Kentucky Laws and Incentives
Listed below are the summaries of all current Kentucky laws, incentives, regulations, funding opportunities, and other initiatives related to alternative fuels and vehicles, advanced technologies, or air quality. You can go directly to summaries of:
Kentucky’s National Electric Vehicle Infrastructure (NEVI) Planning
The U.S. Department of Transportation’s (DOT) NEVI Formula Program requires the Kentucky Transportation Cabinet to submit an annual EV Infrastructure Deployment Plan (Plan) to the DOT and U.S. Department of Energy (DOE) Joint Office of Energy and Transportation (Joint Office), describing how the state intends to distribute NEVI funds. The submitted plans must be established according to NEVI guidance.
On-Farm Biofuel Production Grants
The Governor's Office of Agricultural Policy provides grants through the County Agricultural Investment Program for on-farm energy efficiency and renewable energy production projects, including funding for equipment, structures, or other supplies necessary to convert biomass crops into useable energy or to convert grains and oilseeds into ethanol or biodiesel for use in on-farm equipment. Fuels produced on a farm with assistance through this program may not be used as transportation fuels for highway use. Applicants are encouraged to review manufacturers' warranties and specifications before using the fuels in any on-farm equipment. For more information, see the Kentucky Agricultural Development Fund Program Portal website.
Biodiesel Production and Blending Tax Credit
Qualified biodiesel producers or blenders are eligible for an income tax credit of $1.00 per gallon of pure biodiesel (B100) or renewable diesel produced or used in the blending process. Re-blending of blended biodiesel does not qualify for the tax credit. The total amount of credits claimed by all biodiesel producers may not exceed the annual biodiesel tax credit cap of $10 million. Unused credits may not be carried forward. For the purpose of this credit, biodiesel must meet ASTM Standard D6751, and renewable diesel is defined as a renewable, biodegradable, non-ester combustible liquid derived from biomass resources that meets ASTM Standard D975.
(Reference Kentucky Revised Statutes 141.422 to 141.424)
Ethanol Production Tax Credit
Qualified ethanol producers are eligible for an income tax credit of $1.00 per gallon of corn- or cellulosic-based ethanol that meets ASTM Standard D4806. The total credit amount available for producers is $5 million for each fuel type in each taxable year. Unused ethanol credits from one ethanol-based cap, such as corn, may be applied to another ethanol-based cap, such as cellulosic, in the same taxable year. Unused credits may not be carried forward. Feedstock eligibility restrictions may apply.
Alternative Fuel Manufacturing Tax Incentives
Companies that engage in energy-efficient alternative fuel production may be eligible for an incentive through Kentucky Enterprise Initiative Act (KEIA). The Kentucky Cabinet for Economic Development (Cabinet) provides a refund of Kentucky sales and use tax paid by approved companies for building and construction materials for the acquisition, construction, or expansion of a new or existing facility or eligible equipment used in research and development. Energy-efficient alternative fuels are defined as homogeneous fuels that are produced from processes designed to densify feedstocks such as coal, waste coal, or biomass resources and have an energy content that is greater than the feedstock. For more information, including qualifications and the application process, see the Cabinet Business Incentives website.
(Reference Kentucky Revised Statutes 154.31)
Alternative Fuel Production Tax Incentives
Companies that engage in alternative fuel production and hydrogen transmission pipelines may be eligible for the Kentucky Business Investment (KBI) Program. The Kentucky Cabinet for Economic Development (Cabinet) provides income tax credits and wage assessment incentives to eligible companies that locate or expand operations in Kentucky. Energy-efficient alternative fuels are defined as homogeneous fuels that are produced from processes designed to densify feedstocks such as coal, waste coal, or biomass resources and have an energy content that is greater than the feedstock. The incentive offsets eligible expenses for up to 15 years for an economic development project located in an enhanced incentive county or 10 years for an economic development project located in another county. An approved company may be eligible for a credit of up to 100% of the Kentucky corporate income or limited liability entity tax liability and wage assessment fees are available. For more information, including qualifications and the application process, see the Cabinet Business Incentives website.
