Hawaii Solar

Tax Credits, Incentives and Rebates

In Hawaii, electricity prices are higher compared to states on the U.S. mainland. As a result, homeowners can achieve significant savings by generating their own energy using solar panels. The Aloha State provides several incentives for those who choose to go solar, including a solar tax credit of up to $5,000. 

State Solar Incentives

Hawaii offers a 35% state tax credit for wind and solar energy systems. This credit can significantly reduce the cost of installing renewable energy systems. Residents of Honolulu who own solar systems benefit from a property tax exemption. This incentive encourages homeowners to invest in solar energy. While there are no direct solar rebates in the state as of 2023, Hawaiian Electric provides a rebate program for battery systems. If you’re adding a battery to your new or existing solar array, this program can help offset the costs.

Renewable Energy Technologies Income Tax Credit

Incentive Value: The RETITC provides a tax credit of 35% of the solar photovoltaic (PV) installation costs, up to $5,000.

Frequency: This tax credit is a single-use benefit.

Key Details:

The RETITC is the primary incentive for Hawaii taxpayers who own solar panels.

Introduced by the federal government in 2009, it covers both solar and wind energy systems with a capacity of up to 5,000 kW.

Solar water heating and photovoltaic systems qualify for a 35% income tax credit, while wind turbines qualify for a 20% tax credit.

Example Calculation: Suppose you install a 6-kW solar PV system priced at $16,740. Here’s how the tax incentives apply:

Federal tax credit: $5,022

Hawaii state tax credit: $5,000

The total tax incentive in this example is $10,022, reducing the net cost of the PV system to $6,718. Multi-family properties also qualify, with a maximum incentive of $350 per dwelling.

To claim the RETITC, submit the N-342 Forms available for download on the Hawaii Department of Taxation website. 

Hawaiian Electric Battery Bonus Program

  • Incentive Value: The HECO Battery Bonus Program provides an upfront cash incentive of $850 per kilowatt (kW) when you add energy storage to a new or existing solar system. Additionally, you receive a monthly incentive of $5/kW for 10 years.

  • Participation Details:

    • To qualify for the incentive, you must commit to using battery capacity during a specific two-hour period between 6:00 p.m. and 8:30 p.m. This commitment ensures optimal grid support.
    • You have flexibility in how much of your solar battery capacity you commit. For instance, if you install a 10-kW battery, you can choose to commit 5 kW to the program while keeping the other 5 kW available for your use. However, incentives apply only to the storage capacity that actively participates in the program.

  • Availability:

    • The HECO solar battery program is accessible in the islands of Oahu and Maui, making it widely available to most of the Hawaiian population.
    • The program concludes once the cumulative storage capacity reaches 40 megawatts in Oahu and 15 megawatts in Maui.

This program encourages sustainable energy practices while providing financial benefits to homeowners.

Green Energy Money Saver (GEMS) On-Bill Program

Incentive Value: The GEMS program provides low-interest loans for homeowners and renters who are HECO customers. These loans can be used for solar energy systems and various energy efficiency measures.

Interest Rate: Borrowers benefit from a fixed interest rate of 5.5%.

Repayment Period: The repayment period for GEMS loans extends up to 20 years.

Hawaii Net Metering Explained

  1. Customer Grid Supply Plus Tariff (CGS Plus):

    • Under this tariff, homeowners with solar panels receive a monthly bill credit for any excess solar generation they send to the grid.
    • The feed-in tariff varies by island, and the solar system must allow remote control by the utility company to ensure grid stability.

  2. Smart Export Tariff:

    • Specifically designed for homeowners with renewable generation systems equipped with energy storage.
    • You receive power bill credits for providing stored energy to the grid during times of high demand.

Net Energy Metering History:

  • Hawaii offered net energy metering from 2001 to 2015, during which over 60,000 solar owners participated.
  • Residents who joined the program during its active period can expand their home solar systems with additional PV modules or battery storage.
  • However, capacity expansions are allowed only for on-site consumption, not for grid export.

Cost Comparison:

  • Both the CGS Plus and Smart Export Tariffs are significantly lower than the retail rates charged in Hawaii.
  • To maximize savings, focus on using as much solar electricity as possible rather than exporting excess energy to the grid.

Electricity Price in Hawaii (February 2023):

  • Hawaii’s average electricity price was 44.24 cents/kWh, according to the U.S. Energy Information Administration.
  • CGS Plus Tariffs range from 10.08 to 20.80 cents/kWh, depending on the island.
  • Smart Export Tariffs range from 11 to 20.79 cents/kWh, also varying by island.

