Kentucky Solar Incentive Programs
13 yr
Avg. payback
$850/yr
Avg. annual savings
None
State tax credit
below retail
Net metering rate
Net Metering by Utility
Kentucky's PSC sets individual compensation rates for each investor-owned utility. Your export credit depends entirely on who supplies your electricity. (Rates per Tier 1 PSC orders through 2026.)
Louisville Gas & Electric (LG&E)
Louisville metro and surrounding Jefferson County
Export credit rate$0.07089/kWh
Avg. retail rate~11.43¢/kWh
Export as % of retail~62%
System size cap45 kW
Credit rolloverMonthly (no cash refund)
Kentucky Utilities (KU)
Central and eastern Kentucky (Lexington, Frankfort, Elizabethtown)
Export credit rate$0.07534/kWh
Avg. retail rate~11.07¢/kWh
Export as % of retail~68%
System size cap45 kW
Credit rolloverMonthly (no cash refund)
Duke Energy Kentucky
Northern Kentucky (Covington, Newport, Florence)
Export credit rate$0.062924/kWh
Rate typeAvoided cost (ACEGC)
Effective dateJanuary 1, 2025
Update scheduleBiennial (next 2028)
System size cap45 kW
TVA-Served Cooperatives
Parts of eastern/southeastern KY (Big Sandy, Cumberland Valley, etc.)
Net metering required?Not by KY law
Export treatmentTVA avoided cost or coop policy
Action itemCall your co-op before signing
Rates varyCo-op by co-op
Important: How Kentucky Net Metering Credits Work
Kentucky's net metering credits are on your monthly bill, not a cash payment. If your system produces more than you consume in a month, the excess is credited at the rates above (7¢ to 7.5¢ for LG&E/KU; 6.3¢ for Duke KY). If you close your account, unused credits are forfeited, no cash refund. Systems installed before the PSC's initial net metering order receive 25-year grandfathered protection on tariff terms.
Why Export Value Determines Your System Size
The gap between what you earn exporting and what you'd pay at retail is the key variable in Kentucky solar economics.
Scenario A: Right-sized system for LG&E customer (8 kW, Louisville)
| Category | Monthly | Annual |
|---|---|---|
| Production | 900 kWh | 10,800 kWh |
| Self-consumed (85%) | 765 kWh × 11.43¢ = $87.44 | $1,049 |
| Exported (15%) | 135 kWh × 7.089¢ = $9.57 | $115 |
| Total annual savings | … | $1,164/yr |
| System cost (8 kW, no ITC) | … | ~$22,400 |
| Simple payback | … | ~19 years |
Scenario B: Oversized system (12 kW, same household, too much export)
| Category | Monthly | Annual |
|---|---|---|
| Production | 1,350 kWh | 16,200 kWh |
| Self-consumed (65%) | 878 kWh × 11.43¢ = $100.40 | $1,205 |
| Exported (35%) | 472 kWh × 7.089¢ = $33.46 | $401 |
| Total annual savings | … | $1,606/yr |
| System cost (12 kW, no ITC) | … | ~$33,600 |
| Simple payback | … | ~21 years (+2 years) |
The Takeaway: Don't Over-buy Solar in Kentucky
Adding 50% more panels (12 kW vs. 8 kW) costs 50% more money but only extends payback by 2 years because the incremental power is exported at 62¢ on the dollar. Size your system to cover 85 to 90% of annual consumption. In the absence of the federal ITC to sweeten the math, every dollar counts.
All Kentucky Solar Incentives
The honest scoreboard for 2026.
| Incentive | Status | Detail |
|---|---|---|
| Federal Tax Credit (ITC 25D) | EXPIRED | Section 25D expired December 31, 2025. Systems installed January 1, 2026 or later do not qualify. |
| Kentucky State Income Tax Credit | NONE | Kentucky has never offered a state income tax credit for residential solar. None pending as of 2026. |
| Property Tax Exemption | NONE | Kentucky does not exempt residential solar from property tax assessment. Added system value may increase assessed home value and property tax bill. Confirm with your county PVA (Property Valuation Administrator). |
| Sales Tax Exemption | NONE (RESIDENTIAL) | Kentucky's 6% sales tax applies to residential solar equipment purchases. (Commercial solar operations classified as manufacturing may qualify under separate provisions, does not apply to homeowners.) |
| Net Metering (LG&E/KU) | ACTIVE | Mandatory for investor-owned utilities. LG&E: 7.089¢/kWh export credit; KU: 7.534¢/kWh export credit. Cap: 45 kW per system; aggregate 1% of utility peak. Source: PSC Order 202300404 (Aug 30, 2024) |
| Net Metering (Duke Energy KY) | ACTIVE, LOWER RATE | Duke Energy Kentucky's export credit is being reset under PSC Case 2025-00258 (June 1, 2026 order). The prior residential rate was $0.062924/kWh; check Duke's current Rider NM II for the new rate. Source: Rider NM II tariff PDF & PSC Order 202500258 (Jun 1, 2026) |
| TVA Territory Net Metering | VARIES | Cooperatives served by TVA power are not subject to KY mandatory net metering. Programs vary by cooperative. Contact your specific co-op before going solar. |
| Utility Rebates | NONE (STANDARD) | LG&E, KU, and Duke Energy Kentucky do not currently offer standard residential solar rebates. Check individual utility websites for any pilot programs. |
| USDA REAP Grants | RURAL/FARM ONLY | USDA Rural Energy for America Program (REAP) may cover up to 50% of project costs for agricultural producers and rural small businesses. Not for typical homeowners. |
Estimated Payback by Utility Territory
Based on 2026 incentive stack (no federal ITC), average system cost $2.80/W before incentives, typical production for Kentucky latitude, right-sized to 85 to 90% self-consumption. These are estimates, actual results depend on your consumption profile, system design, and local installer pricing.
