Solar in Kentucky

Kentucky's residential solar policy was reshaped by Senate Bill 100 (2021), which directed the Public Service Commission to move away from full retail net metering. The resulting structure credits exports at the utility's avoided cost — a net-billing framework rather than retail-rate net metering. LG&E and KU Energy, Duke Energy Kentucky, Kentucky Power, and Big Rivers Electric each set their own avoided-cost export rate within the framework, and existing customers are generally grandfathered at the terms of their interconnection.

Kentucky offers no state income tax credit, no SREC market, and no statutory property or sales tax exemption for solar equipment — making it one of the thinnest-incentive states in the country. The federal Section 25D residential credit expired December 31, 2025; leased and PPA systems may still access Section 48E for projects that began construction before July 6, 2026.

The policy direction has tracked the regional shift toward reduced export compensation, and the absence of offsetting state incentives leaves the case resting entirely on cheap hardware, the retail-rate offset of self-consumed production, and the avoided-cost credit for any surplus. Homeowners should model the system against their specific utility's avoided-cost rate and size for self-consumption.

Kentucky's 4.7 peak sun hours are solid for a state at this latitude, with the western Purchase region and the south-central Bowling Green area running marginally above the state average and the Appalachian east somewhat lower. Hot, humid summers drive heavy air-conditioning load that aligns well with peak solar output, and winters are mild enough (in day-length terms) to keep shoulder-season production meaningful.

Because the net-billing tariff compensates exports at avoided cost, the design philosophy favors self-consumption. A system matched to daytime household load — particularly afternoon air-conditioning — captures the full ~$0.14/kWh retail value of every panel, while an oversized array exporting a large midday surplus earns back only a few cents. West- and southwest-facing arrays that extend production into the late-afternoon cooling peak can outperform pure south-facing designs on dollars.

Mature deciduous tree canopy in established Louisville and Lexington suburbs is a real shading factor, particularly in summer, and can push some homeowners toward higher-efficiency panels or modest ground mounts where lot size permits. The installer's familiarity with the specific utility's avoided-cost rate is the detail that most affects a correct sizing decision.

Kentucky's $2.70/W installed cost is below the national average, with a typical 8 kW system around $21,600 before incentives. The 30% federal residential credit (Section 25D) ended December 31, 2025, and Kentucky offers no state tax credit, no property or sales tax exemption, and no SREC market — leaving no structural offset for an owned 2026 system beyond the federal 48E route (leased/PPA, construction before July 6, 2026).

Payback near 14.6 years on the 8 kW model is carried almost entirely by the combination of low cost and the ~$0.14/kWh retail rate. The self-consumed portion of production earns the full retail rate, which is what makes the case; the exported surplus earns only the avoided-cost credit, which is why oversized systems pay back more slowly. Households with high daytime consumption — particularly summer air-conditioning — see faster payback than the state average.

Batteries are not subsidized in Kentucky, so storage is justified on storm-resilience grounds (the state's severe spring weather and occasional ice storms) rather than tariff arbitrage. The thin incentive stack makes accurate sizing and consumption alignment especially consequential here.