Does solar still pay off in Kentucky in 2026?

Kentucky changed residential solar economics meaningfully with SB 100 (2019, effective January 1, 2020) — and most KY-focused solar coverage gets the result backward. NEW 2026 customers on LG&E and KU are NOT on full retail net metering, despite what Palmetto, EnergySage, and greenenergycalc still claim. SB 100 split KY net metering into two regimes by date: NMS-1 (enrollment on or before Sept 24, 2021) is grandfathered to approximately full-retail kWh-for-kWh compensation for 25 years; NMS-2 (all new connections from Sept 24, 2021 onward) is a dollar bill credit at the PSC-approved export rate, NOT full retail. The PSC export rates: LG&E about $0.069/kWh, KU about $0.074, Kentucky Power about $0.09, Duke Energy KY about $0.04 (switched to NM II avoided cost in January 2025 under PSC November 2024 order). Self-consumption offsets full retail (about $0.106/kWh — among the LOWEST US rates, about 20% below the national 13.2¢). Residential cap raised from 30 kW to 45 kW. NO state income tax credit for residential (KEDFA's 'Incentives for Energy Independence' is commercial / industrial only). NO SREC market, no RPS. Federal §25D = $0 for 2026 purchases (OBBBA repeal). Sales tax (6%) NOT EXEMPT for residential solar — Kentucky Energy and Environment Cabinet states directly that KY does not offer a residential sales exemption (about $1,500-1,700 added cost). Property tax DISPUTED — Cabinet says no exemption; some sources claim personal property is exempt from ad valorem; verify with your county PVA. KY property rate is low (about 0.7%) so effect is modest either way. Cheap install pricing (about $2.61/W EnergySage April 2026, among lowest US). Duke Energy KY PowerPair pilot offers up to $9,000 solar + storage incentive — Duke KY territory only, Trade Ally installer required. Typical solar-only payback 13-22 years on LG&E / KU depending on system size and self-consumption percentage (greenenergycalc cites 14.5 on an 8 kW full-retail figure — that uses the outdated NMS-1 grandfather case; new 2026 NMS-2 customers may see 20+ years on smaller systems with high export). 19 rural electric cooperatives are still required to offer net metering (most currently pay full retail cash, but verify); 30 municipal utilities are NOT required to offer net metering and terms vary widely.

Published 2026-06-21VERIFIED 2026-06 · See inline citations

Kentucky solar in 2026 turns on one mechanical fact that most KY solar coverage gets wrong: NEW LG&E and KU customers are NOT on full retail net metering, despite what Palmetto, EnergySage, and greenenergycalc still claim. SB 100 (2019, effective January 1, 2020) split KY net metering by date, and all new 2026 connections are on the NMS-2 regime — a dollar bill credit at the PSC-approved export rate, NOT at full retail.

The headline:

NMS-1 (enrollment on or before September 24, 2021): grandfathered to approximately full-retail kWh-for-kWh compensation for 25 years. NOT what new 2026 buyers get.
NMS-2 (all new connections from September 24, 2021 onward — including everyone in 2026): dollar bill credit at PSC-approved export rate. NOT full retail.
Export rates by utility (NMS-2): LG&E about $0.069/kWh (PSC 6.924¢), KU about $0.074 (PSC 7.366¢), Kentucky Power about $0.09, Duke Energy KY about $0.04 (switched to NM II avoided cost January 2025 under PSC November 2024 order).
Self-consumption offsets full retail (about $0.106/kWh — among the LOWEST US rates, about 20% below the national 13.2¢).
Federal §25D = $0 for 2026 purchases (OBBBA repeal).
NO state income tax credit for residential — KEDFA's "Incentives for Energy Independence" is commercial / industrial only.
NO SREC market, no RPS.
Sales tax (6%) NOT EXEMPT for residential — Kentucky Energy and Environment Cabinet states directly that KY does not offer a residential exemption (about $1,500-1,700 added cost).
Property tax DISPUTED — Cabinet says no exemption; some sources claim personal property is exempt; KY property rate is low (about 0.7%) so effect is modest either way.
Duke Energy KY PowerPair pilot: up to $9,000 solar + storage incentive, Duke KY territory only, Trade Ally installer required.
Cheap install pricing (about $2.61/W per EnergySage April 2026) is KY's one structural plus.
Typical solar-only payback 13-22 years on LG&E / KU depending on system size and self-consumption percentage.

