2022 Kentucky Solar Tax Credits, Rebates & Other Incentives

Here’s a quick look at the solar incentives in Kentucky:

  • Net Metering
  • Federal Tax Credit
  • PACE Financing
  • Additional City & Utility Rebates
Ecowatch Author Karsten Neumeister

By Karsten Neumeister, Solar Expert

Updated 5/19/2022

Why You Can Trust EcoWatch

Our solar experts have sifted through hundreds of local governments’ and utility companies’ websites to find accurate information about current solar incentives in each state. We’ve also unbiasedly ranked and reviewed hundreds of solar installers to empower you to make the right choice for your home.

How Much Can You Save With Solar Incentives in Kentucky?

In this article, we’ll discuss the solar incentives and rebates available to Kentucky homeowners. When you’re ready to speak with a qualified professional, follow the links below. Each of these companies can help you identify and apply for incentives available in Kentucky.

Jump to Section:

  1. Solar Rebates, Tax Credits, and Incentive Programs in Kentucky
  2. Net Metering in Kentucky
  3. Federal Solar Tax Credit
  4. FAQ: Kentucky Solar Incentives
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Kentucky is far from one of the top states for solar, likely because it doesn’t offer many financial incentives — like tax credits or exemptions — for residents who install solar energy projects. However, the Bluegrass State does have a decent net metering program that rewards solar users.

Despite a lack of solar incentives in Kentucky compared to other states, data shows that more and more Kentucky residents are still choosing to install solar photovoltaic (PV) systems on their homes.1 That’s likely because the cost of solar panels in Kentucky is dropping and residents are interested in lowering their electric bills. Aside from the energy savings, many people choose to go solar in Kentucky as a means to be energy independent and avoid utility companies.

Whatever your reason for making the switch to renewable energy, we want you to get the maximum benefit. So we’ve outlined some of the top incentives in Kentucky below.

Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.

Current Solar Rebates, Tax Credits, and Incentive Programs in Kentucky

Here are the current solar rebates and incentives Kentucky residents can take advantage of:

Kentucky Solar Incentive How it Affects the Cost of Solar Panels in Kentucky
Net Metering Kentucky requires investor-owned utilities and electric cooperatives (exempting Tennessee Valley Authority [TVA] utilities) to offer net metering to consumers with a solar system of up to 30 kW. Customers are credited at the full retail rate, a great policy for Kentucky homeowners.2 (Learn more about net metering here.)
Federal Solar Tax Credit The solar investment tax credit (ITC) allows solar adopters to claim 26% of their total solar equipment and installation costs as a tax credit on their next federal filing. In Kentucky, that’s a savings of about $6,692.
PACE Financing Property Assessed Clean Energy (PACE) financing allows property owners to finance the cost of their solar installation and pay back the money via a voluntary property tax assessment. Although this doesn’t lower the cost of going solar, it can be a great option for homeowners who can’t take out a traditional loan or pay for a system in cash.3
Local Solar Rebates & Incentives There are a handful of local utilities that offer energy-efficiency rebates, which solar companies can complete along with your panel installation. For instance, the Blue Grass Energy Cooperative offers rebates up to $750 for air sealing and ceiling installations.4 Check out DSIRE to see if your utility offers any applicable incentives to your home solar system.
Incentives for Energy Independence This state incentive is for commercial solar installations (and other renewable energy facilities), but it’s a pretty enticing offer. Kentucky gives energy tax credits — including income tax credits and sales and use tax incentives — to facilities that don’t use fossil fuels as an energy source.5

Kentucky Solar Incentives

Kentucky does not currently offer a statewide solar tax exemption for residential properties. However, under the Incentives for Energy Independence Act, commercial and industrial renewable energy facilities that generate at least 50 kilowatts (kW) of electricity are eligible for tax credits.6

Unfortunately, Kentucky also doesn’t offer a dedicated state rebate for solar panel installations. That said, some solar companies in Kentucky may offer their own installation or equipment rebates. Be sure to check with your installation provider to see if you’re eligible for any additional rebates or financial incentives for your renewable energy system.

