Tennessee Solar in 2026: The Honest Picture

Tennessee’s residential solar market is small by national standards, with roughly 15,000 rooftop installations to date. The state offers no income tax credit. Tennessee’s solar property treatment is an 87.5% abatement (assessed at 12.5% of installed cost under TCA 67-5-601), not a 100% exemption. Tennessee does not exempt residential solar PV from sales tax (the state’s solar sales tax exemption is limited to certified commercial/industrial green-energy projects). And Tennessee has no statewide net metering: TVA’s Generation Partners Program closed to new applicants in 2019, as did its successor Green Power Providers. Today most local power companies in TVA territory offer only limited avoided-cost buyback (typically $0.03 to $0.05 per kWh) for excess generation, well below the retail rate you pay for grid electricity.

The federal landscape changed in 2026. The Residential Clean Energy Credit (Section 25D) expired for systems placed in service after December 31, 2025. Homeowners can no longer claim a direct federal tax credit on owned systems. However, third-party-owned leases remain viable through Section 48E, where the solar company retains ownership and you purchase the power at a fixed rate. This route requires the installer to begin construction before July 4, 2026.

For Tennessee homeowners, the financial case is real but modest. System costs have stabilized and retail electricity rates continue climbing, but without net metering most exported power earns only avoided-cost credit. The key is sizing your system close to daytime consumption and comparing ownership versus lease options.

Average Solar System Cost in Tennessee (2026)

A typical 6-kilowatt residential solar system in Tennessee costs approximately $26,500 before incentives. This breaks down as follows:

  • Equipment (panels, inverter, mounting hardware): $12,000 to $14,000
  • Labor and installation: $8,000 to $10,000
  • Permitting, inspection, and interconnection: $2,500 to $3,000
  • Soft costs (design, engineering, financing): $2,000 to $2,500

Tennessee does not exempt residential solar PV equipment from sales tax, so the standard ~9.5% combined state and local sales tax is included in your installer’s quoted price. Some local distributors offer modest one-time rebates; check the DSIRE database at https://www.dsireusa.org/ for your utility’s current programs.

System costs vary by region. Urban areas like Nashville and Memphis have more competition and lower labor costs. Rural areas may see higher installation costs due to travel time and smaller installer networks. Roof condition, complexity, and shading also affect pricing. Get quotes from at least three installers to compare.

Real Tennessee Homeowner Savings (Sample Scenarios)

Nashville (NES Service Area) A 6-kW system on a typical home with $130/month electricity bills saves approximately $1,200 annually, assuming the system is sized to match daytime usage (since excess generation earns only avoided-cost credit). Over 25 years, total savings reach roughly $32,000. With an installed cost of about $26,500 (Tennessee does not exempt residential solar PV from sales tax), payback occurs in about 14 years.

Memphis (MLGW Service Area) Memphis has slightly higher retail electricity rates. A 6-kW system saves roughly $1,350 annually. Over 25 years, cumulative savings total about $35,000. Payback period is approximately 12 years.

Knoxville (KUB Service Area) Knoxville’s electricity rates are moderate. A 6-kW system saves approximately $1,050 annually. Over 25 years, total savings are about $28,000. Payback occurs in roughly 15 years.

Chattanooga (EPB Service Area) EPB offers competitive retail rates. A 6-kW system saves about $1,150 annually. Over 25 years, savings total roughly $30,000. Payback is approximately 14 years.

Rural TVA Territory In areas with lower electricity rates, a 6-kW system saves approximately $900 annually. Over 25 years, savings reach about $24,000. Payback extends to roughly 17 years.

These estimates assume 3% annual electricity rate increases, 0.5% annual system degradation, no statewide net metering, and systems sized close to daytime consumption. Actual savings depend on your specific usage, roof orientation, shading, and utility rate changes.

Tennessee Solar Incentives Still Available in 2026

Property Tax (87.5% Abatement, Not 100%)

Under Tennessee Code Annotated 67-5-601, certified solar energy systems are assessed at 12.5% of installed cost for property tax purposes, which is an 87.5% abatement, not a 100% exemption. The benefit is still meaningful (it shields most of the added home value from property tax), but quotes that describe Tennessee as having a “100% solar property tax exemption” are inaccurate.

Sales Tax: No Residential Solar Exemption

Tennessee does not exempt residential solar PV equipment from state and local sales tax. The state’s solar sales tax exemption applies only to certified commercial/industrial green-energy projects, not standard residential rooftop systems. Older marketing materials that quote a “$2,500 savings” from a Tennessee residential solar sales tax exemption are inaccurate. Plan on paying the standard ~9.5% combined state and local sales tax on equipment, included in your installer’s quoted price.

Net Metering (Not Available)

Tennessee has no statewide net metering policy. TVA’s Generation Partners Program closed to new applicants in 2019, and its successor Green Power Providers also closed in 2019. Most local power companies in TVA territory now offer only limited avoided-cost buyback for excess generation, typically $0.03 to $0.05 per kWh, which is far below the retail rate you pay for grid electricity. Because exported energy is poorly compensated, the strongest TN solar economics come from sizing your system close to your daytime load rather than oversizing for export.

Local Utility Rebates

A handful of municipal utilities have offered small, time-limited rebates or low-interest financing. Nashville Electric Service (NES), Memphis Light, Gas & Water (MLGW), and Chattanooga Electric Power Board (EPB) have all run promotional programs in past years. Funding is limited and programs come and go. Visit https://www.dsireusa.org/ and search for your utility to see current offerings before assuming a rebate is available.