Remember to explore these options to optimize your solar investment

How To Enroll in Net Metering

  • Hawaiian Electric (HECO): HECO supplies electricity to 95% of Hawaii residents. For detailed information about their private rooftop solar programs, visit their website.
  • Kauai Island Utility Cooperative (KIUC): KIUC serves 35,000 customers on the island of Kauai. Explore their rooftop solar offerings on their website.

Feel free to check out their respective websites for more insights into their solar initiatives!

Federal Solar Tax Credit

  • The ITC is available in all 50 states, allowing homeowners and businesses to claim 30% of project costs as a federal tax credit when they install solar panels.
  • This tax credit applies to property owners and occupants where solar panels are installed. It’s also available for secondary homes but not for rental properties or other investments.
  • Our solar cost survey across states reveals that as of 2023, the average cost of home solar systems in Hawaii is $2.79 per watt.
  • For a 10-kilowatt solar power system, the total cost would be $27,900.
  • With the solar ITC, you can claim $8,370, reducing the net cost of the system to $19,530.
  • Remember to include the Solar Investment Tax Credit on your annual IRS filing corresponding to the year of your photovoltaic (PV) system installation. Use Form 5695 when submitting your tax return.

Make the most of this incentive while contributing to clean energy!

Estimated Solar Savings in Hawaii

  1. Solar Generation:

    • With abundant sunshine in Hawaii, a 6-kW solar system can generate more than 10,000 kWh per year.

  2. Energy Consumption and Grid Export:

    • If you consume 30% of this solar energy (3,000 kWh), your direct savings amount to $1,302.90 (at the residential electricity price of 43.43 cents/kWh).
    • The remaining 70% (7,000 kWh) exported to the grid qualifies for the CGS Plus Tariff at 10.08 cents/kWh, resulting in an additional $705.60.

  3. Total Annual Savings:

    • Combining direct savings and grid exports, your 6-kW solar panel system saves you a total of $2,008.50 in annual electricity bills.

  4. System Cost and Tax Credits:

    • Normally, a solar system of this size would cost around $16,740 in Hawaii.
    • Thanks to the 30% federal tax credit and the Hawaii income tax credit (amounting to $5,000), the net system cost is reduced to only $6,718.

  5. Payback Period:

    • With the net cost of $6,718 and annual savings of $2,008.50, the payback period calculates to approximately 3.3 years.
    • Keep in mind that if you consume a higher percentage of the electricity generated by your solar panels, annual savings increase, and the payback period becomes even shorter.

  6. Long-Term Perspective:

    • Remember that the best solar panels have a service life of more than 25 years and are fully covered by a product warranty.
    • Considering this lifespan, the payback period is only a fraction of their overall usage.

Investing in solar energy not only saves you money but also contributes to a sustainable future!

The Bottom Line

  1. Solar Generation:

    • With abundant sunshine in Hawaii, a 6-kW solar system can generate more than 10,000 kWh per year.

  2. Energy Consumption and Grid Export:

    • If you consume 30% of this solar energy (3,000 kWh), your direct savings amount to $1,302.90 (at the residential electricity price of 43.43 cents/kWh).
    • The remaining 70% (7,000 kWh) exported to the grid qualifies for the CGS Plus Tariff at 10.08 cents/kWh, resulting in an additional $705.60.

  3. Total Annual Savings:

    • Combining direct savings and grid exports, your 6-kW solar panel system saves you a total of $2,008.50 in annual electricity bills.

  4. System Cost and Tax Credits:

    • Normally, a solar system of this size would cost around $16,740 in Hawaii.
    • Thanks to the 30% federal tax credit and the Hawaii income tax credit (amounting to $5,000), the net system cost is reduced to only $6,718.

  5. Payback Period:

    • With the net cost of $6,718 and annual savings of $2,008.50, the payback period calculates to approximately 3.3 years.
    • Keep in mind that if you consume a higher percentage of the electricity generated by your solar panels, annual savings increase, and the payback period becomes even shorter.

  6. Long-Term Perspective:

    • Remember that the best solar panels have a service life of more than 25 years and are fully covered by a product warranty.
    • Considering this lifespan, the payback period is only a fraction of their overall usage.

Investing in solar energy not only saves you money but also contributes to a sustainable future!