Most KY solar coverage cites about 14.5-year payback for LG&E / KU on an 8 kW system — that figure uses the outdated NMS-1 full-retail grandfather case. New 2026 NMS-2 customers exporting heavily may see 20+ years. This calculator models the correct NMS-2 case at the PSC-approved export rate.

What changed federally — and what's still on Kentucky quotes that shouldn't be

The federal Residential Clean Energy Credit (§25D) — the 30% homeowner credit — was repealed for systems installed after December 31, 2025. For 2026 Kentucky buyers, the federal credit on a purchased system is $0. The same applies to home batteries purchased outright. The §48E commercial credit (30%) still exists, but only for leased or third-party-owned systems where construction begins before July 4, 2026 — and the lessor claims it, not you. Full federal context here.

The repeal came through the One Big Beautiful Bill Act (P.L. 119-21), signed in July 2025. Some KY-focused solar marketing sites (solarsme, ecowatch) still cite the 30% credit as live or reference "IRA through 2033" — outdated. If a 2026 Kentucky quote includes "30% federal solar tax credit" on a purchase, ask the contractor to redo the math with $0 federal and verify with IRS.

VERIFIED 2026-06 · IRS §25D repeal under OBBBA P.L. 119-21

SB 100 and the date split — the "full retail" myth

This is the single most important Kentucky solar fact in 2026, and the part most coverage gets backward.

Senate Bill 100 (SB 100), passed in 2019 and effective January 1, 2020, made two changes to KY net metering:

Raised the residential system size cap from 30 kW to 45 kW.
Changed compensation from kWh-for-kWh retail credit to a dollar bill credit at the PSC-approved export rate — implemented as the NMS-2 regime starting September 24, 2021.

The result was a date split that most coverage doesn't explain:

NMS-1 enrollments on or before September 24, 2021: grandfathered to approximately full-retail kWh-for-kWh net metering for 25 years from interconnection.
NMS-2 enrollments from September 24, 2021 onward — which includes ALL new 2026 customers — get a dollar bill credit at the PSC-approved export rate. NOT full retail.

Why this matters: Palmetto, EnergySage, greenenergycalc, and several other KY-focused solar marketing sites still describe LG&E and KU as "full retail net metering." That description is OUTDATED. It describes the NMS-1 grandfather case (pre-September 24, 2021 enrollments), NOT what a new 2026 buyer gets.

The payback figures these sources cite (around 13-14 years on an 8 kW system) rely on the full-retail NMS-1 math. Under the correct NMS-2 math at about $0.07/kWh export, real 2026 payback can be substantially longer — 20+ years on smaller systems where export percentage is higher.

This calculator models the new 2026 NMS-2 case correctly. Self-consumption is the make-or-break lever in KY exactly because of this — every kWh you self-consume offsets about $0.106, while every kWh you export earns about $0.07 (on LG&E), $0.074 (on KU), or about $0.04 (on Duke Energy KY).

VERIFIED 2026-06 · SB 100 (2019, effective Jan 1 2020); KY PSC orders; LG&E / KU NMS-2 tariff; Duke Energy KY NM II tariff (PSC Nov 2024 order)

Export rates by utility (NMS-2)

The four major KY investor-owned utilities operate under SB 100 but at different PSC-approved export rates:

LG&E (Louisville Gas & Electric, PPL subsidiary, default modeled): about $0.069/kWh (PSC 6.924¢). Dominant residential share in the Louisville metro.
KU (Kentucky Utilities, PPL subsidiary, central and eastern KY including Lexington area): about $0.074/kWh (PSC 7.366¢). Slightly higher than LG&E.
Kentucky Power (eastern KY): about $0.09/kWh. Higher than LG&E / KU, but smaller residential share.
Duke Energy Kentucky (northern KY — Covington area): about $0.04/kWh. Duke switched to NM II AVOIDED COST in January 2025 under the KY PSC November 2024 order. Materially worse export economics than LG&E or KU, but Duke KY is the only utility with a meaningful battery incentive (PowerPair pilot — see below).