Propane Excise Tax Exemption
Propane is exempt from the state excise tax when it is used to operate motor vehicles on public highways provided that vehicles are equipped with carburetion systems approved by the Kentucky Energy and Environment Cabinet or fuel systems that meet Federal Motor Vehicle Safety Standards contained in Title 49 of the Code of Federal Regulations, section 571. (Reference Kentucky Revised Statutes 234.321)
Utility / Private Incentives
Electric Vehicle (EV) Charging Station Rebate – Tennessee Valley Authority (TVA)
TVA will establish and fund a network of direct current fast charging (DCFC) stations every 50 miles along interstates and major highways through the Fast Charge Network Program (Program). The Program offers funding for public DCFC stations along EV corridor gaps, up to $150,000 per DCFC station. Eligible applicants include TVA Local Power Companies, and eligible projects must include a minimum of two DCFC ports per location. Program participants must identify suitable host sites and agree to own, operate, and maintain Program-funded DCFC stations for a minimum of five years. For more information, including guidelines and additional eligibility requirements, see the TVA Fast Charge Network website.
Electric Vehicle (EV) Infrastructure Support
Kentucky utilities joined the National Electric Highway Coalition (NEHC), committing to create a network of direct current fast charging (DCFC) stations connecting major highway systems from the Atlantic Coast to the Pacific of the United States. NEHC utility members agree to ensure efficient and effective fast charging deployment plans that enable long distance EV travel, avoiding duplication among coalition utilities, and complement existing corridor DCFC sites. For more information, including a list of participating utilities and states, see the NEHC website.
Laws and Regulations
Public Utility Definition
An entity that owns or operates an electric vehicle charging station is not defined as a public utility.
Volkswagen (VW) Settlement Allocation
The Kentucky General Assembly must approve the allocation of any funds the Commonwealth receives from the VW Environmental Mitigation Trust. Kentucky will hold all funds received from the environmental mitigation trust pursuant to the Partial Consent Decree in a trust and agency account. The Kentucky Energy and Environment Cabinet must administer the funds.
(Reference Kentucky Revised Statutes 224.10 and 224.10-272)
Alternative Fuel and Conversion Definitions
Clean transportation fuels include propane, compressed natural gas (CNG), liquefied natural gas (LNG), electricity, and other transportation fuels determined to be comparable with respect to emissions. Propane is defined as a hydrocarbon mixture produced as a by-product of natural gas processing and petroleum refining and condensed into liquid form for sale or use as a motor fuel. CNG is defined as pipeline-quality natural gas that is compressed and provided for sale or use as a motor vehicle fuel. LNG is defined as pipeline-quality natural gas treated to remove water, hydrogen sulfide, carbon dioxide, and other components that will freeze and condense into liquid form for sale or use as a motor vehicle fuel.
A bi-fuel system is defined as the power system for motor vehicles powered by gasoline and either CNG or LNG. Bi-fuel systems are considered clean fuel systems. Conversion is defined as repowering a motor vehicle or special mobile equipment by replacing its original gasoline or diesel powered engine with one capable of operating on clean transportation fuel or retrofitting a motor vehicle or special mobile equipment with parts that enable its original gasoline or diesel engine to operate on clean transportation fuel.
(Reference Kentucky Revised Statutes 186.750)
Natural Gas Vehicle (NGV) Safety Regulations
Vehicles converted to operate on compressed natural gas (CNG), liquefied natural gas (LNG), or a bi-fuel system must be inspected for compliance with applicable Federal Motor Vehicle Safety Standards (FMVSS). The inspection must occur at the time of the conversion; every three years or 36,000 miles after the conversion, whichever comes first; and following any collision in which the vehicle was traveling at five miles per hour (mph) or greater. Vehicles originally designed and manufactured to use CNG or LNG must also be inspected for safety following any collision in which a vehicle was traveling at five mph or greater. Any person who performs NGV conversions must certify to the vehicle owner that the conversion does not affect any existing vehicle emissions or diagnostic systems, except as necessary for the conversion. The Kentucky Transportation Cabinet may establish regulations to qualify persons to perform safety inspections; modify FMVSS for state use; and identify converted vehicles and ensure compliance with applicable regulations.
