Hawaii Solar Rebates and Incentives

How Much Can You Save on Solar in Hawaii?

Key Details

• The Federal Solar Tax Credit in Hawaii offers a 30% tax credit for system costs
• Hawaii's Battery Bonus program provides incentive payments to homeowners with new or existing solar systems
• Commercial businesses may qualify for the City of Kauai Commercial Alternative Energy Facilities Exemption Offer
• The Green Energy Money Saver Program (GEMS) offers loans of up to 20 years with a fixed annual rate

Hawaii receives nearly-round sunlight, with an average of about 8.41 hours of sunlight each day. While 72.4% of average daily sunlight in Hawaii is sunny, 27.6% involves sun of low intensity.

As of 2023, Hawaii generates 1,560 MW of solar energy, making it the state with the 19th-highest solar installation in the US. The state solar system services 401,900 homes and provides about 2,241 jobs.

Hawaii’s total energy consumption per capita is 160 Million Btu. According to the US Total Energy Consumption Estimates, Hawaii residents consumed the least energy in the nation as of 2020. Electricity demand is equally low across the commercial sector, accounting for 27.1 million Btu.

How Cheap or Affordable is Solar Energy in Hawaii?

According to the US Energy Information Administration (EIA), the average retail price of grid electricity in Hawaii is 30.31 cents/kWh. In comparison, installing a solar panel costs an average of $2.67 per watt before applying for renewable energy credits.

As of 2023, the average cost of installing a 6kw solar system in Hawaii is $16,020. However, homeowners in Hawaii can save as much as $4,806 with the federal solar tax credit.

Federal Solar Tax Credit in Hawaii

The federal solar tax credit is a deduction in the tax a user ought to pay for consuming solar energy. The tax credit is worth 30% and is deductible from the total system cost of a user’s solar project.

For instance, a user with a gross solar PV cost of $40,000 is entitled to a tax credit of $12,000. If you are unable to claim your tax credit within a single tax year, you can claim it over a period of 5 years. There is no maximum tax credit with the federal solar tax incentive.

The federal solar tax credit is aimed at encouraging full use of solar power across the United States by 2045. In August 2022, the solar tax credit increased from 26% to 30% for solar installations from 2022 to 2032.

Following the Congress extension of the Investment Tax Credit (ITC), solar PV systems installed on or before December 2019 are also eligible for the new tax credit.

Except there is an alteration to the principle or an extension, the 30% tax credit will remain active till the end of 2033. Also, the federal tax rebate system will expire by 2035. Until then, users in Hawaii can enjoy solar energy incentives.

The rate schedule for the reviewed federal tax credit is as follows:

• 30% credit for solar installations from August 2022 to 2032
• 26% credit for solar installations between 2020 and 2021
• 26% credit for solar installations in 2033
• 22% credit for solar installations in 2034

The reviewed federal tax rebate makes solar energy more affordable for homeowners in Hawaii. Granted that the cost of installing a solar system in Hawaii is cheaper than in most other states, the tax credit system puts solar energy further within the reach of residents.

The renewable solar energy incentives available in Hawaii save homeowners as much as $1000 each year.

Eligibility

To be eligible for the federal solar panel tax credit in Hawaii, you must fulfill the following:

• Have a renewable solar panel system installed in your primary or secondary residence. You can be eligible for a federal tax credit if you install the solar panel in a home you purchase or use for vacation. In as much as you own the solar PV system, you are qualified to apply for a rebate. If you are a renter, you are not eligible to apply for the federal tax credit. </p>

• Ensure the solar PV system is in use for the first time. This is essential for the purchased property. If you purchase a home without an existing solar system, you are eligible to apply. However, you cannot claim a solar tax credit in Hawaii if you own a property and intend to use it for rental purposes. Such a property is eligible under the Business ITC but not as a residential property. </p>

• Speak with a tax expert for added guidance.

How do I claim the Federal Solar Tax Credit in Hawaii?

Step 1. Install your solar panel system

Step 2. Fill out the IRS form 5965 to claim your solar energy tax credits

Step 3. Provide all required tax and personal information.

Step 4. Add all federal incentives and rebates on your solar panel

Step 5. File your annual tax return. Note that the federal solar tax credit in Hawaii can only be applied to your renewable energy liability. It is not payable to the user.

Net Energy Metering in Hawaii

As of 2023, Net energy metering (NEM) is out of operation in Hawaii.

In 2001, the state of Hawaii adopted a net metering system to encourage renewable energy use. However, the state electricity utility, Hawaiian Electric Industries (HEI), reported that the available state facilities could not contain the power sent to the grid. Consequently, the state ended the redistribution of solar energy to the interconnected grid.

Instead, the state encouraged homeowners to adopt the battery storage method through a program called Battery Bonus.

