who want to go solar, and it shows in the numbers.
As you can see, the cash purchase option provides a big return, but it doesn't happen until many years in the future. The solar loan, on the other hand, earns you a return right off the bat, in the form of a federal tax credit for 30% of the amount of the loan. Ove time, you'll dip into negative territory, but if you want solar, a loan can be an excellent way to pay for it.
Finally, the blue bars represent a solar loan, but for a smaller system. If you only want a little solar and you can pay for it over time, it can be a good way to help the environment while almost breaking even, at least arithmetically.
If you're interested in masochism, read more below about each of the three options for solar in Tennessee.
Option 1: Paying cash for solar
Paying up front used to be the only way to get panels on your roof, and it's still the option that allows you the most control. But it isn't the best option from a percentage return on investment standpoint—that award goes to the solar loan.
Still, an outright purchase returns the most money over time, because you own the system from day one and reap all the benefits—the Federal solar tax credit of 30% of system costs and your full annual energy savings.
In our example, you put down $20,000, but by the end of year 1, that tax credit and the energy savings will erase a bunch of it. Over 25 years, your system will have produced over $8,000 in income. But that's still not enough to make a solar purchase worthwhile. It takes 18 years just for the dang thing to pay its simple costs back, and as you can see from the NPV number, you're better off financially with an investment in stocks.
Here’s an example of how the numbers work for a purchase of a 5-kW rooftop solar system in Tennessee:
- Installing a typical 5-kW solar system should start at about $20,000.
- The Feds calculate their incentive based on out-of-pocket costs, so you'll get $6,000 (30% of the cost) back next April as a tax credit. Note: you can take the credit over as many years as you need years if you don't owe $6,000 in Federal taxes this year.
- Then there's your first-year energy savings. That's another $624, and it brings the cost after 1 year to just $13,376.
- With all the energy bill savings rolling in, your system will pay itself back after 18 years. Once that happens, you’ll be seeing over $1,000 per year in savings until the end of your system’s life.
- When all is said and done, our 25-year estimate shows a total net profit of $8,092 with an internal rate of return of 3.7%. That's about half as good as an investment in stocks.
- On top of those returns, your home's value just increased by $8,900, too (your expected electricity savings over 20 years)!
- And speaking of doing good for the environment... your system will create some green for the earth by not using electricity from fossil-fuels. In fact, the energy you’re not using has the carbon equivalent of planting 104 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Tennessee. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 2: Using a loan to pay for solar
This is usually where we tell you that taking a loan for solar panels is a no-brainer, because it means investing in an income-generating asset. It's usually true! Unfortunately, Tennessee is not one of the places where it's true.
Here's the important stuff:
As you can see from the chart above, you'll start out after year one with a big windfall, because with a loan, you're not putting any money down, and you get the rebate and federal tax credit just like if you paid $20,000 up front for your system. You'll come out ahead nearly $5,000 after the first year! In the 14 years that follow, your loan payments will actually cost a little more than the money you'll be saving in electricity, but just think of it like a monthly deposit into a savings account.
The rest of our estimate might look like a see-saw, because you start out with a windfall, drop down into "big investment" territory, and then jump up again after the loan is paid off. That's when the solar "savings account" will pay dividends. You'll be saving tons of money every year because you'll own the system outright. But at the end of our 25-year example, you'll be $1,463 to the good, which isn't enough to make up for the earlier costs of the payments.
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can get a solar loan or home-equity line of credit (HELOC) for $20,000 with a fixed rate of 4.5% or lower and a 15-year repayment period.
- You have an appetite for making a little money with a long-term investment, while also producing benefits for the environment.
Here’s how the numbers pencil out for a Tennessee solar purchase with a HELOC:
- Installing a typical 5-kW solar system should start at about $20,000. That's how big your loan will need to be to cover it.
- The electricity bill savings in the first year of operation will total $624, but your loan payments will be $1,775, for a difference of $1,151, or about $96 per month.
- But here comes the tax credit! Because you've technically "paid" for the system with your loan, you'll get the Federal tax credit of 30% of system costs, or $6,000! Even after you make those loan payments, you'll end up with an extra $4,849 at the end of the first year.
- When your loan’s paid off in year 15, you’ll see about $1,000 per year in savings until the end of your system’s life.
- For our 25-year estimate, you'll see a small return of $1,463 after all the payments.
- Finally, the environmental benefits cannot be overstated. Operating your system will take as much carbon out of the air as planting 104 trees every year!
Keep in mind, the numbers above are based on an average home in Tennessee. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
Tennessee does not offer solar Power Purchase Agreements or leases. Perhaps it would be a good idea to contact a solar advocacy organization and ask them to fight for solar in your state!
Tennessee Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in Tennessee:
A Renewables Portfolio Standard (“RPS”) is a statute or other piece of regulation that mandates that a portion of at state’s electricity is produced from renewable resources (like solar power) by a certain date. If you have been following renewable energy policy at all, you already know that a whole lot of states have passed strong a strong RPS. Many of the RPS’s mandate goals as high as 30%, even 40% renewable production in the next 10-15 years.