The utility serving you decides your export economics. Verify your specific utility before sizing.

Co-ops and municipals — different rules

Kentucky has 19 rural electric cooperatives and 30 municipal utilities in addition to the four IOUs.

Co-ops are required to offer net metering. Most still pay approximately full retail in cash for excess generation (more favorable than NMS-2), but terms vary. Verify your specific co-op's tariff in writing before signing.
Municipal utilities (Paducah, Bowling Green, and 28 others) are NOT required to offer net metering. Some do; some don't. Terms vary widely. Verify your specific municipal utility before assuming any net metering benefit.

If you're not on LG&E, KU, Kentucky Power, or Duke Energy KY, the rules above don't necessarily apply to you. Your co-op or municipal utility sets the terms.

State income tax credit — does NOT exist for residential

Kentucky has NO state solar income tax credit for residential. KEDFA's "Incentives for Energy Independence" (Subtitle A income credit + sales / use tax exemption) applies ONLY to qualifying commercial / industrial / utility-scale projects, NOT residential rooftop. There is no separate KY residential solar income tax credit.

If a contractor includes a "KY state tax credit" line in your quote, ask for the statute citation; for residential, there isn't one.

Sales tax — NOT EXEMPT (Cabinet confirms)

Kentucky does not exempt residential solar from sales tax. KY state sales tax is 6%.

The Kentucky Energy and Environment Cabinet (the state government source) states directly that KY does NOT offer a sales tax exemption for residential solar. Some third-party sites (NAZ and others) claim an exemption exists; the Cabinet's official position contradicts those claims.

On a typical residential install this is about $1,500-1,700 of REAL added cost the installer must include. Your quote SHOULD include sales tax. If your installer claims an exemption, ask for the statute citation — KEDFA's commercial / industrial exemption does NOT cover residential rooftop.

Property tax — DISPUTED (Cabinet says no, some sources say yes)

Same pattern as sales tax: the Kentucky Energy and Environment Cabinet states that KY does NOT offer a property tax exemption for residential solar. Some third-party sites (NAZ, solar-electric, others) claim that solar is exempt as "personal property" from ad valorem tax. The Cabinet's official position contradicts those claims.

Conservative treatment: do NOT assume a property tax exemption. Verify with your county property valuation administrator (PVA) before counting on it.

KY residential property tax rates are low (about 0.7% effective), so the practical financial impact either way is modest — unlike high-property-tax states where exemption matters more.

VERIFIED 2026-06 · Kentucky Energy and Environment Cabinet; KY Department of Revenue; KEDFA

SREC / RPS — does NOT exist in Kentucky

Kentucky has NO Renewable Portfolio Standard and NO SREC market. ecowatch confirms there is no SREC revenue stream available to KY residential solar owners.

Don't budget for SREC income — there isn't any. Any quote that includes "SREC revenue" is fictional.

PACE financing exists in some KY counties (loan repaid via property tax assessment) — this is a financing mechanism, NOT an incentive. It doesn't reduce your install cost; it spreads payment.

Battery — PowerPair pilot is Duke Energy KY only

Most KY utilities have NO battery rebate. LG&E, KU, and Kentucky Power do NOT offer residential battery incentives. Federal storage credit is $0 (§25D repealed for storage purchase).

Duke Energy Kentucky operates the PowerPair pilot — the only meaningful KY battery program in 2026:

Up to $9,000 incentive for combined solar + storage.
Residential, Duke Energy KY territory ONLY (Covington and northern KY — small share of state).
Requires Trade Ally installer enrollment.
The largest KY-specific solar incentive in 2026.

If you're not in Duke Energy KY territory, you have no battery rebate.

