Kentucky Solar Power: Check Your Savings, Costs, Tax Breaks, Incentives and Rebates
The state of Kentucky gets a lot of sunlight throughout the year, and all of that sunlight represents potential savings if you invest in a solar photo-voltaic system.
Depending on the part of the state where you live, you can expect to get between four and five peak sun-hours per day on average, and as much as six peak sun-hours during the summer months of June and July.
The main incentives for going solar in Kentucky are the following:
- A favorable net metering policy that requires utilities to give you full credit for any surplus production from you solar PV system.
- An extra $500 in tax credit on top of the 30% federal tax credit when you purchase a PV system in Kentucky.
- If you’re a customer of the Tennessee Valley Authority utility (TVA), you get a $1000 rebate for going solar and a feed-in tariff equivalent to the retail electricity price plus $0.02/kWh, which is even better than net metering.
TVA is one of the largest utilities in Kentucky, serving thousands of customers mostly located in the center, south and west of the state.
This means that the rebate and feed-in tariff are available for a large portion of Kentucky homeowners.
Return on Investment for Residential Solar Power in Kentucky
A 5-kilowatt solar PV system offers a great balance between cost and savings for most homeowners. In order to illustrate the financial performance of a solar PV system in Kentucky, let’s assume you will be installing a system of that rated capacity.
- If there were no incentives, you would pay around $21,000 upfront. - Subtracting the $1,000 rebate, the project costs drops to $20,000. - Adding the 30% federal tax credit and the $500 local tax credit, it is possible to subtract an additional $6,500 from initial expenses. - Considering you will save around $700 during year one, the net cost of going solar in Kentucky is reduced below $13,000 - The payback period you can expect is around 17 years. - When you install solar panels you increase the value of your home by around $12,000. - The environmental benefit can be compared to plating more than 100 trees per year, during 25 years!
- If there were no incentives, you would pay around $21,000 upfront.
- Subtracting the $1,000 rebate, the project costs drops to $20,000.
- Adding the 30% federal tax credit and the $500 local tax credit, it is possible to subtract an additional $6,500 from initial expenses.
- Considering you will save around $700 during year one, the net cost of going solar in Kentucky is reduced below $13,000
- The payback period you can expect is around 17 years.
- When you install solar panels you increase the value of your home by around $12,000.
- The environmental benefit can be compared to plating more than 100 trees per year, during 25 years!
The main factor driving up the project payback period is the extremely low price of electricity in Kentucky: you can expect to pay around $0.10/kWh, which is one of the lowest electric rates in the nation.
Of course, if you go solar and are a TVA customer, you are actually saving around $0.12/kWh due to their feed-in tariff, somewhat compensating the low retail price of electricity.
The low electricity prices in Kentucky are possible in great part due to all the power plants burning fossil fuels such as coal. Solar power has a relatively long payback period in Kentucky, but over the total life of the PV system your savings will exceed your expenses by around $10,500.
You will have also contributed positively to environmental sustainability by self-generating clean energy instead of purchasing it from the grid.
Keep in mind that this analysis is for a 5-kilowatt system and the average sunlight conditions in Kentucky.
Since every home is unique, probably your ideal PV system size is different from five kilowatts. Also, sunlight and shading conditions vary by location, causing variations in PV system performance.
For a accurate evaluation of your situation you can use our solar calculater.
- The inclination or your roof, or most of it, is toward the south. - There are no natural or man-made obstacles blocking a significant portion if incident sunlight.
- The inclination or your roof, or most of it, is toward the south.
- There are no natural or man-made obstacles blocking a significant portion if incident sunlight.
Don’t worry if your site conditions are different from the above; they represent the ideal scenario but their absence is not a deal-breaker.
Of course, there are extreme cases: you will not save much money with solar power if you live in the center of city surrounded by skyscrapers.
A great web resource where you can learn about the available sunshine in your location is the NASA Atmospheric Science Data Center. All you have to do is input your coordinates, and the site will generate a wealth of meteorological information for your exact location, including the available solar radiation.
Kentucky Solar Power Incentives, Tax Breaks and Rebates
Kentucky does not have a Renewable Portfolio Standard requiring local utilities to meet a certain renewable energy percentage by a specified date.
Therefore, the main incentives for solar power in Kentucky are the $500 tax credit and a favorable net metering policy.
Unfortunately, there are no tax exemptions for solar power in Kentucky: PV systems are subject to both the sales tax and the property tax.
