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O’ahu Solar Power for your house – rebates, tax credits, savings

Avatar for Dave Llorens
Written by
Published on 05/25/2012
Updated 02/17/2017

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From Honolulu to Waikīkī to Pearl Harbor –not to mention 75% of Hawaii’s population– when most people think of Hawaii, they are thinking of O’ahu. Little do they know that when they think of O’ahu, they should be thinking of solar power. Why? Oh, only because O’ahu just may be the most cost-effective place in the country to start generating your own electricity with a solar power system. Let’s see why that is, exactly …

Hawaii’s State Legislation

Hawaii has made some solid progress in statewide legislation promoting renewable energy. A healthy solar tax credit helps fund installation of your solar power system, the property tax exemption saves you taxes on the back end, and an adequate Renewable Portfolio Standard (“RPS”) makes sure that things keep chugging in the right direction. There is, however, a great deal of work yet to be done. The legislature should work on strengthening net metering, particularly doing away with the forfeiture of surplus credit after 12 months; improve interconnection standards, making it easier to get you onto the grid; and exempt solar power systems from all Excise and Use taxes.

Hawaii’s Renewables Portfolio Standard

A Renewables Portfolio Standard (“RPS”) sets targets for environmentally friendly power generation. The heart of an RPS is targets for energy from renewable resources like solar power, but the RPS may also include targets for local production and distributed generation (i.e., electricity not from Earth Killing Mega Power Plant, Inc.).

Hawaii has a strong Renewables Portfolio Standard that mandates 40% of all energy must come from renewable sources by 2030. The 40% goal will be phased in over several periods. Current renewable production is around 10%, and is scheduled to reach 15% by 2015. 40% is a strong overall number, but it needs to be supported by specific mandates for the most sustainable and least environmentally detrimental methods of production. Like residential solar systems!

A strong RPS is critical to strong renewable energy policy and solar power rebates. Utility companies don’t want your bill to go down, and they certainly don’t want to go the trouble of tracking your production and crediting your surplus. So why are they doing it? Because the state makes them, that’s why. If there were no RPS keeping politicians and utilities in check, everyone would go back to getting the free passes they had for decades. On the other hand, if the RPS is strengthened to contain strong specific mandates for top-tier production methods like residential solar power systems, you’ll see incentives for environmentally friendly, cost-effective energy take even deeper root.

Hawaii Solar Power Performance Payments

Hawaii does technically offer a cash-based Feed-in Tariff (“FIT”) that will pay you for electricity production. If you opt into the program, your utility will pay you about 22 cents for every surplus kilowatt-hour (“kwh”) you feed back into the grid (i.e., if you produce more electricity than you use).

Much to our (and your wallet’s) sadness, the FIT is an optional program that replaces net metering, which we’ll get to in a second. It’s one or the other, sadly. The FIT payments make sense if you’ve got some serious acres that you want to build a solar farm on, but for a single-home residential system like yours, the net metering program described below is definitely the better option for saving money. You won’t turn a profit, but you will get bill credits at the full retail rates which, as we just saw, are way above $0.22/kwh.

The most economically and and environmentally advantageous plan is to size your solar system appropriately to make sure you don’t generate more electricity than you use, and then opt into the net metering program to get the full retail rate on any little bits of extra power you produce. The expert solar installers we partner with can (and will!) help you plan a system that is properly sized for your home and energy needs.

Hawaii Solar Power Tax Credits

You’ll be smiling when tax day comes around next year if you install a solar power system. It will almost be a holiday in fact, when you see that big fat check.

How big depends on your costs. When you install your solar power system in Hawaii, you’re entitled to a tax credit of 35% of your costs for the system (including installation), up to a maximum of $5,000.

Tax Exemptions

While we’re on the subject of taxes, we should talk quickly about tax exemptions. Installing a solar power system increases your home’s value. Exactly how much your home’s value rises depends on how much you save on your energy bill, but with the price you’re paying for electricity it’s safe to say the number is going to be pretty darn big.

Normally, as you well know, you have to pay property taxes in proportion to the increase in value of your home. Many states have a full 100% property tax exemption for the increase to your home’s value. Much to our dismay Hawaii has no such statewide exemption. Luckily for those of you in O’ahu however, everyone in the county of Honolulu (that’s all of you) is entitled to a full 100% property tax exemption for 25 years after the installation of your solar power system. Whew! we were worried there for a second.