Arbitrage gap on LG&E NMS-2: retail $0.106 vs export $0.069 = gap about $0.037/kWh. Modest. Low retail means absolute dollar arbitrage value is small, and $12,000 capex on a typical 10 kWh battery doesn't pay back on arbitrage alone outside of PowerPair territory.

Resilience case is real for Kentucky — severe weather, tornado risk in central KY, summer storm outages — but secondary to the dollar math.

The honest payback — utility-driven, size-sensitive

At default install pricing of about $2.61/W (per EnergySage April 2026 — among the LOWEST US install pricing), typical Kentucky solar-only payback on LG&E or KU runs in the 13-22 year range depending on system size and self-consumption percentage.

greenenergycalc cites 14.5 years on an 8 kW system — that figure uses the outdated NMS-1 full-retail grandfather case. Under the correct NMS-2 math at about $0.07/kWh export, real 2026 payback is longer for the same size.
Smaller systems with high export percentage (i.e. oversized for your load) may see 20+ year payback under NMS-2.
Larger systems sized to self-consume more (right-sized to annual load) approach the 13-15 year range.
25-year savings estimates run about $30,000-38,000 on representative systems.

Where Kentucky fits regionally:

Virginia (full retail 1:1 net metering, retail higher): about 11 years.
Indiana (instantaneous EDG, similar low retail): about 9-13.7 years.
Ohio (energy-only SSO export): about 12-14 years.
Kentucky (NMS-2 PSC export rate, about $0.07; lowest US retail at $0.106): about 13-22 years.

KY runs slower than its neighbors primarily because of two stacking factors: (1) the lowest retail in the region (about $0.106), so each offset kWh is worth less; and (2) NMS-2 export at about $0.07 (NOT full retail like VA), so exported kWh earn meaningfully less than what they offset. The cheap install pricing partially offsets this.

VERIFIED 2026-06 · eia.gov

How to read this — Kentucky's case for solar

KY solar in 2026 is utility-driven and size-sensitive.

Verify your utility's tariff in writing before signing. LG&E ($0.069), KU ($0.074), Kentucky Power ($0.09), Duke Energy KY ($0.04 avoided cost), 19 co-ops (varies, most still full-retail cash), 30 municipals (varies, may not offer NM) are fundamentally different cases.
Reject "full retail net metering" as a description of new LG&E or KU installs. That's the old NMS-1 (pre-September 24, 2021). New 2026 = NMS-2 at PSC rate of about $0.07. Most KY solar coverage gets this wrong.
Reject any quote citing the federal 30% credit on a 2026 purchase. Dead.
Reject any KY residential state tax credit claim. KEDFA is commercial / industrial only.
Right-size to your load. Don't oversize for export — NMS-2 export at $0.07 is worth far less per kWh than the $0.106 you save by self-consuming. Match annual production to consumption.
Load-shift toward daylight. Every kWh shifted from grid-purchased (about $0.106) to self-consumed avoids retail; exported kWh earn only about $0.07 (LG&E) or less.
Don't accept sales tax exemption as automatic. KY Energy and Environment Cabinet says it doesn't exist for residential. Likely 6% applies — about $1,500-1,700 of real cost.
Don't bank on property tax exemption. Cabinet says no; some sources claim yes; verify with your county PVA. KY rate is low (about 0.7%) so the practical effect is small either way.
Don't budget for SREC revenue. KY has no RPS, no SREC market.
Battery on Duke Energy KY (PowerPair) makes economic sense — up to $9,000 incentive for solar + storage. Trade Ally installer required. Duke KY territory only.
Battery on LG&E, KU, or Kentucky Power is a resilience purchase, not ROI — no rebate, modest arbitrage gap, $12k capex doesn't pay back on its own.
If you have a pre-September 24, 2021 system, you're grandfathered to NMS-1 (approximately full retail) for 25 years from interconnection. This guide's NMS-2 math doesn't apply to you yet.

