Stabled stallions, ready to run
State legislators here have kept a pretty low profile on renewable policy, though in the little time they have spent focused on renewables, solar power seems to be at the forefront of legislators’ minds. In the last few years legislators have passed solid net metering law and a small personal tax credit (highest for solar power). That’s a decent start to strong solar policy, but it’s not nearly enough. First and foremost, we need a strong statewide RPS in place to ensure that utility companies do their part (mostly by providing free cash to you in the way of rebates and performance incentives) to help push smart renewables like residential solar power to the forefront of energy production.
Kentucky’s (Lack of A) Renewable Portfolio Standard
A Renewables Portfolio Standard (“RPS”) is a law or other piece of regulation that mandates that a certain percentage of at state’s energy production comes from renewable resources by specified target dates. A strong RPS is important because it forces utility companies to promote conversion to renewable energy. That generally means free money for you in the form of solar power rebates and performance payments when you switch to solar power.
Unfortunately Kentucky lacks any state or local Renewables Portfolio Standards. As we’ve seen in other states that lack an RPS, failing to set a minimum bar for renewable energy production allows utility companies to keep on coasting, turning huge amounts of fossil fuel burning into even bigger profits. Kentucky lawmakers are missing easy opportunity to make the Bluegrass State one of the regional leaders in solar policy, simply by passing a strong RPS for the utilities to comply with.
Solar Performance Payments in Kentucky
Kentucky’s only solar performance incentive comes through the Tennessee Valley Authority (“TVA”). TVA sells power to tens of thousands of Kentuckians, usually through municipal utility distributors. Distributors of TVA power serve all or a portion of the following counties in south central and western Kentucky: Adair, Allen, Barren, Butler, Caldwell, Calloway, Carlisle, Christian, Clinton, Cumberland, Edmonson, Fulton, Graves, Grayson, Hickman, Livingston, Logan, Lyon, Marshall, Metcalfe, Monroe, Muhlenberg, Ohio, Simpson, Todd, Trigg, Warren and Whitley.
If you’re lucky enough to be TVA customers, your new solar power system is eligible for TVA’s Generation Partners Program. TVA offers a ten-year contract to purchase 100% of the energy produced by your solar power system for a premium of $0.12 on top of the retail electricity rate.
Kentucky Solar Power Rebates
Participants in TVA’s Generation Partners program are also eligible to receive a $1,000 solar panel rebate to offset initial costs of your solar power system. Unfortunately the TVA program is the only solar rebate available in Kentucky.
Kentucky Solar State Tax Credits
While there are no solar power rebates besides the TVA program, everyone here can get a bit of extra cash to help pay for your new solar power system when April rolls around. The state offers a personal tax credit of $3/watt (DC), up to a maximum of $500. If your state tax bill is already low, any excess credit can be carried over to succeeding years.
Kentucky Solar State Tax Exemptions
Unfortunately the state legislatures generosity has not yet extended to the rest of the tax code. In many states we’ve seen both sales and property tax exemptions for new residential solar power systems. No such exemptions exist here. Lawmakers in Frankfort can improve solar policy here significantly with a couple of laws; tax exemptions can save you thousands without ever actually draining the state’s coffers.
Utility Prices in Kentucky
Kentucky pays an average of 9.41 cents per kilowatt-hour of electricity. That’s the cheapest electricity in the region. In fact it’s one of the lowest rates in the country, and well below the national average of 11.43 cents/kwh.
The important part is to remember why most electricity is currently produced by burning fossil fuels. All that earth-killing oil and coal may still be cheap, but the long-term costs associated with fossil fuels will far outweigh those monthly bill savings. When all those long-term costs really start to kick in, monthly electricity bills are going to inevitably rise as well. When that happens, you’ll be patting yourself on the back for having already switched over to clean efficient solar energy.
Kentucky Net Metering and Interconnection
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 any surplus. A strong net metering law ensure that you will be able to take advantage of all potential savings and profits from your solar power system and is an integral part of sensible state solar policy.
Legislators have seen that wisdom as well; net metering is likely the best individual law in the state with regard to solar power. Net metering must be offered by all utilities in the state except TVA distributors (whose customers can take advantage of the Generation Partners program described above). All surplus electricity generation will be credited to your next month’s bill at your utility’s full retail rate. Unused credits may be carried over indefinitely.
That’s a good solid net metering law. The only improvements we’d like to see are the removal of the current 30 kw system size limit, to allow larger commercial and industrial customers to meet all on-site electricity generation needs. More important to you and your residential solar power system, we would also approve of an amendment requiring the utility to write you a check for any cumulative surplus, at least once a year.
5kW Example Return on Investment in Kentucky
Installing a typical 5kW solar system should start at about $25,000 in Kentucky. Don’t worry – even without state incentives, you can still knock a big chunk off the price.
- First let’s slice off that $500 you get back from the state on tax day, and drop your price down to $24,500
- You’ll also claim the much larger (30% of project costs) federal solar tax credit on tax day. Since the feds calculate their incentive based on actual out of pocket costs, no state solar power rebate means a bigger federal tax credit. Subtract $7,500 (30% of $25,000) for a new price of $17,000.
- After the solar tax credits we subtract your first year’s energy savings, which we estimate to be about $550. That brings your cost after the first year to $16,450.
- With a conservative estimate for the future rise of electricity prices, you can expect your new solar power system to pay for itself in about 19 years. Even with that somewhat slower payback time frame, you can still expect to get about 6 years of profits (yes, profits) out of your solar power system. We estimate those profits to be nearly $9,500 through 2036.
- In addition to those direct wallet-fattening savings, you also increased your home value by more than $11,000
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using all that fossil-fuel backed electricity. In fact, the fossil-fuel energy you’re not using is the carbon-saving equivalent of planting 103 trees a year, every year your solar power system is humming.
These numbers are estimates. Your home is unique and how much power you generate and how much money you save depends on that uniqueness. The best way to find out how much cash switching to solar can save you is to get one of our free quotes, and an expert installer in your area can draw up a home-specific estimate for you. Your quote is 100% free (yes, that’s right, 100% free) and you can get as many of them as that smart shopper in you desires!
Kentucky Solar Consensus
Unfortunately, the Kentucky legislature is currently squandering the state’s considerable solar power potential. Without any solar incentives in place (aside from the TVA Generation Partners Program) cost after year 1 remain higher than most other states, and the payback time frame here is a far (far) too slow 19 years. With strong net metering already in place and TVA already offering performance payments to tens of thousands of Kentuckians, a few strong laws from the Frankfort can go a long way. For now, we can’t give Kentucky anything stronger than a “D” grade in our solar ratings.