Kentucky Solar Incentives, Tax Credits & Rebates (2024 Guide)
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After 400+ hours of research into the best solar companies, we’ve found the Bluegrass State has great incentives for residents looking to profit from going solar. Kentucky homeowners in Louisville, Lexington, Bowling Green, and other areas throughout the state can take advantage of loan programs, net metering, and more. Read on to learn more about the state’s best solar incentives.
What Are the Solar Tax Credits and Rebates in Kentucky?
Kentucky offers a few solar incentives for commercial and residential properties. Explore the financial incentives listed below to learn how to save money by switching to renewable energy.
Kentucky Property-Assessed Clean Energy (PACE) Financing
Kentucky business owners can use Property Assessment Clean Energy (PACE) Financing. This option, also known as EPAD (Energy Project Assessment District), lets eligible commercial property owners finance up to 100% of their facilities’ clean energy and water-saving improvements with no out-of-pocket expenses, such as a down payment.
PACE financing is only available in certain jurisdictions within Kentucky. Energize Kentucky, a Greater Cincinnati Energy Alliance program, administers Kentucky’s PACE programs.
USDA REAP Grants & Guaranteed Loans
The USDA’s Rural Energy for America Program (REAP) provides grants and guaranteed loans to agricultural producers and small rural businesses for investments in renewable energy systems and energy efficiency measures. Some grants cover up to 25% of project costs and range from $1,500–$500,000.
The Kentucky Agricultural Development Fund On-Farm Energy Efficiency Incentives Program acts as a state-level program under REAP. It incentivizes Kentucky farm owners to increase the energy efficiency of existing equipment or facilities, which makes solar panels eligible. Applicants may receive up to 50% reimbursement for a qualified energy-saving item with a maximum of $10,000.
What Is the Federal Solar Tax Credit?
Residents of Kentucky qualify for the federal solar investment tax credit (ITC) if they own their solar panel system through a cash purchase or solar loan. This credit reduces the amount of your owed federal taxes at a rate equal to 30% of your total solar installation cost. You won’t qualify for this credit if you lease your solar panels or have a power purchase agreement (PPA) because those payment methods don’t make you the system’s owner.
Is Net Metering Available in Kentucky?
Net metering programs don’t lower solar panel costs but provide long-term electricity bill savings. It’s a billing mechanism your utility company uses to credit you for excess electricity your solar panels send to the power grid. You can apply these credits to future energy costs.
Net metering is mandated by the state of Kentucky for all investor-owned utilities (IOUs) and electric cooperatives, except for the Tennessee Valley Authority (TVA). Customers of all other utility companies can earn energy credits for the full retail rate, such as LG&E’s program.
How Much Do Solar Panels Cost in Kentucky?
The average national cost of solar panels is around $17,640 for a 6-kilowatt (kW) system without solar incentives. According to EnergySage, the average cost for a 6-kW system in the state is around $19,140, which provides $5,742 in savings from the federal tax credit. This credit makes the system cost $13,398.
The total cost-effectiveness of your solar panel system depends on your chosen payment method. We break down each solar financing option below.
- Cash purchase: This option has you pay for a solar energy system in full up-front. You own the system and enjoy maximum long-term savings.
- Solar loan: Solar loans allow you to borrow money to purchase a solar energy system. You gain ownership immediately, benefit from lower up-front costs, and can enjoy tax benefits.
- Solar lease: This lets you lease solar panels from a provider for a fixed monthly fee. This option offers low or no up-front costs, often includes maintenance, and is easy to set up. However, you don’t own the system and take advantage of incentives.
- PPA: PPAs involve purchasing solar electricity from a third-party provider at a predetermined rate. The biggest benefits are no up-front cost, and you get predictable electricity rates. The main drawback is that you don’t own the system and can’t obtain solar incentives.
Is Going Solar in Kentucky Worth It?
Kentucky receives ample sunlight to make solar power feasible, but that doesn’t mean solar panels are worth it for all Kentucky homeowners. Going solar in Kentucky is worth it if you have enough capital to buy your system up-front or finance it using a solar loan, and your utility company offers net metering.
However, Kentucky has below-average electricity prices, so the long-term savings from reduced utility bills may not be as substantial as in some other states. This factor can make the payback period for a solar system in Kentucky exceed the average of 10 years in some cases. Therefore, going solar purely for financial savings may not make sense for most homeowners in Kentucky. Those interested in energy independence or environmental benefits may still find solar worthwhile.
Our Conclusion
Kentucky doesn’t offer many solar incentives for homeowners, but you can profit from the state’s solar tax incentives if you’re a business owner. Solar panels are worth the investment if you can afford an up-front purchase or solar loan. This is especially true for homeowners who want to generate clean energy or obtain energy independence.
Our guide details Kentucky’s main solar incentives, but smaller city- or municipality-specific incentives may be available. Check out the Database of State Incentives for Renewables and Efficiency (DSIRE) for more information on local incentives. You should also read our guide on the best solar companies in Kentucky to find a solar installer that matches your clean energy goals.
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FAQ About Solar Tax Incentives in Kentucky
Does Kentucky offer a solar tax credit?
No, Kentucky doesn’t offer a state-level solar rebate or tax credit.
How many years do you have to pay off solar?
The average payback period for solar panels is six to 10 years, but some factors, such as local electricity rates, access to solar incentives, and your payment method, influence the length of your payback period. Kentucky features a longer payback period due to its lack of state tax incentives and lower-than-average electricity rates.
Are solar panels exempt from sales tax in Kentucky?
No, Kentucky currently doesn’t have a sales tax exemption for solar panels.
Our Rating Methodology
We are committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
To share feedback or ask a question about this article, send a note to our Reviews team at reviews@thisoldhousereviews.com.
