Welcome to the 2017 Kentucky solar power information page
Note: The numbers above are just estimates for a 5kW solar system, and your home is unique. The best way to know exactly how much money solar power can save you is to connect with one of our partners nearby. A friendly solar expert we trust will give you a buzz and help you craft a personal plan to get the absolute most out of a solar power system for your home. It's 100% free (yes, that’s right, 100% free) and you aren't obligated to buy anything.
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.
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 Kentucky solar incentives you see below.
Your guide to going solar in Kentucky
We've designed this page to be a complete guide to the complicated and sometimes confusing process of installing solar panels on a home in Kentucky. Since there's a lot of important information 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!
The Solar Strategy section is all about the various financial options you have in Kentucky. We've created a tool that asks you a few questions about what you hope to get out of a solar purchase and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we give you a detailed picture of how each could work for you.
The Policy Information section contains all of our latest research on the rules set by the state legislature and public utilities commission that determines how easy it is to go solar in Kentucky. These policies and rules govern everything from renewable energy mandates to whether you get paid retail or wholesale rates for the extra energy your system produces, and can have a huge effect on the viability of solar.
Finally, the Solar Incentives section lists all of the available financial benefits available to homeowners who go solar. This section includes information about money-back rebates and grants, tax credits, and tax exemptions. If you're looking for what Kentucky is doing to make solar more affordable for its citizens, you'll find it here.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Kentucky Solar Strategy|
|Comparing Solar Investment Options|
|Buying Solar in Kentucky|
|Kentucky Solar Loans|
|Smaller Solar Systems in Kentucky|
|Solar Purchase Payback Time in Kentucky|
|Kentucky Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Kentucky
Figuring out the best way to go solar in Kentucky 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:
Compare the Return of Different Solar Investments in Kentucky
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan. Since Kentucky doesn't have an RPS, the state isn't quite financially right for leasing yet, so we included two different sizes of solar loans—one for people with a lot of equity (or credit), and one for people with just a little.
As you can see, the purchase option leads to the highest dollar-amount returns over time, but it also requires a big up-front investment. A better option is to take a solar loan or home equity line of credit (HELOC). You'll put $0 down and end up with a big, big tax break at the end of the year.
Your loan payments over 15 years will be more than your electric bill savings, but you'll still come out thousands of dollars ahead by the end of your panels' 25-year warranty, with the potential to continue the savings long into the future.
Read on to find out more about each option.
Buying Solar in Kentucky
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 option.
Still, an outright purchase means you own the system from day one and reap the benefits. You get the 30% Federal solar tax credit and electricity savings to bring your first-year costs way down. The trouble is, in Kentucky, these benefits are environmental; not financial.
In our example, you put down $21,250, but by the end of year 1, incentives and energy savings will erase a bunch of it. Over 25 years, your system will have produced more than $6,500 in income. But that late income makes the system not worth its cost, compared to an alternative investment. Check out the NPV:
Net Present Value: -$3,946
Net Present Value (NPV) measures how good of an investment something is, compared to the best alternative. We use a 6% return to evaluate all solar investments, and Kentucky's -$3,946 NPV on a 5-kW solar system means you'd be that much better off investing your money in stocks over 25 years than solar. Electricity is just so cheap in Kentucky right now, a solar system for you home isn't a good investment unless the environmental benefits are worth at least $3,946 to you.
Here’s how the numbers work for a Kentucky solar purchase of a 5-kW rooftop solar system:
- Installing a typical 5-kW solar system should start at about $21,250.
- The Feds calculate their 30% tax credit based on actual out of pocket costs, so you'll get $6,375 back as a tax credit, for a new price (after year 1) of $14,875. Note: you can take the credit over as many years as necessary if you don't owe $6,375 in Federal taxes this year.
- Next, you'll subtract your first-year energy savings, which will add up to about $605, bringing your cost after the first year to $14,270. Those savings will continue for the life of your system, and will only get bigger over time, considering that utility companies raise their rates 3.5% annually on average.
- By the time your system pays itself back in year 19, you’ll be seeing over $1,000 per year in savings until the end of your 25-year warranty.
- When all is said and done, our estimate shows a total net profit of $6,526, with an internal rate of return of 2.9%. That's not quite half as good as a 25-year investment in the stock market, which means solar isn't the best investment option—but it is a way to make a little money while doing good for the environment.
