Honomanu Bay, Kauai
Solar Legislator Score: 
2012 Update
From the sun to the surf to the black sand beaches, Hawaii is known for its pristine natural settings and beautiful weather. With all of those beautiful places to preserve, we can’t think of very many places we’d rather see protected with a healthy supply of renewable energy resources.
Not to mention the fact that all that sun makes Hawaii a great natural candidate for solar power generation. The state legislature has shown progress with a strong state tax credit and recent attempts to tweak relatively weak interconnection standards, but the laws still have a long way to go to be truly solar friendly.
However, because of Hawaii’s nation-leading high electricity rates, your new solar system will generate massive savings, regardless of any future legislative improvements. In fact, because of those high utility rates, solar power likely pays for itself faster in Hawaii than anywhere else in the United States. For that alone we really had to give Hawaii an A, even if there is still a great deal of room to improve.
Hawaii’s Renewable Portfolio Standard
A Renewable Portfolio Standard (“RPS”) requires utilities in the state to source at least a certain percentage of their electricity from clean, renewable sources by a set year in the future.
Hawaii has a strong general RPS, mandating that 40% of all energy must come from renewable sources by 2030. That goal is being phased in; current policy calls for 10% renewable energy, increasing to 15% in 2015. 40% is a strong overall number, but that worthy goal should be buttressed by targets for environmentally friendly methods of production like residential solar systems that contribute to efficient local production and contribute to greater distributed generation (i.e., less energy from giant gas-spewing power plants).
A strong RPS is critical to strong renewable energy policy. Utility companies don’t want you to produce your own power –it costs them money when you use less of their electricity—and they certainly don’t want to give you credit for your surplus. The only reason the utilities are aiding your transition to lower electric bills is because the state forces them to, to help meet the RPS’s targets. If the RPS contained specific carve-outs for clean and efficient technologies like solar panels, or mandates for the environmentally necessary increases in distributed generation, you’d see even stronger incentives for residential solar power.
Hawaii’s Electricity Prices
Hawaii pays about 36 cents per kilowatt-hour of electricity. 36 cents! That’s more than twice the rates in the next most expensive state. If you live in Hawaii, we have no doubt that you hate how high your electric bill is every month. But frankly, those high rates are nothing more than an opportunity. Because you are currently paying more than twice as much as anyone else, that means you are going to save twice as much as anyone else; more than $2,600 in electricity costs, just in the first year! With absurd savings like that, your solar system is going to pay for itself in just a few years.
Performance Payments
Hawaii does technically offer a cash-based Feed-in Tariff (“FIT”). If you opt into the program, your utility will pay you about 22 cents for every surplus kilowatt-hour (“kwh”) you feed back into the grid (i.e., if you produce more electricity than you use). Unfortunately the FIT is an optional program that replaces net metering (explained below). It’s one or the other sadly.
The FIT payments make sense if you are building a solar farm, but for a single-home residential system like our 5kw example, the Net Energy Metering (“NEM”) program described below is the better option for saving money; it won’t turn a profit, but you will get bill credits at the full retail rates. The most economically and energy efficient plan is to choose net metering and size your solar system appropriately to make sure you don’t generate more electricity than you use. The solar experts we work with can (and will!) help you do exactly that; plan a solar system that meets all your needs and eliminates your electric bill without generating unnecessary surplus to help the utility company.
State Rebates
Hawaii helps offset the costs of installing a solar power system through tax credits rather than through rebates. While there is no rebate for your solar power system, you can get $750 back on the installation of a solar water heater.
State Tax Credits
Hawaii will in fact help you pay for the installation costs of your solar system, making it even easier to get to those amazing energy savings. You’ll just have to wait till tax day to collect that money. When tax day comes, you’re entitled toa credit of either 35% of the total installation cost of your system, or $5,000, whichever is less.
Tax Exemptions
When you add a solar power system, you add value to your home. How much value you add depends on how much money you save on your energy bill. In a state like Hawaii that’s a lot – more than anywhere else in the country in fact.
Normally, as you are all too aware, an increase in your home’s value means a corresponding increase in property taxes. Many, if not most states exempt you from those property taxes. Hawaii sadly lacks such a statewide law. Don’t panic just yet though. The City and County of Honolulu has passed their own property tax exemption! No, that’s not the entire state, but it is about 70% of the people here in Hawaii.
If you’re one of those 70%, you’re already golden – you’re 100% exempted from property taxes associated with your new solar power system for 25 years. If you’re one of the unlucky 3 in 10, sounds like we all need to get on the phone to the state capitol to tell them we want solar power tax exemptions!