Battery bonus is a cash incentive and bills credit system that rewards users for adding energy storage to their new or old rooftop solar system. For every kilowatt stored, users are rewarded $850.

The solar power incentive is capped at 15 MW for panels on Maui and 40 MW for users on Oahu. Regardless of the maximum, the Battery Bonus helped the Hawaiian state toward its goal of achieving clean energy use by 2045.

With added solar batteries, users can generate and store power for their respective use. As a result, homeowners in Hawaii have shifted from generating power for sale to storing generated power for personal use. The Battery Bonus incentives system has helped Hawaii sustain a balance between homeowners and the Aloha state target for clean energy.

How the Hawaiian Battery Bonus Works

In 2021, the Hawaiian Public Utilities Commission (PUC) approved some adjustments to the Battery Bonus program. Each user is allowed a committed capacity of two hours, 30 minutes each day from 6 pm to 8.30 pm.

Within this time, a 15kW battery can commit up to 10kW. In addition, the incentive is calculated based on the amount of capacity committed.

For example, a user who commits 5kW gets $4,250. In extreme weather conditions, when the battery cannot commit up to the required capacity, there is no penalty, granted that the added battery is connected to a PV generation with a ratio of 1 to 2 kW of capacity committed.

How to Apply for the Hawaiian Battery Bonus Program

Any homeowner with a new or existing solar system can partake in the Battery Bonus program in Hawaii. You can also combine the Battery Bonus incentive with federal or state rebates in Hawaii. To qualify for the Battery Bonus reward, you must:

• Add batteries of any suitable size to your solar system or install a new solar system that comes with storage. (Use only trusted solar contractors)
• Be willing to use or export energy in the battery at the specified amount within the chosen two-hour frame between 6 pm and 8.30 pm (including weekends and holidays)
• Run your solar system for seven consecutive days to help the company check the performance of the battery and its commitment capacity. This information is necessary to determine the incentive costs.
• Provide solar system data and your personal information for validation
• Provide proof of your permit application
• Provide a signed W9 form. The signatory must be the owner of the battery. Complete the form on DocuSign or forward the signed W9 form to Hawaiian Electric, P.O Box 2750, Honolulu, Hl 96840, Attn: Al18-SG.

Note: The Hawaiian Battery Bonus program is intended to run for ten years. And an initial commitment will span February 28, 2024, for users on Oahu and December 31, 2024, for users on Maui.

Hawaii Property Tax Exemption

Hawaii has two active property tax exemption programs for renewable energy power facilities in the state. The programs are hosted in two of the state’s major counties – Kauai and Honolulu. And they operate on a distinct set of rules.

County of Kauai Commercial Alternative Energy Facilities Exemption

As of 2023, commercial institutions in Kauai are eligible for a 100% exemption from property taxes on their alternative energy facilities.

The City of Kauai County Code Chapter 5A details the specific benefits under the Commercial Alternative Energy Exemption. All renewable energy facilities, including solar energy, biomass, methane, geothermal and hydroelectric energy, are listed as eligible for exemption.

Commercial, according to the ordinance, means that the facility sells at least 25% of renewable energy produced to the electric utility.

Another perk that comes with the Kauai exemption program is that energy generation improvements are also incorporated into the exemption. Energy generation improvements are all structures, equipment, generators, machinery, and associated transmission lines on the facility. For such improvements to be considered, they must be essential for energy generation and located on or attached to the property to be exempted.

How to Enroll for the City of Kauai Commercial Alternative Energy Facilities Exemption

Apply to the city director of finance with the following information and documents:

• Your personal information such as name and contact address
• Location of your commercial renewable energy facility
• The site plan of the property or energy generation facility
• A copy of the construction permit issued on the facility
• Photographs of all associated generation improvements
• Available copies of all contracts with the state electric utility

Applications for an exemption should be done before or on September 30th of each year. You can complete the application in person or by proxy through a legal representative.

After application, the state assesses your facility to confirm its eligibility for exemption. In addition to generating at least 25% for sale, the facility must have generated gross income for one calendar year.

If the property qualifies, it enjoys a 100% exemption from property tax. Also, the land on which the facility is sited is exempted from property tax by 50%.

As an alternative, the property owner can opt for exemption by commutation. In this plan, the facility is made to pay 1% of the gross income generated in the previous tax year.

City and County of Honolulu Real Property Tax Exemption for Alternative Energy Improvements

The City and County of Honolulu RPT exempts all property associated with renewable energy from taxes. First passed in 2009 and amended in 2011, the bill considers improvements to be all added modifications or repair work done on an alternative energy property.

Residents in Honolulu can enjoy zero taxation on added solar property for a term of 25 years. Eligible devices include Solar Photovoltaic, biomass, thermal energy and landfill gas, among others.