- On top of those returns, your home's value just increased by just about $19,000, too (your expected annual 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 101 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Kentucky. 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.
Solar Loans in Kentucky
Usually, this is where we tell you that taking a loan for solar panels is a no-brainer, because it means investing in an income-generating asset. And technically, that's true in Kentucky, too. It's just not a sure-thing like it is in other states, because KY has some of the lowest electricity prices in the nation, and the savings aren't as great.
As you can see from the chart above, you'll start out with a big windfall, because with a loan, you're not putting any money down, and you get the Federal 30% tax credit for the whole installed cost of your system. Then, over the 15-year repayment term of your loan, you'll be spending more than you're saving in electricity costs, to the tune of about $1,000 per year until you pay the loan off.
After that, you'll save over $900 per year in electricity costs from your paid-for solar panels, but by the end of the system's 25-year warranty, you still won't have broken even. That means a solar investment like this in Kentucky will cost rather than save you money over the long term.
Net Present Value: -$2,218
Net Present Value (NPV) measures how good of an investment something is, compared to the best alternative. We use a 6% return to evaluate all solar investments, and Kentucky's -$2,218 NPV on a solar loan means you'd be that much better off investing your money in stocks over 25 years than solar. We believe in the environmental benefits of solar, but $2,218 is a lot of money to pay for something that usually saves you money over the long term.
Here’s how the numbers pencil out for a Kentucky solar purchase with a solar loan:
- Installing a typical 5-kW solar system should start at about $21,250. That's how big your loan will need to be to cover it.
- The electricity you'll save in the first year of operation would have cost $605, but your loan payments will total $1,886, for a difference of $1,281, or about $107 per month.
- That's not so bad when you consider your tax savings for the year will be $6,375! You'll come out nearly $5,100 ahead in year 1, which should help ease the burden of loan payments for a few years, at least.
- When your loan’s paid off in year 15, you’ll start see over $900 year in savings until the end of your system’s life.
- Still, at the end of your 25-year panel warranty, you'll be in the hole about $500. That's not a huge amount of money, but considering what you could have made from an alternative investment, it ain't pretty.
- If you decide the cost is worth it, the environmental benefits might make you smile a little. Operating your system will take as much carbon out of the air as planting 101 trees every year!
Keep in mind, the numbers above are based on an average home in Kentucky. 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.
Small Rooftop Systems in Kentucky
Let's say you don't have a ton of extra cash laying around, but you do have a bit of equity in your home. Can you get solar panels? YES! Is it a good idea in Kentucky? That depends on what you're in it for...
See, solar saves you money on your electric bill, but in Kentucky, we only pay $.10 per kilowatt-hour (kWh) of electricity, which means solar saves you less money than in states with high electricity costs. You'll still save a little over the long-term with solar, but it won't be better than an alternative investment.
Here are the factors we'll look at for this example:
- A 2-kW rooftop system that will cost around $10,200 installed.
- A HELOC for that amount with a 10-year payback at 4% interest.
Just like with a big system, you don’t have to put any money down, but you still get the big federal tax credit for buying solar. You'll get the 30% of your solar costs back as a tax credit and the energy bill savings will start right away. Your loan payments will be about $103 per month while your energy bill savings will be about $20—a difference of $53. Basically, for the cost of cable TV service, you do your part to save the planet from carbon pollution, and make a little money later in your life, too.
Net Present Value: -$2,199
Net Present Value (NPV) measures how good of an investment something is, compared to the best alternative. We use a 6% return to evaluate all solar investments, and Kentucky's -2,199 NPV on a small solar system means you'd be that much better off investing your money in stocks over 25 years than in solar here. We're sorry to say it's one of the worst in the country. So only go solar in Kentucky if the environmental benefits are worth at least that much to you.
Here’s how the numbers pencil out for a Kentucky solar purchase with a small rooftop solar system:
- Installing a typical 2-kW solar system should cost about $10,200. Your loan should be for this amount.
- The electricity you'll save in the first year of operation would have cost $242, while your loan payments will cost $1,239.
- At the end of the year, the Federal government will give you a tax credit of 30% of the cost of your system. That's $3,060 that you won't owe this year. You can take that credit over two years if you don't owe that much in federal taxes this year.