Net Metering in Kentucky

Kentucky has a pretty solar-friendly net metering program, requiring all investor-owned utilities and electric cooperatives (exempting Tennessee Valley Authority [TVA]) to offer net metering to consumers with systems up to 30 kW.7 With net metering, any kilowatt-hours (kWh) your solar panel system produces and sends to the power grid will offset the kWh supplied to you by your utility provider.

Kentucky solar users were originally credited at the full retail rate, but in 2021, state utility regulators reduced the credit to roughly $0.09 per kWh for Kentucky Power customers and about $0.07 per kWh for customers of Louisville Gas and Electric (LG&E) and Kentucky Utilities (KU).8,9

Bottom line: How much money you get back with net metering will vary based on your electric company, but you’ll still benefit in some way. Be sure to check with your solar installer or utility websites to learn about any new developments.

Local Energy Efficient Incentives and Rebates

While the government hasn’t mandated any state tax credits or rebates, there are a few additional incentives offered by specific counties and utility companies in Kentucky. Below are a few that we found, but we recommend checking in with your local municipality or utility or looking on the DSIRE database for additional programs you may qualify for.

County / Utility Company Incentive Program
Blue Grass Energy Rebates up to $750 for heat pump retrofits or air sealing and ceiling installations.10
Cumberland Valley Electric Rebates ranging from $50 to $1,370 for select energy-efficient home upgrades.11
Duke Energy Rebates range from $100 to $450 for select energy-efficient upgrades via Progress Energy Carolinas. Doesn’t include solar panels but does include equipment for water heating, HVAC and more.12
Jackson Energy Cooperative  Rebates up to $2,000 for weatherization upgrades.13
LG&E Kentucky Utilities Rebates ranging from $50 to $750 to upgrade to energy-efficient home appliances and heating and air conditioning equipment.14
Taylor County RECC  Varying rebates for a variety of residential energy-efficiency measures, including air-to-air heat pumps and new construction incentives.15

Solar Financing Kentucky

Although solar financing doesn’t necessarily lower the cost of going solar, Kentucky does offer some pretty good financing options for homeowners who can’t take out a traditional loan or pay for a system in cash.

  • Kentucky PACE: Property Assessed Clean Energy (PACE) financing allows property owners to finance the cost of their solar installation and pay back the money via a voluntary property tax assessment.16
  • City of Louisville Go Green Loan Program: Small businesses and agribusinesses can take advantage of a below-market-rate incentive program aimed at increasing energy efficiency and creating green jobs. Small businesses can get a loan up to $50,000 and agribusiness’ up to $100,000.17

Federal Solar Tax Credit

Regardless of which state you live in, all homeowners in the U.S. are eligible for the federal solar investment tax credit, or ITC, for installing solar panels as well as solar batteries and other energy storage systems. You can claim the ITC on your federal tax filing, and it deducts 26% of the total cost of the system from the taxes you owe.

With the average cost of a solar system in Kentucky at about $25,740, the federal tax credit can lead to a savings of about $6,692.

The ITC was first developed through the Energy Policy Act of 2005, under the Bush administration. Initially, it was set to last just two years, but due to its success, it has continually been extended for solar panel installations. It’s important to note that, unless Congress extends the credit, it is set to phase out for residential systems by the end of 2023.

To be eligible for the solar tax credit, homeowners must meet the following criteria:

  • You have installed a residential solar energy system at any point from 2006 through the end of 2022.
  • You have placed the solar energy system in a residential location. It does not have to be your primary residence.
  • You own the solar energy system, either having paid for it in cash or by taking out a solar loan. Homeowners who lease solar panels are not eligible to claim the ITC.

Related Topics

FAQ: Kentucky Solar Incentives

Here at EcoWatch, we field many questions from Kentucky homeowners who are interested in going solar. Here are some of the more common queries we see:

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Karsten Neumeister

Solar Expert

Karsten Neumeister is a solar energy specialist with a background in writing and the humanities. Before joining EcoWatch, Karsten worked in the renewable energy sector of New Orleans, focusing on solar energy policy and technology. A lover of music and the outdoors, Karsten might be found rock climbing, canoeing or writing songs when away from the workplace.