Kentucky Solar Rebates, Tax Credits, and Incentives

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STATE LEGISLATION

Kentucky’s electric utility rates are among the lowest in the country. According to the Department of Energy, Kentucky’s electricity rates average 5.43 cents per kW hour compared to the national average of 8.90 cents per kW hour. E.ON U.S., LLC, formerly Louisville Gas & Electric, is the principal electrical energy provider in Louisville, and in 2007 won the highest J.D. Power customer satisfaction ranking in the Midwestern Region for the eighth time in the last nine years.

That’s about the extent of the good news for Kentucky’s residential electric power customers. The state has introduced very few incentives to encourage utilization of solar power and other renewable/sustainable energy sources, particularly for the benefit of homeowners. Air quality is an issue in Kentucky, and a compelling argument for a greater emphasis on solar energy systems.

STATE INCENTIVE PROGRAMS, UTILITY REBATES, UTILITY LOANS, AND UTILITY INCENTIVES

State Bill 247 was enacted in Kentucky in 2004, requiring all investor-owned utilities and electric co-ops (TVA excepted) to offer Net-Metering to customers with photovoltaic solar-electric installations of 15 kW or less. A single, bi-directional meter is to be supplied by the utility; additional meters or distribution upgrades must be installed at the customer-generator’s expense. Excess power generated will be credited to the customer-generator at the utility’s normal retail rate. More on Kentucky net-metering here.

On September 30, 2007, the state legislature enacted a Sales Tax Exemption for Large Scale Renewable Energy Projects. It provides the commercial sector an exemption for 100% of sales and use taxes up to a maximum of 50% of the capital investment, and applies to solar energy systems producing at least 50 kW. The incentives also apply to wind power systems, biomass, landfill gas, hydropower, and similar resources generating at least 1 mW. There are other benefits and conditions; for further information, click here.

The Kentucky Solar Partnership (KSP) and the Mountain Association for Community Economic Development (MACED) offer a Solar Water Heater Loan Program, available to both commercial and residential users. It is a monthly installment loan program, with 5% down and a relatively low rate of interest for a fixed term of six years, covering the full equipment and installation cost. For details, click here.

The Tennessee Valley Authority (TVA) offers an interesting program through participating Green Power Switch (GPS) Generation Partners. Solar or wind power produced by residential or small commercial generators can sell 100% of their output to TVA for 15 cents per kilowatt-hour. An additional $500 incentive to help offset start-up costs is also available to residential users who qualify. This TVA website provides the particulars.

EXAMPLE RESIDENTIAL SOLAR INSTALLATION

Louisville/Jefferson County has an estimated population of about 700,000 people, excluding annual visitors to the Kentucky Derby, and just over 322,000 housing units that are exposed to plenty of sunshine; the area has a solar rating of “good”. Although utility rates are low, average electrical usage in Kentucky is a relatively high 14,328 kWh/year. To achieve a 50% net reduction in power company usage, a solar installation would require about 600 square feet of roof space and would cost approximately $54,000 (midrange estimate). Unfortunately, a $2,000 federal tax credit is the only direct offset to the cost. On the plus side:

• Estimated increase in property value – $8,200
• Estimated 25-year utility savings – $17,204

• Estimated reduction in greenhouse gas emissions – 147 tons

CONSENSUS

The obvious lack of solar incentives in the previous example highlights the need for action on the part of Kentucky’s governor and legislators. Although past and present government officials deserve kudos for whatever role they played in achieving the state’s low electric utility rates, the fact remains that most of their power comes from the burning of coal. Kentucky has fallen short in implementing renewable/sustainable energy alternatives, and needs to make this a priority.

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