Solar in Hawaii Growing Beyond State’s Small Stature

Who would have thought that one of the smallest states in the country has turned into a leader in solar energy. has quietly become a presence in the solar market due to market demands and innovation legislative action.

First, how good has 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 per person than California showing just how widely solar power has been accepted throughout the state. (Source: ). 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 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 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 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 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 …

Source: Solar in Hawaii Growing Beyond State’s Small Stature.