Kentucky Tax Credit
There is a tax credit of 3 dollars per watt in Kentucky, but unfortunately it has an extremely low cap of $500. In fact, you will most likely hit the cap with the first solar panel: most commercial PV modules are rated above 200 watts ($600 rebate before applying the cap).
Of course, you also have access to an excellent incentive in the form of the 30% federal tax credit, which takes off a huge portion of your upfront costs as soon as you file your next tax declaration.
If you are not taxed high enough to get the full benefit, don’t worry because you can split it among two consecutive tax declarations.
Are There Any Rebates for Solar Power in Kentucky?
While there are no state-wide rebates for solar power in Kentucky, you do get a $1,000 rebate if you are a customer of TVA, one of the largest local utilities. The combination of this rebate and the available tax credits reduces the upfront cost of your PV system cost by more than $7,000!
Kentucky Electricity Rates
Kentucky has one of the lowest electric rates in the nation, at an average value of $0.10/kWh, and this is the main factor that results in a long payback period for solar power.
However, going solar in Kentucky provides savings despite the low energy prices, and you help the environment in the process by reducing the amount of energy you get from fossil fuels.
Is There Net Metering in Kentucky?
The net metering policy is one the strong points in favor of solar power in Kentucky: utilities are required to give you full credit for any kilowatt-hour you export to the grid. If you don’t use the credits during the following month, they’re rolled over indefinitely!
Although the net metering policy is great, there is no standard interconnection policy in Kentucky, so each utility company sets its own requirements.
Is there a Feed-in Tariff in Kentucky?
TVA, one of the largest utilities, offers you an extra $0.02/kWh on top of the retail price of electricity if you sign up for their Generation Partners Program.
This is better than net metering, where you only save the retail price of each kilowatt-hour.
If you are a TVA customer, sign up for the program to boost your solar PV system savings from $0.10/kWh to $0.12/kWh, a 20 percent increase!
Are There $0 Down Payment Financing Options in Kentucky?
Kentucky does not have a legal framework for solar leasing and Power Purchase Agreements, which means that the only option for going solar with $0 down is to get a loan, ideally a low-interest HELOC (Home Equity Line of Credit).
The main advantage of purchasing a solar PV system through a loan is that you pay for your system over 10 to 15 years, but get a tax credit for 30% of the system cost within one year.
Given that low energy prices limit your savings when you go solar in Kentucky, purchasing a PV system through a loan only provides around $2,000 in total savings over the project’s lifetime.
If you take the loan option to purchase a PV system in Kentucky, the benefit is more environmental than financial.
Cash Purchase VS Loan: What’s Best for Kentucky Homeowners?
The choice between a cash purchase and a loan when installing a PV system in Kentucky depends strongly on cash availability, payback period you are willing to assume, and the amount of equity owned in your home.
Purchasing a PV system in Kentucky in cash is recommended if your motivation for going solar is financial and you are willing to pay the full price of the PV system upfront. You can expect to save more than $10,000 over the next 25 years.
Purchasing a PV system in Kentucky
Purchasing a PV system in Kentucky through a loan is recommended if your motivation is having a green home and contributing to the environment.
You will only save around $2,000 over 25 years, but your PV system will have the same benefit as planting 100 trees per year.
Cash purchase in Kentucky
The cash purchase is the recommended option if your motivation is to maximize savings.
What is the Solar Power Installation Process in Kentucky?
The lack of an interconnection policy can complicate the process of going solar in Kentucky, so we strongly recommend hiring a solar contractor with good reputation to make the process go by smoothly.
1. Fill our solar installation form, providing basic information on your property.
2. Talk with trusted solar contractors near you to get accurate quotes.
3. Compare quotes (we recommend you get at least three) and choose the best option for you.
4. Have your contractor install the PV system, and enjoy clean power while helping the planet.
Remember this article is for a general case based on a 5-kW PV system, assuming the average conditions for the state of Kentucky.
You can get a detailed explination about choosing a solar system and customized solar power proposal once you get in touch with a contractor near you.
The installation process for a residential PV system is quick, taking from three to four days on average.
Kentucky gets a decent amount of sunlight and has a favorable net metering policy for solar power. The outlook is even better if you’re a TVA customer, since you will get a $1,000 rebate and a 20% boost for your savings!
Of course, the 30% federal tax credit is available everywhere in the US, and you get an extra $500 in tax credit if you live in Kentucky.
The main limiting factors for going solar in Kentucky are lack of a state-wide RPS, having no tax exemptions and having no access to leases and PPAs.
Of course, a residential PV system is a sound investment nevertheless if you can afford to purchase it in cash, saving you more than $10,000 over 25 years.