Your 2019 guide to getting solar panels for your home in Hawaii
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Hawaii home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2019 **
The newest news from the Aloha State is the HECO program designed to let anyone with solar panels connect to the grid and get credit for their excess energy. Called "Customer Grid Supply Plus," it allows for home solar without batteries, which can power the home and send excess electricity to the grid, with a caveat or two. It gets kind of complicated, and there are other options for people who do want to install batteries to store solar energy, so read on below to discover more about how it all works.
In general, Hawaii has extremely high electricity costs, so solar can save you a lot of money here. How much money depends on which island you live on and how much electricity you use, but everyone in Hawaii can grab the US federal solar tax credit alongside Hawaii's own state solar tax credit to help them on their way. It's important to know that Hawaii's state government has your back. Even without huge incentives or a perfect net metering program, the state is committed to achieving 100% renewable energy by 2045, and they're gonna need a lot of help form folks like you to do it.
So check out this page full of information about solar panels in Hawaii, and get ready to go solar!
Questions? Our network of solar experts are on call to assist you! Simply sign up for personalized help. You can get discounted pricing as low as $3,000/kW! This is paired with the very strong Hawaii solar panel incentives below.
The Solar Strategy section is focused on the 3 ways of paying for solar in Hawaii, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in Hawaii. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in Hawaii.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Hawaii Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Hawaii|
|Solar Loans in Hawaii|
|Solar PPAs in Hawaii|
|Solar Purchase Payback Time in Hawaii|
|Hawaii Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Hawaii
Figuring out the best way to go solar in Hawaii can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
How to pay for solar panels in Hawaii
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan or lease. As you can see, the purchase option leads to the highest dollar-amount returns over time, but it also requires an up-front investment. We've also estimate the returns if you take a loan to pay for solar, or if you sign up for a PPA.
Hawaii does something a little different than most states when it comes to solar payback. For most people, the easiest option (the one that doesn't involve batteries), is HECO's "Customer Grid Supply Plus" program, aka CGS+. Under the program, your home still gets to use the solar energy your system generates, up to as much as it needs while the sun is shining. But the excess electricity made by your panels goes to HECO, who sends it to other customers. In most states, you get full credit for that electricity, and whatever you end up needing from the utility at night offsets what you've banked up by sending electricity.
In Hawaii, however, you get a reduced-cost credit for that electricity. So while you might be paying $.30 for every kilowatt-hour (kWh), you'll only be getting, say, $.108 per kWh (if you live on Oahu). That makes it hard for us to estimate how much you'll save, because if you're a heavy user of electricity during the day and light at night, you'll actually be saving more than if you have a more typical usage pattern, heavy during "peak" times like afternoons and evenings. The system HECO uses isn't perfect, and there's no telling if they will come up with something better than CGS+, or what exact effects it will have on your usage, or long-term, on your rates.
The US Energy Information Administration shows the average household usage in Hawaii is just over 6,000 kWh per year. That's actually pretty low, which makes sense considering the relatively mild climate. But that 6,000 kWh costs a ton of money, because the average price of electricity is $.30/kWh, compared to $.13/kWh US average.
For all the estimates in this section, we assume that 39% of your solar energy will power your home, and 61% will go to HECO. That represents a pretty standard usage curve that's heavy during peak times. We also assume the compensation for excess energy will remain relatively unchanged, but also that the price you pay for retail energy won't change much over the next 25 years. After all, as Hawaii transitions to 100% clean energy, the costs should actually stabilize, because HECO won't be reliant on the fluctuating, impossible-to-predict prices of imported fuels.
If you're ready to read on about our estimated solar savings for Hawaii, read on to get detailed information about each option.
Option 1: Paying cash for solar
An outright purchase is a very fine way to go solar in Hawaii, and with the combination of two sweet tax credits and savings on your electric bill, you can have your system paid off in just 5 short years. Speaking of electric bill savings, because Hawaii does things differently with CGS+, we've designed a system here that we estimate will make enough electrciity to offset your usage during daylight hours, while not generating so much that you end up with a huge amount being sent to HECO and paid out at a lower-dollar rate.
In our example, you put down $16,000 up front, but by the end of year 1, incentives and energy bill savings will erase a bunch of it. Over 25 years, your system will have produced over $26,000 in income, thnaks to all the money you'll be saving on electricity. But even though that sounds huge, look into the solar loan or HELOC option, because taking a loan to buy an income-generating asset means it'll pay for itself starting on day 1, and you'll actually be making money as you pay the loan off.