- When your loan’s paid off after year 10, you’ll see over $300 per year in savings until the end of your system’s life.
- At the end of your system's 25-year warranty, you'll end up in the hole a little bit; -$772 per our estimate.
- Your system will remove as much carbon from the air as planting 40 trees per year, which is a pretty great thing, we'd say.
Keep in mind, the numbers above are based on an average home in Kentucky. 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.
Kentucky 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 Florida—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 Kentucky:
A Renewables Portfolio Standard (“RPS”) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels. 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 an 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.
An RPS is critical to strong renewable energy policy. Utility companies aren't really all that gung-ho about you producing your own power. After all, it costs them money when you use less of their electricity. They also don’t naturally want to give you big payments for energy you're feeding back into the grid. The main reason the utilities are aiding the transition to lower electric bills and offering incentives to put solar on roofs is because the state forces them to. Without an RPS, it’s difficult to convince utilities to help. That’s what’s happening here in Kentucky.
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
The best states for solar mandate that a certain percentage of the RPS comes directly from solar energy. Without a mandatory RPS in Kentucky, this is another area that falls short. If an RPS contains specific carve-outs for clean and efficient technologies like solar panels, or mandates for environmentally necessary increases in distributed generation, you see even stronger incentives for residential solar power.
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!
Kentucky Electricity Prices
Kentucky pays an average of a little more than 10 cents per kilowatt-hour(kWh) for electricity. That’s significantly lower than the national average of 13 cents. In fact, it’s one of the lowest rates in the nation.
Why is energy still so cheap? Only because most of our electricity still comes from burning millions of tons of fossil fuels. The cost of those fossil fuels in dollars and cents may be low (for now), but the environmental costs are astronomically high. New regulations on carbon emissions and dwindling supplies will likely drive the cost up over the next few decades. But while everyone else is paying through the nose for the fuels of the past, you’ll be rocking that sweet, shiny solar power system on your roof, and making money! Just remember to thank us.
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.
Kentucky 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.
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.
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.
Kentucky Interconnection Rules
Kentucky’s interconnection rules are decent for homeowners, whose systems are rarely large enough to trigger expensive reviews and additional insurance, but the law leaves open the possibility that utilities will require a redundant external disconnect switch. Still, homeowners with solar power systems should have little problem getting hooked in to the grid.
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 Kentucky
Kentucky Solar Power Rebates
With no RPS, there is little reason for the utilities to help you go solar. In states with strong RPS laws, utilities have been offering huge rebates that help homeowners save thousands on the up-front costs of solar power systems. This is just another way the General Assembly is missing the mark on helping Kentuckians start generating their own clean, reliable power.
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.
Kentucky Solar Power Tax Credits
Oh boy here's another one. Kentucky used to have a small tax credit for people who bought a solar system. Not anymore. Sorry, Kentuckians!
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
Kentucky used to have a solar performance payment program for people who are served by Tennessee Valley Authority (TVA). Sadly, those payments are done, but the TVA does still make it (relatively) easy to get on the grid with solar, through their Green Power Providers program.
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.
If you don’t know what an SREC is, or how they work, check out this great SREC video
Property Tax Exemption
Unfortunately the Topeka General Assembly’s 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.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Many argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing. Leasing still has a positive impact on the ability to sell your home though, in our opinion).
For many average-sized solar power systems on a house, that can mean $20,000 to your home value. (Edit April, 2014: Some companies, like Solar Mosaic, are starting to offer traditional style equity-based home loans for such a thing). 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 also sourced from the Database of State Incentives for Renewables and Energy Efficiency. The stronger the tax exemption, the higher the grade.
Sales Tax Exemption
With no sales tax exemption, you’ll pay a 6% premium on your solar installation.
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).
Switch to solar and save $36.44/mo on avg ($0 installations available) - Click Here
The consensus on Kentucky solar power rebates and incentives
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 13 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 Frankfort would go a long way. For now, we can’t give Kentucky anything stronger than a failing grade in our solar ratings.
Again, if you are confused about how these numbers work and would like some personalized assistance or a quote of your own, simply connect with our network of solar experts. They’ll help sort out all the pricing, get you access to special deals, and they’re super friendly to boot!