LG&E (Louisville)
18 to 22
years payback
7.089¢ export · 11.43¢ retail
Right-sized system
Right-sized system
KU (Lexington/Central)
17 to 21
years payback
7.534¢ export · 11.07¢ retail
Best net metering in KY
Best net metering in KY
Duke Energy KY (NKY)
20 to 25
years payback
6.29¢ export · ~12¢ retail
Lowest export credit in state
Lowest export credit in state
TVA Co-ops (East KY)
Call first
, verify co-op policy
Net metering not required;
terms vary significantly
terms vary significantly
Pre-Order Systems: 25-Year Grandfather Protection
Kentucky's PSC included an important protection in its net metering order.
Existing Systems Are Protected Through Their 25-Year Lock-In
If you installed solar before Kentucky's initial net metering PSC order, your tariff terms are locked in for 25 years from the date you began service. Rate changes that apply to new customers do not affect grandfathered systems at the same premises. This protection applies to the original installation, adding panels to expand the system may restart the clock.
Kentucky Solar Q&A
Is Kentucky net metering "full retail" or avoided cost?
It's neither pure retail nor pure avoided cost, it's a hybrid. If you produce less than you consume in a month, you only pay for the net difference at retail. That's effectively a retail offset for consumed power. But monthly surplus (exported kWh) is credited at the utility-specific rates: 7.089¢ (LG&E), 7.534¢ (KU), or Duke KY's avoided-cost rate (being reset in 2026). These are well below retail but above Louisiana-style avoided cost. The key is to minimize monthly surplus by right-sizing your system.
Will solar increase my Kentucky property taxes?
Possibly. Kentucky does not have a residential property tax exemption for solar. If your county PVA (Property Valuation Administrator) increases your assessed home value to reflect the solar installation, your property tax bill could rise. In practice, assessment treatment varies by county. Ask your local PVA before installation, some counties may not add solar value, while others may.
Are there any Kentucky state programs coming?
As of mid-2026, no state-level residential solar incentive legislation has passed in Kentucky. House Bill 785 (2026 session) addressed related energy topics but did not create residential solar credits. Kentucky remains one of the fewer states with mandatory net metering but no state incentive stack. Watch the Kentucky Legislature website for future sessions.
Should I add a battery to my Kentucky solar system?
A battery makes more sense in Kentucky than in states with full retail net metering, precisely because the export credit is well below retail. Instead of exporting at 7¢ and buying back at 11¢, a battery lets you store that power and consume it yourself at full retail savings. Battery economics hinge on your utility's time-of-use rates (if available) and the cost of the battery itself. Ask installers for a battery-included vs. battery-excluded payback comparison for your specific load profile.
What about the USDA REAP grant for farm solar?
The USDA Rural Energy for America Program (REAP) can cover up to 50% of a solar project's eligible costs for agricultural producers and rural small businesses. This is a legitimate and significant incentive for farms, it changes the math dramatically. Homeowners without farm income or rural small business status do not qualify. Contact your local USDA Rural Development office in Kentucky for current funding availability and application guidance.
Sources & Methodology
All net metering compensation rates are Tier 1 sourced from Kentucky Public Service Commission orders and filed tariffs: PSC Order 202300404 (August 30, 2024, LG&E/KU NMS-2 rates); PSC Order 202500258 (June 1, 2026, Duke Kentucky Rider NM II methodology update); Duke Energy Kentucky Rider NM II tariff PDF (January 1, 2025 to $0.062924/kWh ACEGC for residential). Retail rate estimates from Wattbuy utility data (Tier 2, consistent with EIA reported ranges). Tax treatment from Kentucky DOR Technical Advice Memorandum KY-TAM-21-01 and multiple corroborating Tier 2 sources. Page last verified October 2026. This page is informational, not financial or tax advice.
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