If you're on LG&E or KU, can size to maximize self-consumption, and you can take advantage of the cheap install pricing, Kentucky solar is a weak-to-middle case in 2026 — payback in the 13-15 year range on properly sized systems. If you're considering an oversized system that exports heavily, expect 20+ year payback under NMS-2. If you were counting on the federal credit, on a state credit, on full retail net metering, or on an SREC market — none of those apply to new 2026 buyers.

Run your real Kentucky payback →

The honest picture

Fact	Kentucky (LG&E default)	Source
Federal credit	$0 (purchase)	IRS — §25D repealed under OBBBA P.L. 119-21
State income tax credit	NONE for residential — KEDFA "Incentives for Energy Independence" is commercial / industrial only	KEDFA
Net metering	NET BILLING by PSC export rate — SB 100, NOT full retail for new connections	KY PSC; SB 100 (2019)
Date split	NMS-1 (pre-Sept 24, 2021) grandfathered to full retail 25 yr; NMS-2 (new 2026) at PSC rate	LG&E-KU NMS tariff
LG&E export	About $0.069/kWh (NMS-2, PSC 6.924¢) — NOT full retail	KY PSC; LG&E tariff
KU export	About $0.074/kWh (PSC 7.366¢)	KY PSC; KU tariff
Kentucky Power export	About $0.09/kWh	EnergySage
Duke Energy KY export	NM II avoided cost about $0.04 (since January 2025)	KY PSC November 2024 order
"Full retail" myth	Palmetto / EnergySage / greenenergycalc still cite full retail — that's the OLD NMS-1 grandfather; new 2026 = NMS-2	(debunk)
System cap	45 kW (raised from 30 kW by SB 100)	SB 100 (2019)
Self-consumed	Full retail offset (about $0.106/kWh)	(mechanical)
Retail rate	About $0.106/kWh (about 20% below national 13.2¢; among LOWEST US)	EIA; greenenergycalc
Sales tax	NOT EXEMPT — KY 6% applies (about $1,500-1,700 added cost)	Kentucky Energy and Environment Cabinet
Property tax	DISPUTED — Cabinet says no exemption; KY rate low about 0.7% (modest effect either way)	Kentucky Energy and Environment Cabinet
SREC market	NONE — KY has no RPS	(no market)
Battery rebate	Duke Energy KY PowerPair pilot up to $9,000 (solar + storage) — Duke KY territory ONLY	Duke Energy KY
$/W	About $2.61 (among LOWEST US install pricing)	EnergySage April 2026
Typical payback	About 13-22 years (size and self-consumption dependent)	greenenergycalc; this calculator

Before you commit:

Reject any "full retail net metering" claim for a new LG&E or KU install. That's the old NMS-1 (enrollment on or before September 24, 2021). New 2026 connections are on NMS-2 at about $0.07/kWh, not retail.
Reject any quote that includes a 30% federal credit. Repealed for 2026 purchases.
Reject any "Kentucky state tax credit" claim for residential. KEDFA's program is commercial / industrial only.
Don't assume sales OR property tax exemption. The Kentucky Energy and Environment Cabinet says neither exists for residential solar. Verify with KY DOR and your county PVA before signing.
Size to maximize self-consumption. Exports at about $0.07 are worth far less than the about $0.106 you save by self-consuming — a roughly 1.5x swing.
PowerPair battery (up to $9,000) is Duke Energy KY only. Not LG&E / KU / Kentucky Power. Trade Ally installer required.
Verify your utility's tariff in writing — LG&E / KU / Kentucky Power / Duke Energy KY / co-op / municipal are fundamentally different cases.

Run your real Kentucky payback →

Estimates only — PSC-approved export rates update with each utility filing, Duke Energy KY PowerPair pilot enrollment and terms vary by Trade Ally installer, co-op and municipal utility terms vary widely and are not bound by SB 100 / IOU PSC orders the same way the four IOUs are. Verify with the Kentucky Public Service Commission, your specific utility (LG&E, KU, Kentucky Power, Duke Energy KY, or your co-op / municipal), the Kentucky Energy and Environment Cabinet for sales / property tax confirmation, and the Kentucky Department of Revenue. This is not financial advice.