Here’s how the numbers pencil out when you pay up front for a 5.2-kW rooftop solar system in Hawaii:
- Installing a typical 5.2-kW solar system should start at about $16,000. Don’t worry, because the two tax credits you're about to get will reduce that by a ton after just 1 year.
- First, take the federal tax credit, equal to 30% of out-of-pocket costs. That's $4,800 off, for a new price of $11,200.
- The Aloha state gives you a nice tax break, too. This 5.2-kW system is eligible for the full $5,000, so now you've only invested $6,200 after year 1.
- On top of the tax credits, you get to save a bundle in electricity costs. Subtract your first year’s energy savings, which we estimate to be about $1,400. That reduces your cost after the first year to be only a little more than $4,800.
- Over the 25-year life of your system, you'll see a total net profit of $26,251, after the system pays for itself.
- And don't forget... your home's value just increased by over $6,000, too (your expected costs after incentives)!
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil fuels. It's like planting 128 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Hawaii. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 2: Using a loan to pay for solar
Did you ever see that Matthew Lesko guy on late-night TV? He had an informercial all about how the government is giving away free money, and he was basically begging people to buy his book that told you how to get all that sweet gubbamint cash. Buying solar with a loan in Hawaii is kinda like that, but, y'know... not insane.
This is without a doubt the best solar option when it comes to return on investment. That’s because it relies on using a bank's money for the purchase price, which you then pay back over time out of the electricity savings caused by the system. We know you hate your electric bill, and in Hawaii, a solar loan will take out a huge chunk of it—enough that it will pay for itself on day 1, because your savings will always be greater than your costs.
The reason this works so well is that you don’t have to put any money down, but you still get all of the incentives that go along with buying solar. You'll get the 30% federal tax credit and the $5,000 Hawaii tax credit, and then you'll start saving on your electric bill. As we mentioned above, HECO's CGS+ program works a little differently than normal, but the numbers come out relatively simply. Here's how it works:
Here’s how the numbers pencil out for a Hawaii solar purchase with a solar loan:
- Installing a typical 5.2-kW solar system should start at about $16,000. That's how big your loan will need to be to cover it.
- The electricity your system will produce will net you about $1,415 off your electric bill in year 1, but your loan payments will total $1,480, for a difference of $65, or about $5.50 per month.
- On top of that, your tax savings for the year will be $9,800 ($4,800 from the feds and $5,000 from Hawaii)! You'll come out $9,770 ahead after year 1, which is so crazy that we're thinking about moving to Hawaii right now.
- You'll never actually spend a penny on loan payments. And after the loan is paid off, your profits stack up just like if you bought the system outright. You'll end up with $20,000+ in profits over our 25-year example.
- On top of the green that will stay in your pocket, your system will mean green for the environment, too. 128 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in Hawaii. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
Hawaii is a state where a solar Power Purchase Agreement isn't a runaway first choice. That's because electricity prices are so high here that paying for solar a different way is monumentally better. That's not saying that a PPA is a bad idea—far from it, actually—and if you don't have a ton of cash or equity in your home, you can still save a good deal of money over the next 25 years.
How a solar PPA works
Solar PPAs are also called "third-party solar," because they're basically billing arrangements under which a third party (your solar installer) owns the solar panels that are installed on your house and sells you the solar energy for a price a little lower than the cost of electricity from the utility company. PPAs work great for people without any equity, income, or cash, because they don't require any down payment.
In Hawaii, you can get a PPA that will save you about $64 per month starting now, which is no small thing. Because we estimate that the price of electrciity will remain relatively stable over the next few decades as the state switches to 100% renewable power, the PPA might not actually save you a ton of money over the long term. That's because most PPA contracts include a clause that raises the per-kWh price you pay by around 2% annually. According to our estimates, that will eventually lead the PPA to ost more than electricity from HECO after aabout 14 years. But hey, if you haven't got equity, cash, or income, there are worse ways to save $64 per month for a decade.
Keep in mind, the numbers above are based on an average home in Hawaii. If you're ready for a custom quote for a solar PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Hawaii Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in Hawaii:
100% by 2045
A Renewable Portfolio Standard (“RPS”) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels.
In 2015, Hawaii kicked its pursuit of renewables into the highest gear possible. The state now has a goal of 100% renewable energy generation by 2045, up from its earlier goal of 40% by 2030.
