Electricity rates climb every year. Some US states see their electricity costs rise by as much as 3% per year. For this reason, many are looking for alternative sources of energy production. Therefore, installing solar panel systems for power generation has become a popular option. Keep in mind that the cost of solar panels has decreased by as much as 80% in the last decade.
If you live in Kentucky, you may be considering the installation of a solar array. There are a variety of factors to take into consideration. Our aim is to determine whether solar is worth it in Kentucky. To do this, we will first have to assess a variety of figures.
First, we need to determine how much energy people in Kentucky use on average and how much it costs. Then, we need to figure out how much an average solar panel array costs in the state. We then need to determine how much power those solar panels can produce and how much money can be saved per year. Finally, we will look at the overall payback period for solar in Kentucky.
Kentucky Residential Energy Use and Expenditures
Let’s first determine how much electricity an average household in Kentucky uses. The average electricity use there is roughly 1,154 kilowatt-hours per month. This is the 8th highest energy consumption rate of all states; the national average is somewhere around 890-kilowatt hours per month.
Knowing how much electricity you use is half of the equation, but you also need to know how much it costs. For example, a household in Kentucky pays an average of 11.07 cents per kilowatt-hour of electricity.
Keep in mind that the energy costs in Kentucky are significantly lower compared to the national average of around 13.45 cents. This means that Kentucky pays roughly 17.67% less for its electricity than the national average.
On average, if we do the math, this equates to a monthly energy bill of $122.32 or a yearly energy bill of $1,467.84.
Kentuckians pay less per kilowatt-hour than the national average but also use more. Therefore, energy costs in Kentucky end up being quite significant. Since yearly energy bills are so high, solar is an attractive alternative in the state.
Federal and State Level Solar Tax Incentives
Next, you need to know how much solar panels will cost. However, before we talk about the average installation and purchase costs, there are some financial incentives. First and foremost, there is the ITC, or investment tax credit.
This is a federal incentive, also known as the federal solar tax credit, currently set at 26%. In other words, you get a 74% reduction in cost from the onset.
Next, Kentucky also provides an additional $500 rebate to all solar array purchasers. Also, those who get their power from TVA (Tennessee Valley Authority) get an additional $1,000 off your purchase.
Therefore, as it stands, any solar purchase can benefit from a 26% + $1,500 deduction right from the onset. This makes the purchase significantly more affordable, and therefore solar more attractive in Kentucky.
Although somewhat irrelevant to the main point of our topic, Kentucky also has a tremendous feed-in tariff program; TVA subscribers can get up to $0.02 or two cents back for each kilowatt-hour produced in excess. So, if you don’t use all the electricity produced by the solar system, you can turn a profit.
The Average Cost of Solar Panels in Kentucky
Bulk pricing usually applies to solar arrays. In other words, the bigger the system, the less it costs per watt. Therefore, it makes sense to install a more extensive system. This is especially the case in Kentucky, where residential energy use is high.
The average cost of a solar panel in Kentucky per watt is $2.34. Once again, the price depends on the size of the system. Typically, people choose 5-kilowatt solar systems.
Before any tax credits are applied, a 5-kilowatt system costs $2.45 per watt. This would cost you $12,250 before rebates. After the federal tax credit, this drops to $9,065. After the state incentives, this drops to $7,565.
Before tax credits, a 10-kilowatt system would cost $2.24 per watt, totaling $22,400. After the federal tax credit, this drops to $16,598. After the state incentives, this drops to $15,098.
Peak Sunlight Hours – How Much Power Do Solar Panels in Kentucky Produce?
The average 5-kilowatt solar system will produce roughly 20 kilowatts per day. This equates to 600 kilowatts per month. However, this calculation is based on those solar panels getting 4 hours of peak sunlight per day.
Kentucky gets an average of 4.5 hours of peak sunlight per day roughly, 12% more than the 4 hours used for the calculation. Therefore, in Kentucky, a 5-kilowatt system will produce 22.4 kilowatts per day. This equates to 672 kilowatts per month.
Once again, keep in mind that the average household in Kentucky uses 1,154-kilowatt-hours per month. Therefore, a 5-kilowatt solar system would produce just over 58% of your monthly energy requirements. This is fine, but it does not take care of your entire energy needs.
Based on peak sunlight hours, a household in Kentucky would need a 9-kilowatt system to fully meet energy requirements. For example, a 9-kilowatt system with 4.5 hours of peak sunlight would produce roughly 40.32 kilowatts per day. This equates to 1,209.6 kilowatts per month (just slightly over the 1,154-kilowatt monthly usage).
Kentucky Solar Panel Costs vs. Energy Cost Savings – The Payback Period
Finally, we’ll compare the overall cost vs. money saved to determine the payback period or how long it will take for solar panels in Kentucky to pay for themselves?
5 Kilowatt Solar System
Let’s first use the most popular solar array size as an example, a 5-kilowatt system. A 5-kilowatt system will cost $7,565 after tax credits and rebates. This size solar panel system can produce 672 kilowatts per month. This is 58% of your monthly energy requirements.
This allows you to save 58% of your $122.32 monthly energy bill. This equates to monthly savings of $70.94 or yearly savings of $851.34. This means that it would take roughly 8.88 years for a 5-kilowatt system to pay for itself.
9-Kilowatt Solar System
As mentioned above, it would take a 9-kilowatt system to fully meet your energy needs in Kentucky. So, a 9-kilowatt system would cost $13,618 after incentives and rebates.
This system can fully meet your energy needs, and you would save $1,467.84 per year on energy costs. The payback period for this would be about 9.2 years.
However, keep in mind that you get 2 cents for every additional kilowatt that you don’t use, thanks to feed-in tariffs. So the money you get from this is not substantial by any means, yet still better than nothing.
Is Solar Worth it in Kentucky? Final Thoughts
The bottom line is that, yes, solar power is worth it in Kentucky. The payback period for a 5-kilowatt system is just under 9 years. Considering that solar panels also add significant resale value to a house, it is worth the investment.