Who would have thought that one of the smallest states in the country has turned into a leader in solar energy. Hawaii has quietly become a presence in the solar market due to market demands and innovation legislative action.
First, how good has Hawaii solar become? In 2010, Hawaii ranked the second highest in the U.S. for installed solar water heaters. In fact, prior to 2006, about half of the solar hot water heaters sold in the United States were installed in Hawaii. In addition, the total grid-connected photovoltaic capacity installed in Hawaii increased by 45% from 12.7 megawatts in 2009 to 18.5 megawatts in 2010. In 2010, Hawaii (along with Arizona, Colorado, Nevada, New Jersey and New Mexico) actually installed more solar power per person than California showing just how widely solar power has been accepted throughout the state. (Source: 2010 U.S. Solar Market Trends, Interstate Renewable Energy Council). Hawaii’s main utility, Hawaiian Electric Company (HECO), has contributed enormously to the growth of solar power in Hawaii. In 2010, HECO placed third out of all utilities in the country in the solar watts-per-customer category with 33.2-watts per customer despite being domiciled on one of the smallest states in the U.S.
Hawaii’s solar success is attributable to two main forces: energy market demands and legislative innovation. First, Hawaii has the highest electricity rates in the country, partly due to the fact that 90% of Hawaii’s energy comes from imported petroleum. In fact, $7 billion annually flows out of the state to meet Hawaii’s energy needs. Because of this, Hawaii residents pay, on average, $0.285 per kilowatt-hour which is extremely high as compared to the rest of the country and makes solar a much more worthwhile investment than in states with lower electricity rates. On top of this, as the price of oil fluctuates, so does the price for electricity in Hawaii reinforcing economic instability throughout the state. And with respect to the solar thermal market, installation costs are relatively low because local installers do not need to provide additional insulation or make other special, costly provisions as a result of seasonal freezing temperatures.
Hawaii’s government has also played a key role in promoting the adoption of solar power. First off, in 2007, the legislature adopted the Hawaii Global Warming Solutions Act which aims to reduce greenhouse gas emissions to 1990 levels by 2020 and sets a goal of meeting 70% of Hawaii’s energy needs through clean energy sources by 2030. This has provided the over-arching mandate for the development of renewable energy sources. Pursuant to this, the Hawaii Clean Energy Initiative was created to develop the state’s local resources and meeting the 70% goal. As a result, Hawaii has developed a robust set of rebates and incentives to promote the adoption of solar. The main Hawaii solar incentive is a tax credit, which works as follows:
- For solar panel systems – a tax credit of 35% of project costs or $5,000 (whichever is less) for single family residences; a tax credit of 35% of project costs or $350 per unit (whichever is less) for multifamily residences; and a tax credit of 35% of project costs or $500,000 per unit (whichever is less) for commercial properties.
- For solar thermal systems – a tax credit of 35% of project costs or $2,250 (whichever is less) for single family residences; a tax credit of 35% of project costs or $350 per unit (whichever is less) for multifamily residences; and a tax credit of 35% of project costs or $250,000 per unit (whichever is less) for commercial properties.
Unique to Hawaii’s solar tax credit is that it may be used in conjunction with the federal renewable tax credit, which not all states allow. On top of this, Hawaii recently amended its tax credit incentive program providing the option for Hawaiian taxpayers to claim a refund instead of a tax credit for the purchase of a solar water heater or solar panel system (if you meet certain criteria). Tax credits provide little incentive value for those with fixed incomes or with no tax liability. Now, with a refundable tax credit, more consumers may be able to purchase and install solar through the receipt of actual cash instead of an reduced tax liability.
Also virtually unique to Hawaii is a feed-in-tariff system for installing a solar energy system. A feed-in-tariff is essentially where your utility company has to pay you cash for the amount of energy your system produces above the amount you consume. Currently in Hawaii, participating utility companies (HECO, MECO and HELCO) are paying $0.218/kWh for solar panel systems that are less than or equal to 20 kW; and $0.189/kWh for solar panel systems that are greater than 20 kW and less than or equal to 500 kW. Hawaii has not set rates for systems that are greater than 500 kW just yet. Assuming that the average U.S. home uses approximately 8,900 kWH per year, a solar equipped homeowner could be looking at payments from their utility between $1,680 and $1,940 each year!
Furthermore, Hawaii has also exempted the value of a renewable energy source from a property owner’s property taxes. Unlike other home improvements, you will not have to pay increased property taxes even though the value of your home may increase with the installation of a solar electric system.