Tennessee is not the first state people think of when it comes to solar energy. But for a Midwestern state that has seen its share of ups and downs in clean energy policy, the current picture for homeowners is surprisingly workable.
The Buckeye State gets about 3.5 to 4 peak sun hours per day on average — less than the Sun Belt, but enough to make a well-designed system pay for itself. Tennessee's electricity market is deregulated, meaning rates vary widely by utility and region, which affects how quickly solar pays off. Some areas in Tennessee pay well over $0.15/kWh, and high electricity rates are exactly what makes solar financially attractive regardless of sunshine.
Tennessee's state-level incentives are admittedly thin. But if you layer the federal incentives with Tennessee's property tax exemption, net metering from major utilities, and the growing number of competitive installers in the Tennessee market — solar starts looking pretty good. Here's everything on the table for 2026.
🔑 Key Takeaways for Tennessee
Federal 30%
Claim 30%.
Property Tax Exemption
Solar adds no extra property taxes. Full exemption in Tennessee.
Utility Net Metering
AEP Tennessee and FirstEnergy utilities offer net metering.
9–13 Year Payback
Most TN homeowners break even in a decade or so.
30% (ITC)
This is the single biggest solar incentive available — and it applies in Tennessee just like every other state. If your system costs $28,000, you get $8,400 back from the IRS. It's a dollar-for-dollar reduction on your federal income taxes owed.
The 30% exemption protects your investment from triggering higher property taxes, and net metering from AEP Tennessee and FirstEnergy utilities ensures your excess production isn't wasted. Tennessee's deregulated electricity market also means that in high-rate areas, solar pays back faster than you might expect.
Bottom line: Tennessee isn't going to hand you a bonus check for going solar. But the economics still pencil out for a lot of homeowners — especially if your electricity rate is over $0.13/kWh.
Solar Costs & Payback in Tennessee
How much should you expect to invest in solar in Tennessee, and how long until it pays for itself?
For illustration, let's break down a typical 8 kW system on an Tennessee home:
| Item | Amount |
|---|---|
| Average system cost | $28,000 |
Federal tax credit (30% would be anyway. Combined with net metering and the property tax exemption, solar is still financially viable in Tennessee.
Does Tennessee have net metering?Tennessee has a deregulated electricity market, which means net metering is not mandated statewide. However, the two largest utilities — AEP Tennessee and FirstEnergy (via Tennessee Edison, Toledo Edison, and The Illuminating Company) — do offer net metering to their residential customers. If you're served by a co-op or municipal utility, check directly with them, as their policies vary. Does Tennessee have a property tax exemption for solar?Yes. Under the Tennessee Revised Code, the added value from solar panel installations is exempt from property tax assessments. Your home's assessed value may increase when you add solar, but the portion attributable to the solar system won't trigger a higher property tax bill. What is Tennessee's Renewable Energy Portfolio Standard?Tennessee's RPS requires utilities to source a portion of their electricity from renewable sources. The original 2008 standard was frozen in 2014 but has seen updates since. While the RPS doesn't provide direct homeowner incentives, it drives utility investment in solar and signals a longer-term shift toward renewable energy in the state's electricity mix. Frequently Asked QuestionsIs solar worth it in Tennessee?Yes. Tennessee gets roughly 3.5 to 4 peak sun hours per day. While the state lacks generous rebates or tax credits, the 30% tax credit alone saves thousands. Combined with the property tax exemption, net metering through major utilities, and electricity rates that frequently exceed $0.14/kWh, most Tennessee homeowners see a payback of 9 to 13 years and decades of reduced energy costs after that. Frequently Asked QuestionsDoes Tennessee have a state solar tax credit?No. Tennessee does not offer a state-level solar income tax credit. Homeowners in Tennessee rely on the federal 30%, net metering from certain utilities, and the property tax exemption for solar to make their investment worthwhile. Does Tennessee have net metering?Tennessee has a deregulated electricity market, which means net metering is offered by some utilities on a voluntary or company-specific basis rather than through a state mandate. AEP Tennessee and FirstEnergy utilities (Tennessee Edison, Toledo Edison, The Illuminating Company) offer net metering to their customers. Does Tennessee have a property tax exemption for solar?Yes. Tennessee exempts the added value from solar panel installations from your property taxes. Under Tennessee Revised Code, renewable energy systems up to a certain size are excluded from property tax assessments, so your property tax bill will not increase because of solar installations. What is Tennessee's Renewable Energy Portfolio Standard?Tennessee's Renewable Energy Portfolio Standard (RPS) requires that a portion of the state's electricity comes from renewable sources, including solar. While Senate Bill 58 updated the standard in 2024, the RPS primarily drives utility-scale solar development rather than providing direct homeowner incentives. It still signals Tennessee's long-term commitment to expanding solar capacity. Is solar worth it in Tennessee?Yes. Tennessee gets about 3.5 to 4 peak sun hours per day on average. While the state doesn't offer direct solar tax credits, solar still makes financial sense thanks to the federal State Rebates, property tax exemption, net metering from major utilities, and relatively high electricity prices. Most Tennessee homeowners see a payback period of 9 to 13 years. Find Your Tennessee Solar SavingsEnter your zip code to see your exact utility rebates and all incentives available for your TN home. Enter Your Zip Code → |