(Reference Kentucky Revised Statutes 186.752)
Compressed Natural Gas (CNG) Deregulation
The Kentucky Public Service Commission (Commission) may not regulate the rates, terms, or conditions of service for the sale of CNG to a fueling station, retailer, or to any end-user for use as a motor vehicle fuel. However, transporting, distributing, or delivering natural gas to a CNG retailer or end-user is subject to Commission regulations.
(Reference Kentucky Revised Statutes 278.508)
Alternative Fuel Tax
An excise tax rate of 9% of the average wholesale price on a per gallon basis applies to all special fuels, including diesel, natural gas, propane, ethanol, biodiesel, hydrogen, and any other combustible gases and liquids, excluding gasoline, used to propel motor vehicles. Additionally, a highway motor fuel tax of $0.02 per gallon applies to all special fuels. For taxation purposes, one gasoline gallon equivalent of compressed natural gas (CNG) is equal to 5.66 pounds (lbs.) or 126.67 cubic feet. One diesel gallon equivalent of liquefied natural gas (LNG) is equal to 6.06 lbs.
Electric Vehicle (EV) Charging Station Tax
Beginning on January 1, 2024, EV charging station owners and lessees must pay a combined excise tax and surtax fee of $0.03 per kilowatt hour of electricity used to charge EVs. The tax will be added to the selling price charged by the station operator. If the station operator provides free electricity, they will be responsible for paying the tax on stations installed after June 30, 2022. The station operator must report total kilowatt hours distributed, tax amount collected, and provide payment to the state monthly. Beginning December 1, 2024, the Kentucky Department of Revenue must compare the tax rate to the most current quarterly National Highway Construction Cost Index 2.0 (NHCCI 2.0) annually. Beginning on January 1, 2025, the tax rate must be adjusted annually to match the NHCCI 2.0 change, up to a maximum 5% annual increase or decrease.
(Reference Kentucky Revised Statutes 186.010 and 189.282)
Electric Vehicle (EV) Fee
Beginning January 1, 2024, in addition to standard vehicle registration fees, EV owners must pay an annual fee of $120 and hybrid electric vehicle and electric motorcycle owners must pay an annual fee of $60.
(Reference Kentucky Revised Statutes 138.32)
Low-Speed Electric Vehicle Access to Roadways
A low-speed vehicle is defined as a four-wheeled vehicle propelled by an electric motor, combustion-driven motor, or a combination of the two and designed to operate at speeds of up to 25 miles per hour (mph). Low-speed vehicles may operate on roads with posted speed limits of up to 35 mph provided that the vehicle has not been modified to increase its speed above the original standard manufactured limit. Low-speed vehicles may only cross roads with posted speed limits above 35 mph if the intersection is equipped with a traffic signal. Low-speed vehicles must display a vehicle identification number; be titled, registered, and insured as motor vehicles; and meet safety standards specified in Title 49 of the Code of Federal Regulations, section 571.500. (Reference Kentucky Revised Statutes 186.010 and 189.282)
(Reference Kentucky Revised Statutes 186.010 and 189.282)
Alternative Fuel Vehicle (AFV) Acquisition Requirements
By January 1, 2026, the Kentucky Finance and Administration Cabinet (Cabinet) must increase the use of ethanol, biodiesel, and other alternative transportation fuels and replace at least 50% of light-duty state fleet vehicles with new AFVs or vehicles equipped with low-emission technology. Beginning December 1, 2024, the Cabinet must compile annual reports detailing the progress made towards these requirements, including a life-cycle cost assessment, vehicle replacement timeline, and targets for increased alternative fuels in state agency vehicles.