After hundreds of hours of research into the best solar companies, we’ve found the Bluegrass State offers several incentives to help residents save money. Although Kentucky has fewer sunshine hours than some states, it ranks 21st on the SEIA’s leaderboard for solar installations. That said, Kentuckians should take advantage of the state’s tax incentives, financing and loans, and other helpful perks. Read on to learn about Kentucky’s top solar incentives that could help you save money
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What Are the Solar Tax Credits and Rebates in Kentucky?
Kentucky offers a few solar incentives for commercial and residential properties. Explore the financial incentives listed below to learn how to save money by switching to renewable energy.
Kentucky Property-Assessed Clean Energy (PACE) Financing
Kentucky business owners can use Property Assessment Clean Energy (PACE) Financing. This option, also known as EPAD (Energy Project Assessment District), lets eligible commercial property owners finance up to 100% of their facilities’ clean energy and water-saving improvements with no out-of-pocket expenses, such as a down payment.
PACE financing is only available in certain jurisdictions within Kentucky. Energize Kentucky, a Greater Cincinnati Energy Alliance program, administers Kentucky’s PACE programs.
USDA REAP Grants & Guaranteed Loans
The USDA’s Rural Energy for America Program (REAP) provides grants and guaranteed loans to agricultural producers and small rural businesses for investments in renewable energy systems and energy efficiency measures. Some grants cover up to 25% of project costs and range from $1,500–$500,000.
The Kentucky Agricultural Development Fund On-Farm Energy Efficiency Incentives Program acts as a state-level program under REAP. It incentivizes Kentucky farm owners to increase the energy efficiency of existing equipment or facilities, which makes solar panels eligible. Applicants may receive up to 50% reimbursement for a qualified energy-saving item with a maximum of $10,000.
What Is the Federal Solar Tax Credit?
Kentucky homeowners who purchase their solar systems, either upfront or through a solar loan, can take advantage of the federal solar investment tax credit (ITC). This credit lets you deduct 30% of your total solar installation cost on your federal taxes, making solar more affordable. However, you won’t qualify for this credit if you lease your solar panels or use a power purchase agreement (PPA) because those payment methods don’t make you the system’s owner.
Is Net Metering Available in Kentucky?
Net metering programs don’t lower solar panel costs but provide long-term electricity bill savings. It’s a billing mechanism your utility company uses to credit you for excess electricity your solar panels send to the power grid. You can apply these credits to future energy costs.
Net metering is mandated by the state of Kentucky for all investor-owned utilities (IOUs) and electric cooperatives, except for the Tennessee Valley Authority (TVA). Customers of all other utility companies can earn energy credits for the full retail rate, such as LG&E’s program.
How Much Do Solar Panels Cost in Kentucky?
The average cost of going solar is around $$16,700.* While the sticker price can seem overwhelming, consider that solar systems are essentially long-term investments that reduce your reliance on traditional energy sources and significantly cut your utility bills. To help you afford the up-front cost, you can use federal and state incentives and solar financing options, which could potentially save you tens of thousands of dollars over time. This section outlines the different ways you can pay for solar.
- Cash purchase: This option requires paying for the solar energy system up front. You will benefit from maximum long-term savings since you won’t be paying interest on a loan, and you’ll be able to take advantage of solar incentives and tax credits. However, not everyone has the money to buy a system outright.
- Solar loan: With a solar loan, you borrow money to purchase a system, paying it back over time with interest. This results in lower up-front costs, and you still own the system, which means you can take advantage of solar incentives and tax credits. However, you’ll end up paying more than you would for a cash purchase.
- Solar lease: This allows you to lease solar panels from a provider for a fixed monthly fee. The advantage here is low or zero up-front cost, and your monthly payments tend to be less than your previous electricity bills, so you still save money. However, you don’t own the panels, meaning you won’t qualify for solar incentives and tax credits.
- Power purchase agreement (PPA): With a PPA, a solar company installs a system on your property at no cost to you, and you pay a fixed rate for the energy the system produces. Like solar leases, PPAs offer low up-front costs but don’t let you take advantage of solar incentives.
*Based on our 2025 survey of 1,000 home solar customers.
The Process of Going Solar in Kentucky
Before diving into Kentucky’s solar incentives and financing options, it’s important to understand the solar installation process. Here’s what you can expect when making the switch to solar energy in the Bluegrass State:
- Consultation: Start by reaching out to a few reputable solar companies to evaluate your home’s solar potential. Companies will use satellite imaging and solar calculators to assess factors such as roof angle, shading, and energy consumption. After the initial assessment, an expert may visit your property for an in-person inspection to finalize system size and requirements. This step typically takes a few days.
- System design: Once your property is assessed, your installer will customize a solar system tailored to your home’s roof space, energy needs, and budget. Expect to receive multiple design options, including recommendations for inverters and battery storage. The design phase usually takes about one to two weeks, during which you’ll work with your installer to refine the final plan.
- Permitting and approvals: Before installation can begin, your installer will file necessary permits in accordance with Kentucky’s zoning laws, HOA restrictions, and utility company requirements. The approval timeline varies by location and utility provider but typically takes one to two months.
- Solar panel installation: Once permits are approved, your solar panels, inverters, and batteries (if applicable) will be installed. Most residential installations are completed in one to two days, though larger or more complex systems may take longer.
- Final Inspection and System Activation: After installation, your system must pass inspection by the local jurisdiction and your utility provider before it can be activated. Once approved, your installer will guide you through monitoring your system’s energy production—whether through an app or a manual inverter check. If your system includes a solar battery, your installer will explain how it uses off-grid solar energy in the event of a power outage. Additionally, if you’re enrolled in net metering, they will go over how energy credits will appear on your electric bill.
Is Going Solar in Kentucky Worth It?
Kentucky receives ample sunlight to make solar power feasible, but that doesn’t mean solar panels are worth it for all Kentucky homeowners. Going solar in Kentucky is worth it if you have enough capital to buy your system up-front or finance it using a solar loan, and your utility company offers net metering.
However, Kentucky has below-average electricity prices, so the long-term savings from reduced utility bills may not be as substantial as in some other states. This factor can make the payback period for a solar system in Kentucky exceed the average of 10 years in some cases. Therefore, going solar purely for financial savings may not make sense for most homeowners in Kentucky. Those interested in energy independence or environmental benefits may still find solar worthwhile.
Our Conclusion
Kentucky doesn’t offer many solar incentives for homeowners, but you can profit from the state’s solar tax incentives if you’re a business owner. Solar panels are worth the investment if you can afford an up-front purchase or solar loan. This is especially true for homeowners who want to generate clean energy or obtain energy independence.
Our guide details Kentucky’s main solar incentives, but smaller city- or municipality-specific incentives may be available. Check out the Database of State Incentives for Renewables and Efficiency (DSIRE) for more information on local incentives. You should also read our guide on the best solar companies in Kentucky to find a solar installer that matches your clean energy goals.
FAQ About Solar Tax Incentives in Kentucky
Does Kentucky offer a solar tax credit?
No, Kentucky doesn’t offer a state-level solar rebate or tax credit.
How many years do you have to pay off solar?
The average payback period for solar panels is six to 10 years, but some factors, such as local electricity rates, access to solar incentives, and your payment method, influence the length of your payback period. Kentucky features a longer payback period due to its lack of state tax incentives and lower-than-average electricity rates.
Are solar panels exempt from sales tax in Kentucky?
No, Kentucky currently doesn’t have a sales tax exemption for solar panels.
Our Rating Methodology
We are committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
