Kentucky

Overview

Bordered on the north by the Ohio River, Kentucky stretches from the Appalachian Mountains in the east to the flat plain of the Mississippi River in the west. In between, the rolling hills of the state’s fertile Bluegrass region extend southward from the Ohio River to the Pennyroyal region, which is famous for its thousands of caverns and springs, including Mammoth Cave National Park. Major coal deposits are found both in the Central Appalachian Basin in the eastern part of the state and in the Illinois Basin in the northwest. Dams on the Tennessee, Cumberland, Ohio, and Laurel Rivers provide Kentucky with hydroelectric power. The state also has some oil and natural gas resources. Although two-thirds of Kentucky’s agricultural economy is livestock, primarily thoroughbred horses and beef cattle, the state’s abundant rain, temperate climate, and fertile soils provide ideal conditions for several crops. Kentucky’s most important crops are tobacco, soybeans, corn, and wheat. Corn and beverage waste from distilleries in the state provide feedstock for Kentucky’s ethanol production.

Kentucky is among the top 10 states in energy use per dollar of gross domestic product. The industrial sector leads the state’s energy demand. Low energy prices have helped attract manufacturing to Kentucky, and the state’s largest manufacturing industries include motor vehicles, food, beverage and tobacco products, and chemicals. The state is also a major transportation and logistics hub. Kentucky is a net energy supplier to the nation, largely because of its coal production.

Renewable Energy

Renewable resources are a small part of Kentucky’s energy mix, and the state has no renewable energy standard or goals. The largest source of renewable energy in Kentucky is hydroelectric power, which provides about 4% of the state’s electricity generation at 6 dams around the state. Biomass accounts for the other 0.5% of the state’s net generation from renewables. Wood wastes are the largest source of biomass for electricity.

Kentucky has few wind resources suitable for developing utility-scale power projects and no commercial wind power facilities, but the state does have some solar potential. Kentucky’s first utility-scale solar photovoltaic (PV) generating facility, the 2-megawatt Bowling Green Solar Farm, came online in 2011 and sells its power to the TVA. A second utility-scale solar farm, a 10-megawatt facility located at the E.W. Brown coal-fired generating station near Harrodsburg, Kentucky, began construction in 2016. Increasing amounts of distributed solar PV capacity, from home rooftops to industrial systems, have been installed across the state. Solar facilities are by far the largest component of distributed generation in Kentucky, with more than 12 megawatts of solar PV installed. In 2015, three-fourths of distributed solar generation in Kentucky came from commercial-sector facilities. Kentucky is home to the nation’s first net-zero energy-use public school building. The school design combines energy efficient systems, geothermal heat pumps, daylight harvesting, and a thin film rooftop solar PV system. Kentucky law provides for net metering of distributed generation from solar, wind, hydro, biomass, and biogas facilities of 30 kilowatts or less. Each power provider’s obligation to connect eligible customer generators is limited to 1% of the provider’s peak load in the previous year.

Kentucky has two ethanol plants with a combined capacity of about 35 million gallons per year. Most of the ethanol is produced at a plant owned by a farmers’ cooperative that uses corn as its primary feedstock. The smaller ethanol facility is a recycling operation in an abandoned bourbon distillery that produces ethanol from waste non-alcoholic and alcoholic beverages, sugars, industrial alcohols, health and beauty alcohols, and pharmaceutical manufacturing by-products. Kentucky also has three biodiesel production plants with a combined capacity of about 47 million gallons per year. The biodiesel plants use multiple feedstocks, including waste vegetable oil and soy oil.

Electricity

In 2015, for the first time in decades, coal generated less than nine-tenths of Kentucky’s net electricity.

Coal-fired power plants have routinely produced more than nine-tenths of Kentucky’s net electricity generation, but, in 2015, coal accounted for less than nine-tenths of net generation for the first time in decades. Natural gas-fired electricity production more than doubled, to 7% of net generation. However, Kentucky still relied on coal to generate a greater share of its electricity than any states except West Virginia and Wyoming. The rest of Kentucky’s electricity generation comes from hydroelectric power plants, with a small contribution from biomass.

As of 2014, Kentucky had the fourth-largest amount of coal-fired generating capacity in the nation, after Texas, Indiana, and Ohio. But with coal-fired generating units aging and becoming more costly to operate, a number of coal-fired power plants in Kentucky are being shut down or retrofitted to burn natural gas. In 2015 alone, 10% of Kentucky’s coal-fired electricity generating capacity was shut down. A total of nearly 3,000 megawatts of coal-fired generating capacity in the state has been retired or is scheduled to be retired between 2012 and 2025. At Kentucky’s largest power plant, the 2,550-megawatt coal-fired Paradise Plant, the Tennessee Valley Authority (TVA) is replacing units 1 and 2, which have a combined capacity of more than 1,400 megawatts, with natural gas-fired capacity by 2017.

Kentucky has not restructured its electric utility industry. Utilities in the state remain vertically integrated generators, transmitters, and distributors of electric power.Electricity is supplied to consumers by three investor-owned electric utilities, 26 cooperatives, 20 municipal utilities, and the TVA. Electricity rates vary by provider, but, on average in 2015, Kentucky had the fifth lowest rates of any state, and the lowest rates east of the Mississippi River. About half of Kentucky households use electricity as their primary heating source.

Natural Gas

Kentucky’s annual natural gas production rose from about 90 billion cubic feet in the mid-2000s and peaked at slightly more than 135 billion cubic feet in 2010,reaching 0.5% of total U.S. natural gas production. Natural gas prices subsequently declined, and Kentucky production fell back to less than 80 billion cubic feet by 2014. Most of the state’s natural gas is produced from wells in eastern Kentucky, and the state’s natural gas resources in the Devonian Shale underlying two-thirds of the state may exceed 100 trillion cubic feet.

Natural gas production in Kentucky is lower than consumption, and several major interstate natural gas pipelines supply Kentucky consumers. Most natural gas entering Kentucky originates in the Gulf region and comes by pipeline through Tennessee, but, in 2014, Kentucky also began receiving natural gas from the Marcellus and Utica shales by pipeline from Ohio and West Virginia. More than nine-tenths of the natural gas entering Kentucky is shipped on to other states, primarily Indiana, Illinois, and Tennessee. Kentucky has 23 underground natural gas storage facilities that comprise 2.5% of U.S. storage capacity.

Kentucky’s industrial sector uses nearly one-half of the natural gas consumed in the state. The electric power sector doubled its natural gas consumption from 2014 to 2015 and is now the second-largest consuming sector. The residential sector receives about one-fifth of the natural gas delivered to end users, and 4 out of 10 households in Kentucky use natural gas as their primary fuel for home heating. Natural gas use per capita by Kentucky’s residential sector is below the national average.

Source: U.S. Energy Information Administration (Apr 2016)