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Tax Credits
Updated information about Federal and State Tax credits can be found here.
Originally enacted in 1990, the Hawaii Energy Tax Credits allow individuals or corporations to claim an income tax credit of 20% of the cost of equipment and installation of a wind system and 35% of the cost of equipment and installation of a solar thermal or photovoltaic system.
As a result of SB 855 in 2003, the tax credits were revised and extended to the end of 2007. SB 3162 of 2004, allowed for a credit that exceeds the taxpayer's income tax liability to be carried forward to subsequent years until exhausted. Finally, HB 2957, enacted in June 2006, removed the credit's sunset date, increased the maximum credit for some applications, and eliminated the provision that required new federal tax credits to be deducted from the actual cost before calculating the state tax credit.
For solar thermal energy systems, the maximum allowable credits are as follows:
- Single family residential property is eligible for a credit of 35% of the actual cost or $2,250, whichever is less;
- Multi-family residential property is eligible for a credit of 35% of the actual cost or $350 per unit, whichever is less; and
- Commercial property is eligible for a credit of 35% of the actual cost or $250,000, whichever is less.
For photovoltaic systems, the maximum allowable credits are as follows:
- Single family residential property is eligible for a credit of 35% of the actual cost or $5,000, whichever is less;
- Multi-family residential property is eligible for a credit of 35% of the actual cost or $350 per unit, whichever is less; and
- Commercial property is eligible for a credit of 35% of the actual cost or $500,000, whichever is less.
For wind powered energy systems the maximum allowable credits are as follows:
- Single family residential property is eligible for a credit of 20% of the actual cost or $1,500, whichever is less;
- Multi-family residential property is eligible for a credit of 20% of the actual cost or $200 per unit, whichever is less; and
- Commercial property is eligible for a credit of 20% of the actual cost or $500,000, whichever is less.
Note that the state Capital Goods Excise Tax may not be claimed in conjunction with the state Energy Tax Credit. In addition, for taxable years beginning after December 31, 2005, the dollar amount of any utility rebate must be deducted from the cost of the qualifying system and its installation before applying the state tax credit.
The federal Energy Policy Act of 2005 (H.R. 6) expanded the federal business energy tax credit for solar and geothermal energy property to include fuel cells and microturbines installed in 2006 and 2007, and to hybrid solar lighting systems installed on or after January 1, 2006. These provisions of the tax credit were later extended through December 31, 2008, by Section 207 of the Tax Relief and Health Care Act of 2006 (H.R. 6111). (A 10% federal energy tax credit was available to businesses that invested in or purchased solar or geothermal energy property in the United States prior to January 1, 2006.)
For eligible equipment installed from January 1, 2006, through December 31, 2008, the credit is set at 30% of expenditures for solar technologies, fuel cells and solar hybrid lighting; microturbines are eligible for a 10% credit during this two-year period. For equipment installed on or after January 1, 2009, the tax credit for solar energy property and solar hybrid lighting reverts to 10% and expires for fuel cells and microturbines. The geothermal credit remains unchanged at 10%.
The credit for fuel cells is capped at $500 per 0.5 kilowatt (kW) of capacity. The maximum microturbine credit is $200 per kW of capacity. No maximum is specified for the other technologies.
The Energy Policy Act of 2005 (H.R. 6, Sec. 1335) established a 30% tax credit up to $2,000 for the purchase and installation of residential solar electric and solar water heating property. An individual can take both a 30% credit up to the $2,000 cap for a photovoltaics system and a 30% credit up to a separate $2,000 cap for a solar water heating system. A 30% tax credit up to $500 per 0.5 kilowatt (kW) is also available for fuels cells. Initially scheduled to expire at the end of 2007, the tax credits were extended through December 31, 2008, by Section 206 of the Tax Relief and Health Care Act of 2006 (H.R. 6111).
HELCO Net Metering
Net energy metering is a way to encourage the use of eligible renewable energy electricity generators by residential and commercial customers. Hawaiian Electric Company, Hawaii Electric Light Company and Maui Electric Company support net energy metering as mandated by Hawaii state law. Here is information that we hope will be helpful.
1. What is net energy metering?
If you own or lease an eligible renewable energy generator, you may enter into an agreement with your utility to connect your generator to the utility grid, allowing it to feed surplus electricity into the grid. Net energy metering means that any kilowatt-hours your renewable energy generator feeds into the grid will be subtracted from the kilowatt-hours of electricity you obtain from your utility to determine the net amount of kilowatt-hours. You will be billed only on the net kilowatt-hours. Here is the formula:
Kilowatt-hours from utility
-- Kilowatt-hours self-generated and fed to the grid
= Net kilowatt-hours2. What’s the value of net energy metering?
Net energy metering allows you to get more value from the electricity you generate with your renewable system. It allows you to offset the purchase of electricity from your utility against excess electricity produced by your renewable system at the retail rate.
Without net metering, the excess electricity you produce from your renewable system would be worth less. You would use the electricity generated by your system to supply your own needs and purchase any additional power you need at the regular retail rate. At certain times, your system may generate excess power that it feeds into the grid. Without net metering, if you had a power purchase agreement from your electric utility, you would be compensated for that power only at the lower wholesale rate.
