Kentucky solar rebates and incentives: 2024 guide

Want to go green in the Bluegrass State? All-electric homes make good sense in Kentucky, due to the relatively high costs of most heating fuels. Power that with solar, and you can end up saving big time. Solar often carries an especially big environmental benefit in Kentucky, too, since many of the state’s utilities still generate the bulk of their electricity from coal-fired power plants.

The best solar incentive in Kentucky is actually a federal tax credit. 

Residential Clean Energy Credit

The Residential Clean Energy Credit, formerly known as the federal investment tax credit (ITC), can reduce your solar panel system's cost by 30%. Your entire system, including all the equipment, labor, permitting, and sales tax, qualifies for the ITC.

When you file your taxes, you can claim this incentive as a credit towards your federal tax bill. Just keep in mind that to qualify for the ITC, you need to purchase your system either with cash or a solar loan–if you lease your system, you won't be eligible. 

You also need a high enough tax bill, though you can roll over any remaining credit year-to-year until the end of 2034 when the ITC expires. The only time you might be eligible for a direct payment for the ITC is if you're a tax-exempt entity, like a nonprofit organization.

Some electric utilities in Kentucky are required by state law to offer net metering for residential solar, while others are not. 

Net metering is a practice where you earn credits for any solar power that you can’t use at home, and send to the grid instead. Then, whenever your home uses more power than your solar panels can crank out, you’ll draw against those banked credits. 

Under Kentucky’s net metering programs, any leftover energy credits at the end of a monthly billing cycle get converted into a cash credit on your account. It’s really the ultimate incentive for going solar, and what helps you squeeze the most value out of your panels.

Even among the Kentucky utilities that provide net metering, the details vary from company to company.

LG&E and KU Energy both have full retail net metering. Every extra kWh at the end of a monthly billing cycle converts to a cash credit, at the same price that the companies would charge you for that electricity—you’re getting 100% of the value of those credits, which is as good as it gets. The credit rolls forward on your account indefinitely.

Duke Energy also currently offers full retail net metering, though they’re appealing to the utility commission and courts to have that rate reduced. The earliest the change would happen is June 2024. 

Kentucky Power did successfully get their net metering credit for new customers reduced to about $0.09 cents per kWh, a few cents below the full retail rate. It’s not a consumer-friendly move, but the good news is that they were blocked from offering an even-lower rate.

Kentucky’s 19 state-regulated rural utilities are also required to offer net metering. The details might vary from provider to provider, but as of early 2024 it appears that most of those providers do offer full cash credits for each excess kWh.

Municipal electric utilities (including those for Paducah, Bowling Green, and 28 others) do not appear to be required by law to offer net metering, though many of them do.

Finally, electric utilities in the western part of Kentucky that are managed by Tennessee Valley Authority are not required to offer net metering, though they might offer it anyway. TVA-administered companies include: Gibson, Pennyrile, Tri-County, Warren, West Kentucky.

Kentucky doesn't offer any state-specific battery incentives. However, all batteries above 3 kWh in size are eligible for the same 30% federal tax credit as solar panels are. 

In parts of Kentucky served by utility companies without full net metering with 100% bill credits, a solar battery can make some financial sense by helping you squeeze the maximum value out of the solar energy you produce—without letting it go to waste, or off to the grid for a discounted price. You could also use a battery as a backup power source for your home.