The 100% goal is being phased in by the following schedules:
- 15% of net electricity sales by December 31, 2015
- 30% of net electricity sales by December 31, 2020
- 40% of net electricity sales by December 31, 2030
- 70% of net electricity sales by December 31, 2040
- 100% of net electricity sales by December 31, 2045
Hawaii is setting the pace for the nation, and it's doing it because the switch to renewables is so necessary. Much of the energy generation in Hawaii is done with imported fuel oil and other fossil generation. That's why the state has such terribly high electricity prices—shipping in all that fossil fuel is expensive.
Hawaii also has a good chance at meeting its 2045 goal, too, considering its natural wind, solar, and geothermal potential. Let's all give a cheer for Hawaii and its forward-thinking governor, David Ige! Hip-hip hooray!
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner. Read more about Renewable Portfolio Standards.
RPS solar carve out
You'd think with a goal of 100% of electricity from renewable source, we might see a specific requirement for solar here, but that's not the case. Not to worry though, since Hawaii has high electricity prices and a great solar tax credit, the possibilities for huge savings with home solar are better here than in almost any other state.
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
Hawaii Electricity Prices
Hawaii electrciity prices fluctuate month by month, because of the state's unique mix of imported and locally-generated energy. For the last year, the average price you pay has been about 30 cents per kilowatt-hour of electricity. 30 cents! That’s over two times than the rates most mainlanders pay!
If you live in Hawaii, we have no doubt that you hate how high your electric bill is every month. And being subject to the fluctuations only hurts more! Hawaii has a goal of 100% renewable energy by 2045, so why not do your part today and get mutlitple quotes for a home solar system.
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
Hawaii Net Metering
Grid Supply Tariff
Hawaii no longer has net metering for solar owners. Instead, HECO has switched to giving homeowners a choice. In Hawaii, you can set up your solar panels under a system called "Customer Self Supply," which means you have to use all the solar energy to power your home (hello, batteries!) or "Customer Grid Supply," which means you send all your solar energy to HECO, and they pay you less than retail prices for it. Finding out which system works bets for you can be complicated, so make sure to talk with a solar expert near you to get help with this complicated decision.
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
Hawaii Interconnection Rules
Standard for most
Even though net metering is gone in Hawaii, getting your system connected to the grid is now much easier than it used to be. That's good news, because it used to be nearly impossible to get solar in some places here.
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Solar Incentives in Hawaii
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 30% of your costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how Hawaii measures up:
Hawaii Solar Power Rebates
Hawaii utility companies offer no rebates for getting solar installed on your home. Usually, we'd be crying in our poi about that, but the state does have a really excellent tax credit that will get you up to $5,000 back when you go solar, so no worries!
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
Hawaii Solar Power Tax Credits
35% or $5,000
Here's where Hawaii wins when it comes to solar. If you buy a solar system in the Aloha state, you'll see 35% of the cost (up to $5,000) come back as a credit at tax time, in addition to the federal tax credit of 30% (with no limit)! When April 15th rolls around, a standard 5-kW system will net you an estimated $11,000 back from both credits, provided you owe at least $6,000 to the feds and $5,000 to the state. These credits reduce your first-year cost of that 5-kW solar installation to just $9,000. Wow.
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Solar Power Performance Payments
Sensible for solar farms only
Hawaii Net Metering is dead, and the "Performance Payment" that is offered is less than retail. It works for large solar farms, because they can earn more by selling power at the special rate than they could on a wholesale market. Home solar is still a great choice in Hawaii even without Performance Payments, because the electricity prices are so insane. Check out the Net Metering section below for more information on selling your power into the grid.
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
We've got a great article if you like to read more about what SRECs are and how to earn them.
Property Tax Exemption
100% HNL only
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, solar panels can save you 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 Excise and Use Taxes for solar panels.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Some argue that solar power adds approximately 20 times your annual electricity bill savings (if you own the system and are not leasing). Other studies seem to indicate a home price premium about equal to solar panel cost, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
Sales Tax Exemption
Hawaii does not have a true sales tax, but 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%.
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
The consensus on Hawaii solar power rebates and incentives
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 hard for us to give Hawaii anything but the full 5-sun rating.
Really though, the state gets such high marks only 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.
With the improvements we recommend, Hawaii would be an A+ for solar. In fact, if your tolerance for messing around with utility company rules is high, it already is. Of course, if you’d like some personalized assistance from someone who’s in your corner, get in touch with us and we’ll have an expert contact you in a jiffy.