Your 2020 guide to getting solar panels for your home in Kentucky
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Kentucky home. Since there's a lot 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!
** What's new for 2020 **
Kentucky lawmakers enacted Senate Bill 100 in 2019, which guts net metering rules in the state. We’d like to say we’re hopeful there will be an improvement here for 2020 and beyond, but new governor Andy Beshear has a lot bigger fish to fry. We’ll keep our eyes peeled for any movement, but don’t hold your breath.
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.
What you'll find on this page:
The Solar Strategy section is focused on the 3 ways of paying for solar in Kentucky, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in Kentucky. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in Kentucky.
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|
|Paying Cash for Solar in Kentucky|
|Solar Loans in Kentucky|
|Solar PPAs 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:
How to pay for solar panels 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.
Option 1: Paying cash for solar
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.
Option 2: Using a loan to pay for solar
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.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
Kentucky does not offer solar Power Purchase Agreements or leases. Perhaps it would be a good idea to contact a solar advocacy organization and ask them to fight for solar in your state!
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 Georgia—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:
Kentucky's Renewable Portfolio Standard
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.
Kentucky's Solar carve-out and SRECs
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.
Kentucky Electricity Prices
Kentucky pays an average of about 11 cents per kilowatt-hour(kWh) for electricity. That’s significantly lower than the national average of 13.6 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.
Kentucky Net Metering
Before 2020, the net metering policy in Kentucky was probably the best individual law in the state to help make home solar power here compelling. While net metering used to be required by all utilities in the state, that law has been scrapped, in favor of regulators being able to set new rates to pay solar owners for their excess generation. All surplus electricity generation will now no longer be credited to your next month’s bill at your utility’s full retail rate, instead this rate will be much lower.
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.
Kentucky Solar Incentives
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 26% of your total system costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how Kentucky measures up:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
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.
Kentucky Solar 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!
Property Tax Exemption
Unfortunately the Kentucky Legislature'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.
Sales Tax Exemption
With no sales tax exemption, you’ll pay a 6% premium on your solar installation.
Low-income Solar Programs
Grade: FLearn more about low-income solar programs available in the U.S.
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!