Energy facilities sourced from nuclear fossils and geothermal energy are not considered for exemption in this solar energy incentives program.

Furthermore, a strong condition for eligibility is that the improvements done on the alternative energy generation property must facilitate energy generation. Unlike the City of Kauai commercial tax rebate program, the Honolulu RPT exemption covers all solar properties, whether for commercial value or for personal use.

If you are eligible for the Improvements tax exemption, you can fill out a claim form. You also need to submit the following information:

• Applicant’s personal information
• Applicant’s contact information
• Parcel ID (Tax Map Key)
• A copy of the recorded lease agreement if the energy generation property is rented
• A document stating the total cost of installation, date, and life expectancy of the improvement
• A plot plan showing the exact location of the improvement on the solar facility
• The total land area of the solar facility.

Note: The Real Property Department does not allow applicants to submit this claim via email. All applications must be made before or by September 30, before the tax year of exemption. Applicants must submit the claim and all necessary documents via post to either of their offices below.

Real Property Assessment Division
842 Bethel Street, Basement
Honolulu, Hl 96813

Real Property Assessment Division
1000 Uluohia Street #206
Kapolei, Hl 96707

Green Energy Money Saver Program in Hawaii

The Green Energy Money Saver Program (GEMS) offers homeowners loans that can stretch for as long as 20 years at a fixed annual rate of 5.5%. This renewable energy rebate system is hosted by the Hawaii Green Infrastructure Authority (HGIA). It finances low-income and middle-income homeowners and renters willing to go green.

Besides the ease of repayment, GEMS is unique in its method because it charges the bill on the utility meter, and not the user. This way, both landlord and renter can contribute to repayment, making it easier for all parties involved. For easy processing, the HGIA partners with registered loan servicers in Hawaii who serve as intermediaries between the utility and the HGIA.

Eligibility for GEMS

To be eligible for GEMS in Hawaii:

• The applicant must be on Maui Electric or Hawaii Electric
• The applicant must have been an active user of the utility 6 months before the application
• The applicant must not have any record of disconnection or disconnect notice within the past 12 months
• If the applicant is a renter, they must have the documented approval of the landlord
• The energy improvement project must be an approved one
• The project installation must be done by a GEMS-approved contractor
• The applicant can afford 10% savings over their loan after installation

How to Apply for GEMS

Step 1. Visit the official HGIA application page.

Step 2. Select which option describes you: Homeowner, Tenant, Landlord, or Solar Lease.

Step 3. Fill out the form online

• You can also print out the form. Make sure to download the right application packet for you.
• If you are a homeowner, download the homeowner printable form.
• If you are a renter, download the renter printable form.
• If you are a landlord, download the landlord printable form.

State Sales Tax Exemptions in Hawaii

As of 2023, Hawaii has no sales tax exemptions for solar equipment in Hawaii, either partial or full. Sales tax exemptions often involve a 50 to 100% energy rebate on solar panels with high generating capacities.

However, Hawaii has a state tax credit system that offers homeowners a 35% rebate on their solar installation costs. The 35% credit is applied to their personal income tax for the year. Renewable Energy Technologies Income Tax Credit (RETITC) is open to all purchased residential solar systems in Hawaii. It is capped at $5,000.

There are also several other relief programs and solar energy incentives, including low-interest loans and tax credits in Hawaii. With the available Hawaii renewable energy rebate programs, the state is on a progressive drive toward clean energy by 2045.

Renewable Energy in Hawaii

Renewable energy in Hawaii is sourced mostly from solar power. Solar power accounts for 58% of Hawaii’s renewable energy and 17% of total energy generation in the state. Onshore and offshore wind sources are also available for renewable energy generation. Wind-generated energy makes up 20% of the state’s renewable energy and 6% of its overall electricity supply. Also, biomass, including agricultural wastes from sugarcane, provides up to 10% of Hawaii’s renewable energy and 3% of total energy consumption.

Hawaii’s energy is mostly generated from petroleum products. However, thanks to renewable energy incentives in Hawaii, the state has witnessed a steady growth in solar energy adoption. In 2014, the Aloha state recorded an unprecedented dip in petroleum-generated energy. In 2022, the percentage dropped to 62%.

The Hawaiian state government has continued to make efforts to increase renewable energy capacity and use in the state. Although petroleum accounts for a larger percentage of energy, 29% of Hawaii’s electricity is generated from renewable sources.

To further underscore its commitment to renewable energy use in Hawaii, the Hawaiian government allows residents to purchase 100% of their electricity from renewable energy sources.

Going by the 2015 amendment of the Renewable Portfolio Standard (RPS), residents are required to switch to 100% renewable energy by 2045.