No Federal Tax Credit (2026)

The federal Residential Clean Energy Credit (Section 25D) is no longer available for systems placed in service after December 31, 2025. For details on the change, see the IRS guidance at https://www.irs.gov/credits-deductions/residential-clean-energy-credit.

The only federal benefit available in 2026 is through third-party-owned leases under Section 48E. In this model, the solar installer owns the system and you purchase the power at a fixed rate, typically 10% to 20% below your current utility rate. The installer claims the federal investment tax credit. This option requires no money down and locks in electricity costs, but you do not own the system or claim depreciation. Construction must begin before July 4, 2026.

Is Solar Worth It in Tennessee Without the Federal Credit?

Solar can still pencil out in Tennessee, but the economics are tighter than in net-metered states. Here’s the honest read:

Payback Period: Without statewide net metering, most Tennessee homeowners see payback in 12 to 16 years. That’s still within the 25 to 30-year lifespan of modern solar panels, but well behind states with retail-rate net metering.

Long-Term Savings: Over 25 years, cumulative savings typically land between $25,000 and $32,000, depending on your utility and electricity usage. Returns are positive but modest.

Electricity Rate Inflation: Tennessee’s electricity rates have risen 2% to 3% annually. Solar locks in your generation costs for self-consumed power, protecting you from future rate hikes. If rates rise faster than historical averages, your savings accelerate.

Property Value: Homes with solar systems sell faster and at higher prices. Studies show solar adds 3% to 4% to home resale value, offsetting the cost of the system.

Lease vs. Ownership: If you prefer no upfront cost and predictable monthly payments, a third-party lease (Section 48E) is viable through mid-2026. Leases typically save 10% to 20% on electricity costs with zero down payment. You sacrifice long-term ownership benefits but gain simplicity and immediate savings.

Decision Framework: If you plan to stay in your home for 10+ years, own the system. If you prefer simplicity and zero upfront cost, explore a lease. If you’re unsure about long-term plans, a lease minimizes risk.

Top Cities for Solar in Tennessee

  • Nashville: Higher retail electricity rates and a competitive installer market make Nashville one of Tennessee’s better solar markets. Average payback is roughly 13 years.

  • Memphis: MLGW service area has among the highest retail electricity rates in the state, making solar ROI relatively strong by TN standards. Payback typically occurs in about 12 years.

  • Knoxville: KUB serves a moderate-rate market with a growing installer base and good solar irradiance. Payback is roughly 15 years.

  • Chattanooga: EPB offers competitive rates and Chattanooga has good solar irradiance (4.3+ kWh/m2/day). Payback is approximately 14 years.

  • Clarksville: Located in TVA territory with lower electricity rates. Payback is roughly 16 to 17 years.

  • Johnson City: In the Tri-Cities region, Johnson City has good solar irradiance. Payback is roughly 14 to 15 years.

What to Look for in a Tennessee Solar Installer

  1. Local Distributor Interconnection Experience: Confirm the installer has completed interconnections with your specific local power company in TVA territory (or your municipal utility). Each distributor has its own application process and buyback terms.

  2. Licensing and Insurance: Verify the installer holds a current electrical license from the Tennessee Department of Commerce and Insurance. Confirm they carry liability insurance and workers’ compensation coverage.

  3. Local Experience: Choose an installer with at least 5 years of experience in Tennessee. They should understand local utility interconnection rules, permitting processes, and climate-specific installation challenges.

  4. Warranty Coverage: Ensure the installer offers a 10-year workmanship warranty and uses panels and inverters with 25-year manufacturer warranties. Clarify what is covered and the process for warranty claims.

  5. References and Reviews: Ask for at least three recent customer references in your area. Check independent reviews on Google, Yelp, and the Better Business Bureau. Look for patterns in feedback, not isolated complaints.

  6. Transparent Pricing: Get detailed written quotes from at least three installers. Pricing should itemize equipment, labor, permitting, and soft costs. Avoid vague “per-watt” pricing without breakdown.

  7. Financing Options: Confirm the installer offers multiple financing paths: cash purchase, loan, lease, or power purchase agreement. They should explain the pros and cons of each and help you choose based on your situation.

Next Steps for Tennessee Homeowners

Ready to compare solar options? Use our free quote tool to connect with vetted installers in your area. You’ll receive detailed proposals, financing options, and estimates of your savings. Most quotes are free and come with no obligation.

For additional research, check the SEIA state market data at https://www.seia.org/states-map and review solar resource maps from NREL at https://www.nrel.gov/gis/solar-resource-maps.html to understand your area’s solar potential. Compare costs and incentives using EnergySage benchmarks at https://www.energysage.com/local-data/solar-panel-cost/tennessee/.

Tennessee’s solar market is small but workable. Returns are modest without statewide net metering, a state income tax credit, or a residential solar sales tax exemption. The partial (87.5%) property tax abatement plus rising retail electricity rates still produce positive lifetime savings for most homeowners who stay in their home through the 12 to 16 year payback window.

Want solar power without the installer process at all? A solar generator pairs portable panels with a battery in one box that ships to your door — no permits, no roof work, no sales calls. See our Tennessee backup power guide for the sizes that fit Tennessee homes and outage risks.

Sources for 2026 data: IRS Section 25D guidance, DSIRE state incentive database, Tennessee Department of Commerce and Insurance, Tennessee Valley Authority, Nashville Electric Service, Memphis Light Gas & Water, Knoxville Utilities Board, Chattanooga Electric Power Board, SEIA state market data, NREL solar resource maps, EnergySage cost benchmarks.