Energy Incentive Programs, Kentucky

Updated January 2012

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

Kentucky has no public-purpose-funded energy efficiency programs. The state's utilities budgeted over $40 million for energy efficiency and load management programs in 2010.

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), industrial processes, and food service equipment. Beside the prescriptive offerings, there is also a new custom incentive program to cover measures outside of the prescriptive program's scope. Incentives are based on the efficiency and capacity of equipment, and are capped at $50,000 per calendar year per facility for all measures.

Louisville Gas & Electric (LG&E) and Kentucky Utilities Company (KU) offer their Commercial Rebate Program. Prescriptive rebates, up to $50,000 per facility per year for all claims, are available for many types of high-efficiency electric equipment, ranging from LED exit signs to water-cooled chillers. Free energy audits are also available.

Tennessee Valley Authority (TVA) is the largest publicly-owned utility in the U.S. In 2008, TVA's board approved a goal of reducing peak demand by 4% (1,400 MW) by 2012.

Under its Energy Right Solutions program, TVA offers two new energy efficiency incentive programs to its commercial and industrial customers that are served by a participating distributor of TVA power:

The energyright solutions initiative provides 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 (currently $0.10 per kWh of estimated first-year savings). To qualify for incentives, customers must complete an application and receive written approval prior to equipment purchase or installation.
The Commercial Efficiency Advice and Incentives (CEAI) program provides free energy assessments, detailed energy studies and financial incentives to qualifying most commercial facilities (those that have a demand charge) for installing lighting and HVAC equipment that reduces demand. One-time incentive amounts are $200 per kW reduced during TVA's summer peak period. To start the process, customers should contact their local power distributor and sign up for the free assessment.

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

LG&E and KU offer the Experimental Load Reduction Incentive Rider, which provides participants with payments of up to $0.30/kWh for voluntarily operating standby generation at the request of the utility. To be eligible, the generator must have a capacity of at least 500 kW and be on an isolated circuit.

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.

Kentucky Power (a unit of AEP) offers both emergency and price curtailable service riders for large customers in Kentucky:

The Emergency Curtailable Service Rider provides credits ($0.35/kWh or $0.50/kWh, depending on whether the customer has committed to a maximum of four or eight hours of load reduction per call) based on curtailed energy use, to participants who reduce load when requested by the utility during emergency conditions in the winter (December through February) or summer (June through August). Even if the curtailment period is less, credit is guaranteed for at least two hours. Both winter and summer period total curtailments are capped at 50 hours.
The Price Curtailable Service Rider provides credit, based on curtailed energy use, to participants for reducing load when requested by the utility during high price periods. Participants specify the minimum price as well as the maximum number of days they would be willing to curtail. Payments are set at the greater of the participant's stated minimum price and 80% of the daily published price index for electricity into the system.

For both programs, customers must curtail a set amount upon notification or be assessed non-compliance penalties. Payments are based on the difference between the participant's peak demand and the highest 30-minute integrated demand reached during the curtailment period. Participation is limited to customers with a curtailable demand of at least 100 kW.,/p>

TVA's Demand Response initiative provides payments to customers for agreeing to reduce non-essential electric consumption during system emergencies. Events last between 2 and 8 hours each and may occur on business days between 12 p.m. and 8 p.m. during the summer season (April through October) and between 5 a.m. and 1 p.m. during winter (November through March). Payment levels are based on the amount of energy the facility can reduce, the specific participation strategy, and performance during actual events. A facility with a 1 MW commitment can receive between $18,000 and $40,000 per year. To find out how to participate, federal facility managers should contact their local power distributor.

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 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 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 > 50kW 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.
Through the Green Power Switch Generation Partners 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. (Note that the maximum installation size for new projects under the Generation Partners Program has been reduced from 200 kW to 50 kW. Larger systems may qualify for the Renewable Standard Offer (see below)). The remuneration rates are $0.12/kWh above the retail rate for solar installations and $0.03/kWh above the retail rate for the other renewables. Purchases must be brokered by a participating power distributor (generally, utilities that purchase TVA power).

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, which average about 5.5¢/kWh, are based on seasonal time-of-day averages. 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 program has a production limit of 100 MW total, with no more than 50% of the total coming from any one renewable technology.
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 LG&E) may be able to take advantage of 3^rd-party financed energy efficiency projects called utility energy services contracts (UESCs). Information is available on GSA's Energy Center of Expertise Library Page. 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, and not be dispatchable. 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.