3. What types of generators are eligible?
Hawaii law specifies that net energy metering applies to solar, wind, biomass or hydroelectric generating facilities, or a hybrid system of two or more of these technologies, with a capacity up to 50 kilowatts. The Public Utilities Commission (PUC), by rule or order, can increase the maximum allowable capacity beyond 50 kW. (For more information about these technologies, visit the website of the State of Hawaii, Department of Business, Economic Development and Tourism, Strategic Industries Division, Energy Branch).
4. I am installing a solar water heating system. Does that qualify for net energy metering?
No. Net energy metering applies only to systems that generate electricity. Solar electric systems, known as photovoltaics, use solar cells to convert the sun’s light into electricity. By contrast, solar water-heating systems use heat from the sun directly to heat water for your use. Since solar water-heating systems do not produce electricity, they cannot feed into the grid and do not qualify for net energy metering.
5. How many customers can sign up?
Under the law, the cap on the total power producing capacity of generators signed up to take advantage of net energy metering is set at 0.5 percent of each electric utility’s system peak demand. The PUC, by rule or order, can increase this percentage. The actual number of customers who can sign up before this cap is reached depends on the combined size of the individual renewable energy systems.
6. Why is the number of customers who may sign up limited?
The cap is provided in the law. When customers use net energy metering, they are getting credit at the retail rate for self-produced electricity. The retail electric rate that the utility charges includes recovery of not only the cost of producing electricity, but also the cost of facilities (e.g., lines, substations, etc.) to deliver power to customers, as well as the cost of maintaining and operating these facilities, and administrative and other operating costs, such as billing.
Those who produce their own electricity on site only incur the cost of generating the electricity, not additional delivery and other costs. By receiving credit at the higher retail rate, in essence, the customer who net meters is receiving a subsidy from all remaining customers. By providing a cap in the law, the subsidy can be kept to a reasonable level and still help to support small renewable energy producers.
7. Do I need a new meter and, if so, do I need to pay for it?
New and existing net metering systems will require new meters able to track the amounts of electricity returned to the grid. Your electric utility will provide the meters at no cost to you. You may be required to provide space for additional metering sockets if added meters are required.
8. What happens to my electric bill if I generate more electricity than I use from the utility?
Billing is on a monthly basis and you are responsible for a minimum charge even if you generate more electricity than you use from the utility. The minimum charge you will pay covers some of the fixed costs of maintaining your electric account, including reading your meter and billing. The net energy metering law now specifies a 12-month reconciliation period and allows monthly carry-over of unused credits (excess net generation expressed as a monetary value) since the last 12-month reconciliation. Unused credits left at the end of each 12-month reconciliation period may not be carried over to the next period. According to the law, only if you have a purchase power agreement (a contract different from the net energy metering agreement) with the utility, can you be paid for excess kilowatt-hours, at wholesale rates.
9. What do I have to do to sign up?
See this handout that describes the steps you can take.
In general, for systems up to 10 kilowatts, you will need to enter into a simple customer agreement with the utility which may be completed after your system is installed. And you must obtain an inspection by a licensed electrical contractor to certify your renewable system meets the necessary safety standards. You can download the forms you need. Forms are also available from your electric utility.For systems over 10 kilowatts and up to 50 kilowatts, your electric utility will perform an interconnection review. Unless more detailed study is needed, this review will be at no charge. It is highly recommended that you contact your utility early in your planning process. Additional costs for facilities needed to complete the interconnection are the responsibility of the customer. Of course, you must obtain any building permits needed in your county.
Also for systems over 10 kilowatts and up to 50 kilowatts, you must enter into a more detailed customer agreement that specifies the technical requirements necessary to ensure your system can safely connect to the utility grid. You will also need to provide proof of a commercial general liability policy. The agreement will require you and the licensed electrical contractor who installed your system to certify that your renewable energy systems meets the necessary safety standards and that an electrical permit was issued. Download the forms you need. Forms are also available from your electric utility.
For photovoltaic systems up to 50 kilowatts, the interconnection process is more streamlined if your system has an approved DC-AC inverter. Here is a list of approved inverters.
10. Why are these requirements necessary?
If your generator mistakenly back-feeds power into an electric line that utility crews think is de-energized, the crews can be seriously injured or even killed. The interconnection study also helps assure that you and other customers continue to receive reliable service and good power quality, avoiding potentially disruptive swings in voltage levels that could damage your equipment and that of the utilities.
Whether you are installing a new renewable energy generator or considering net energy metering for an existing generator, compliance with all safety and other codes is required.
11. How are requirements established for net energy metering?
The net energy metering law specifies that the Public Utilities Commission -- by order, tariff, or rule -- shall set forth safety, performance, and reliability standards and establish qualifications for exemption from requirements for additional controls, tests, or liability insurance for systems greater than 10 kilowatts. The utilities proposed such initial standards, which were approved by order of the Commission and reflected in tariff filings in June 2005.
12. How can I get more information about renewable energy systems that might qualify for net energy metering in Hawaii?
Please call for more information:
HECO (Oahu) 543-4760 HELCO (Big Island) 969-0343
MECO (Maui) 871-8461 or (toll-free from Molokai and Lanai) 1-877-871-8461
For information on how to obtain a county building permit (if needed), call 523-4505 (Oahu), 961-8331 (Hilo), 327-3520 (Kona), 270-7250 (Maui County).Here is a printable brochure (in PDF format) version of this information.
Peter Shackelford, President • P.O. Box 278 • Pa‘auilo, Hawai‘i 96776 • Ph 808-775-0852 • email: res@ilhawaii.net