Energy Incentive Programs, Kentucky

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Updated June 2015

Kentucky utilities budgeted over $60 million for energy efficiency and load management programs in 2014.

What public-purpose-funded energy efficiency programs are available in my state?

Kentucky has no public-purpose-funded energy efficiency programs.

What utility energy efficiency programs are available to me?

Duke Energy offers the Smart Saver Incentive program for rebates on high efficiency lighting, VFDs, pumps, HVAC equipment (including chillers), IT, industrial processes, and food service equipment. The Smart Saver Custom Incentive program is available for measures outside of the prescriptive program's scope. Incentives are capped at 50% of the incremental cost.

Louisville Gas & Electric (LG&E) and Kentucky Utilities Company (KU) offer a Commercial Rebate program that covers efficient lighting, motors, chillers, pumps, HVAC, and VFDs. Custom rebates are available for compressed air systems, exhaust ventilation, HVAC occupancy sensors, energy management systems, and daylighting controls. Incentive payments are capped at $50,000 per facility per year for all claims.

Tennessee Valley Authority (TVA) is the largest publicly-owned utility in the U.S. Under its Energy Right Solutions program, TVA offers a variety of resources to commercial and industrial customers that are served by participating distributors of TVA power:

  • Standard Rebates and Custom Incentives provide two different options for offsetting the costs of energy efficiency projects. Standard cash rebates are available for replacing specific types of equipment (lighting, motors, HVAC, and food service equipment) with more efficient versions. Projects that are more comprehensive or involve other types of efficiency upgrades may qualify for custom incentives.

  • Other resources include technical advice for qualifying customers and the Business Energy Advisor, which provides calculators and tips on common ways to reduce energy by facility type.

What load management/demand response options are available to me?

Duke Energy offers two load management programs that may be of interest to federal customers.

  • The Peak Load Management program offers negotiated incentives for small- to mid-sized customers (> 500 kW) to reduce load during the utility's peak periods. Participants must reduce their demand down to a firm level upon being notified by the company.

  • The Real Time Pricing program allows very large (> 5,000 kW) customers to save by shifting load away from peak periods when electricity is costliest, based on day-ahead pricing quotes.

The TVA-EnerNOC Demand Response program provides payments to participants in exchange for agreeing to reduce electricity consumption during times of exceptionally high demand with a 30-minute notice. Demand response events may occur weekdays April-October between 12 and 8 p.m. and November-March between 5 a.m. and 1 p.m. EnerNOC collaborates with customers to create an optimal demand reduction plan. Demand response efforts typically involve curtailing energy usage of such equipment as lighting, chillers, pumps and HVAC equipment. Interested customers may contact their local electricity distributor or fill out the program's inquiry form.

The PJM Interconnection (PJM), a regional transmission organization (RTO), offers several demand response programs. Two specific programs may be attractive to federal facilities in the eastern Kentucky PJM footprint:

  • The Economic Load Response program allows electricity users to provide load reductions in exchange for a payment based on hourly wholesale electricity prices. Participation is fully voluntary. Customers start by submitting load reduction bids through their curtailment service provider (any existing PJM member, such as their utility, a third-party electricity supplier, or a specialty CSP) of at least 100 kW into the day-ahead energy market. Participants whose bids are accepted are paid for their load reductions based upon the day-ahead, hourly electricity market prices (the day-ahead "locational marginal price," or LMP). Reductions are figured based on a customer baseline load (CBL), which is essentially the average of load levels for the same hours in four of the facility's previous non-responding days. Regardless of which type of firm it is, the CSP will generally offer to split the revenues with the customer at a pre-determined percentage.

  • PJM's emergency "capacity" program allows demand resources to participate in PJM's Reliability Pricing Model (RPM) forward capacity market via a CSP. Participants pledge to either reduce their load by a specified amount (guaranteed load drop, GLD), or to a specific kW level (known as firm service level, FSL), within one or two hours of an event notification. Load reductions are mandatory and may occur up to ten times per year, lasting up to six hours per event. Penalties for non-compliance are substantial. Remuneration is based on the results of the annual RPM capacity auctions in various PJM regions. Remuneration levels for the 2012-13 and 2013-14 PJM years (which begin June 1, 2012 and June 1, 2013, respectively) in PJM's southwestern reach (which includes part of eastern Kentucky) are as low as $6,000 per MW in 2012-13 and $10,000 in 2013-2014, compared to roughly $40,000 in 2011-12. Participants are also eligible to receive energy payments for actual reductions, though, if and when the program is called.

In both programs, participants can provide load reductions either through curtailing electricity use or operating on-site generation consistent with local environmental regulations and permits.

Utilities in the western Kentucky footprint of MISO (formerly the Midwest Independent System Operator) may enroll interested customers in any of MISO's various demand response offerings, from which they can receive payments for reducing load. Federal customers should contact their local utility representative to inquire about participation.

What distributed energy resource options are available to me?

The Database of State Incentives for Renewables and Efficiency (DSIRE) provides information on programs that offer incentives for renewable distributed generation. The following programs may be of interest to federal customers:

  • The 2007 Incentives for Energy Independence Act created a state tax relief program for businesses that develop large renewable projects (including solar PV > 50 kW and other types of renewable generation > 1 MW) in Kentucky. The federal government is not a tax payer, but federal facilities whose on-site plants are developed and owned by private contractors may be able to benefit from this program.

  • TVA's Renewable Standard Offer program provides power purchase plans of up to 20 years to developers of renewable projects (biomass combustion, biomass gasification, methane recovery, wind and solar) greater than 50 kW and up to 20 MW in size. Rates paid are based on seasonal time-of-day averages. To be eligible, projects must have gone online after October 1st, 2010. The energy seller must provide TVA with project financing and interconnection agreements as well as metering installation plans, and must sign over title to RECs and other environmental attributes generated by the system. The Solar Solutions Initiative pilot program offers additional incentives to participants in the standard program that use local NABCEP-certified installers.

  • Through the Green Power Providers program, TVA will provide an up-front incentive of $1,000 and then purchase the output of a solar photovoltaic, wind, biomass, or small hydropower installation of up to 50 kW for ten years. The maximum installation size is 50 kW. Larger systems may qualify for the Renewable Standard Offer. Purchases must be brokered by a participating power distributor (generally, utilities that purchase TVA power).

  • Kentucky offers a 100% state investment tax credit for renewable installations. While federal customers do not pay taxes and thus cannot utilize the incentive directly, contractors that develop renewable projects at federal sites with power purchase agreements may be able to take advantage of the credit and share the benefit with their federal customers.

Are there energy efficiency programs sponsored by the state government?

For information on energy efficiency programs administered by the state government, contact the state's Department for Energy Development and Independence.

What additional opportunities are available to me?

Federal customers whose utilities have area-wide supply contracts through GSA (such as Atmos Energy, Duke, or AEP.) may be able to take advantage of 3rd-party financed energy efficiency projects called utility energy services contracts (UESCs). Information is available in GSA's Energy Division Library. Federal facilities should contact their account executive to determine the level of each utility's participation.

PJM (see above in the demand response section) now allows energy efficiency projects to participate in its forward capacity markets, based on its Reliability Pricing Model (RPM). To be eligible, EE projects must reduce load continuously by at least 100 kW during peak summer hours. This load reduction can be bid into PJM's annual (for three years in advance) and "residual" (nearer-term) capacity auctions, and if selected will receive the auction clearing price. Interested customers can participate through energy service companies conducting ESPCs or utilities executing UESCs at their sites.