Seriously … that phone call might not be a bad idea, because Hawaii is slacking altogether on these tax exemptions. In addition to lacking a statewide property tax exemption, Hawaii fails to exempt solar power systems from Excise and Use Taxes.
While Hawaii does not have a true Sales Tax, the General Excise Tax is built into the price of goods and services throughout the state. With one simple law exempting solar panels and their installation from such those taxes, the legislature could reduce the initial cost of solar systems by another 4-5%.
Net Metering and Interconnection
Net Energy Metering (“NEM”) is a key cog in any effective renewable energy policy. With net metering, the utility company must keep track of how much energy you produce and how much you consume. If you generate a surplus, every extra kilowatt-hour of energy you produce is carried over as a credit to future bills. The credit is at the full retail rate for electricity – currently about 36 cents/kwh.
That’s a pretty solid net metering law. Unfortunately your credits have a 12-month expiration date on them. Any credit unused after 12 months reverts back to the utility company without compensation. In other words, if you run a surplus for an entire year, the utility company gets to keep it. We are so not OK with that Hawaii. You need to follow the lead of states like Colorado and make the utilities cut a check for accumulated surplus at the end of the year.
Net metering may be decent in Hawaii, but interconnection standards are off the charts bad. We give the state legislature credit for trying to create simplified procedures for small renewables like residential solar systems, but the process is still too complicated, and you may be required to pay for an expensive Interconnection Requirements Study to determine if you will be allowed to connect to the grid. Even worse, the required installation of an external disconnect switch and mandated insurance coverage cost renewable-generating customers money. In the face of an overall system that strongly encourages Hawaii residents to switch to residential solar systems, it’s just plain silly to make it difficult and expensive to connect those systems to the grid.
5kW Example Return on Investment
So, what does this all add up to for you and your wallet? Glad you asked! Just have a look.
No, you don’t need glasses! Yes, you are seeing those numbers right!
Now, before you run out the door to go find some solar panels and start slapping them on your roof, remember that these number are estimates. Your house is unique, and how much return you get on a solar power system depends on how much sun you get and what you pay for electricity, among other things. Those two factors can vary a bit depending on where in Hawaii you live. The best thing to do is to get one (or two, or three …) of our free quotes, and one of our expert partners can give you a much more exact estimate of how much money solar can save you.
In the meantime, let’s have a look at our general estimate, to get a ballpark of what you can expect:
Installing a typical 5kW solar system should run about $25,000. At least until the price starts dropping fast.
- The state tax credit is capped at $5,000 and we qualify for all of it. Subtract that $5,000 for a new starting price of $20,000.
- The federal government offers its 30% tax credit on the cost after state incentives, so you take 30% off of the $20,000 price tag. Subtract another $6,000, for a new cost of $14,000.
- Your annual electricity savings are an astounding $2,686. Once we subtract that, you are left with a final cost after year 1 of just $11,314. You’ve already saved 55% of the system costs, right off the bat!
- Meanwhile, your home just went up in value $53,723. Wait … what?! 50 grand?! Yep. 50 grand. The increase in home value is estimated by calculating your expected energy savings overs 20 years (a conservative estimate for the life of your solar power system). Lots of electricity bill savings means lots of home value!
- The planet will be thanking you too, since those solar panels on your roof are the greenhouse-gas fighting equivalent of planting 131 trees in your backyard. (Nice work!)
Getting back to your wallet though, a solar power system here should, on average, pay for itself in just 4 years. 4 years! After that it’s all profit baby. A cool $116,623 of it over the life of your system.
To find out exactly how the numbers will work out for you, just drop your info into the form below and we’ll connect you to experts we trust here in Hawaii. They will calculate realistic estimates for you based on the uniqueness of your home and your energy usage. They’ll even do it for free!
Consensus
Hawaii is really in a class all its own when it comes to the money you can save by installing a solar power system, and the delightfully short payback timeframe. With the huge amount of cash you’ll save, and how fast you will save it, it’s impossible for us to give Hawaii anything but the full 5-sun rating.
Really though, the state virtually fell into that rating because of the high electricity rates. The rest of the landscape is less rosy … In fact, it’s pretty bad overall.
While the state tax credits are nice, the legislature should be doing more to encourage solar power. The tax exemptions should be extended, and we’d love to see tariff payments be paid in addition to net metering surpluses, as Renewable Energy Credits are in other states. At the very least, the net metering law needs to be amended to force utilities to pay you for yearly surpluses, and interconnection laws need to be vastly simplified and improved.
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