So what’s going on in Tennessee? Well, not much. Nothing in fact. Tennessee has absolutely no renewables portfolio, no targets – nothing. Tennessee needs to get on track; Colorado, California, New York, New Jersey, Connecticut, Rhode Island, Oregon, Washington, Arizona, and many other states that have already passed strong RPS’s to ensure a bright future for solar power and other renewable energy. Trust us, a strong RPS is integral to having that bright future here. No one wants to give you free money – least of all the electric companies. Without a strong RPS pushing them, politicians and CEOs have no incentive to give you incentives. Incentives for more solar power, that is!
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner. Read more about Renewable Portfolio Standards.
RPS solar carve out
No RPS means no solar carve out.
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
Tennessee Electricity Prices
Electricity costs about 11 cents/kWh here. Here at Solar Power Rocks, we kind of geek out on anything that affects solar power, including electric prices, so trust us when we tell you that 10.96 cents/kWh is super cheap. In the bottom tier of the county, in fact, and well below the national average of 13.14 cents/kWh. You should also trust us when we tell you that cheap electricity is a bad thing.
All that cheap electricity is produced by burning fossil fuels -- tons and tons of earth-killing fossil fuels. When the astronomical environmental costs start to mount, monthly electricity bills are inevitably going to rise as well. When that happens you’re going to feel pretty darn smart for making the early switch to producing your own clean, efficient solar power.
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
Tennessee Net Metering
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume, and make sure you get credit for the surplus.
Sadly, Tennessee lacks any statewide program for net metering, and there hasn’t been so much of a peep out of the legislature. Fortunately, with the entire state in its service area, TVA is able to come to the rescue again. Remember the Generation Partners program we talked about above? Remember the part where if you run a surplus and your credit exceeds your bill, you get a check for the extra money? Well, that basically amounts to a net metering program, and a darned good one in fact.
Although the TVA program basically amounts to a net metering program, it has some restrictions. Every year TVA sets a capacity limit on the amount of systems that can be installed in the region. A capacity limit means that not everyone who wants to install a solar system will be able to install one. Although TVA came to the rescue with a solar program, they will only rescue so much per year!
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
Tennessee Interconnection Rules
Interconnection standards govern the procedures and fees that utilities may implement for getting you and your net-metered system connected to the grid.
Like the lack of net metering policy above, Tennessee also hasn't issued any clear policy for easily connecting to the grid. Both net metering and interconnection are critical parts of strong renewable energy policy. They help you get the absolute most out of your solar power production. A solid net metering plan, with interconnection standards that make it simple to get on the grid can help you zero out your entire electric bill, and even turn a profit where net metering regulations provide for cash payments. Legislators have a bit of work to do here.
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Solar Incentives in Tennessee
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 30% of your costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how Tennessee measures up:
Tennessee Solar Power Rebates
Tennessee currently lacks any sort of statewide solar rebate program. If the RPS set mandatory levels of renewable energy production, we can guarantee more utility companies would offer incentives to help you make the switch to solar. How do we know? It’s worked everywhere that a real RPS has been implemented. Get on it, Tennessee!
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
Tennessee Solar Power Tax Credits
Many states like to offer state tax credits as a way to promote the local solar industry. It’s true, Tennessee does not offer any state tax credits, but in a state that has no state income tax, tax credits wouldn't be much of a help anyways.
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Solar Power Performance Payments
As you've surely guessed from the lack of an RPS, Tennessee lacks any legislation-based (i.e. truly statewide) performance payment program. At least TVA will help you sign up to sell your solar power back to them.
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
We've got a great article if you like to read more about what SRECs are and how to earn them.
Property Tax Exemption
2/3 of Assessed Value
What Tennessee doesn't have, sadly, is a property tax exemption for solar power systems. When you install a solar power system your monthly electric bill goes down. When your bill goes down, your property value goes up by about 20 times your expected annual savings. The majority of states now have property tax exemptions for renewable energy systems like your spiffy new solar power system. If the legislature doesn't want to get off its butt to provide a thorough statewide renewable energy policy, the least they could do is at least remove hindrances like this.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Some argue that solar power adds approximately 20 times your annual electricity bill savings (if you own the system and are not leasing). Other studies seem to indicate a home price premium about equal to solar panel cost, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
Sales Tax Exemption
If there aren't any tax credits, is Tennessee at least helping with a full tax exemption somewhere? You bet! When you install a solar power system here, the cost of that system is exempt from all sales tax. That saves you 6.25-8.25 % off the starting cost! You can choose to apply for the exemption up front (again, our installer partners will take care of all of this for you!) or to take the amount after the system is installed as a sales tax rebate. Hey! Tennessee does have a state tax credit … sorta. It’s not money back per se, but money not spent is still money saved!
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
The consensus on Tennessee solar power rebates and incentives
Tennessee has something of a split-identity going on with solar power policy. The legislature has been so silent on the issue, one wonders if they’ve ever even heard the word “photovoltaic.” But where the legislature has failed, the statewide utility company has shone (at least kinda) bright. Before the TVA program, Tennessee was a solar no-man’s land, with payback timeframes pushing decades beyond the expected life of your system. Now, however, TVA’s Generation Partners program has pushed payback down to 12 years. That’s not what we call stellar around here, but it’s more than enough for your solar power system to pay for itself, and then some. But without some strong goals to ensure that the solar scene remains steady, it doesn’t merit any more than a “D” grade.