Not even Honolulu exempts solar power system purchase and installation from the General Excise Tax (“GET”) unfortunately. You may barely notice the GET in most transactions, but the taxes that businesses pass on to you can add up on large transactions. Including local surcharges, the GET adds 4.712% to prices in O’ahu. That would save most most home-owners converting to solar about $1,000, give or take a bit depending on what size system you install.

Utility Prices

Wowzers! Electricity rates hovered around 32.6 cents per kilowatt-hour (“kwh”) for residents of O’ahu in April 2012. That number is actually down from record highs closer to 37 cents/kwh over the winter! While current rates may be down from those records, they are up, way way up, from what you were paying not too long ago. In 2010 the average cost of electricity for residential customers in O’ahu was 25.41 cents/kwh. That’s 28% less than your paying now, and an absurd 45.3% less than the winter highs. For a direct year-over-year comparison, compare December 2010 (35.1 c/kwh) and December 2011 (24.85 c/kwh); an increase of 41%.

To put this in perspective, utility rates usually rise at a rate around 1.5% per year. So the current rate of increase in O’ahu isn’t just high – it’s stratospheric!

Heck, folks were worried when national averages rose by 4% in 2011. At the rate your electric bill is rising, you’ll be paying north of $0.50/kwh before you know it. All of which is to say – man oh man, if I lived on O’ahu I’d sure be looking into generating my own power! I wonder if there is a way that I can eliminate most of my electric bill and help reduce greenhouse gas emissions … Wait. What’s that? Solar power can do both of those? And the state will help me pay to install it? Tell me more!

Net Metering and Interconnection

So, what exactly is this net metering program you should be choosing over the FIT program? Just like FIT, net metering requires the utility to track how much power you produce and consume. If you generate more power than you use you’ll get a credit on your next bill at the full retail rate. Credits can be carried over to bill for up to 12 months.

All of that is great. Awesome really. What’s not so hot is what happens to any credits you’ve got stored up after 12 months of rollover; they go back to the utility without compensation. Say what?! That’s some seriously inequitable stuff right there. You go and do some cool stuff for the planet and for your bank account, and the giant utility gets to keep some of your extra savings? We think that’s nonsense. We think that you think that’s nonsense also, and that you should give your state legislators a call to tell them so.

Depending on where you live you may have trouble getting hooked up to the grid to take advantage of net metering because of Hawaii’s poor Interconnection standards. We give the state legislature some credit for recognizing the need for more customer-friendly standards and attempting to simplify procedures for small residential power systems. Really, we do. We can’t commend, however, the fact that the process is still too far complicated, far too limited, and that despite the Public Utilities Commission’s 2011 attempt to reduce such needless expenses, you may still be required to pay for an expensive Interconnection Requirements Study. Even if you can get connected, required installation of an external disconnect switch and mandated insurance coverage is going to cut into your savings. Now sure, you are going to have a LOT of savings, but the utilities have a LOT of fossil-fuel backed profits, and we’d rather see the money going to you. Solid interconnection standards are an easy way to encourage and streamline the transition to renewable energy. It’s just plain silly to ignore such an easy fix.

Example 5kW (5000 Watt DC STC) Solar System Return on Investment in O’ahu

  • We start with an average price of $5/watt, or $25,000 (costs might vary a bit in your area). Fear not! That number is going down fast.
  • The state solar tax credit cuts $5,000 off the bill, for a new price of $20,000 already!
  • Next we take away the federal solar tax credit. This credit is calculated after the state tax credit is figured in, so we subtract 20% of $20,000, or another $6,000. Your new price is an even $14,000.
  • After accounting for both tax credits we subtract your yearly energy savings – a whopping $2,416! Your cost after year 1 is now just $11,584.
  • Your home’s value has already increased by $48,313 – more than 4 times your out-of-pocket costs for the system. And remember. That nearly 50 grand increase is exempt from property taxes for 25 years.
  • Best of all, with that low year 1 cost and those sky-high electricity bill savings, your solar power system pays for itself in just 5 short years!
  • Don’t forget about all those environmental benefits! By not using all that fossil-fuel generated electricity, you’ve done the planet a service equal to planting 131 trees.

If you’re anything like us, you’re ready to jump on board with solar power right now! We don’t blame you. Just keep in mind that these numbers are estimates – your actual savings could be either higher or lower depending on the specifics of your home. To find out exactly how much money you can save for certain, fill out the form below to get one (or two, or three) or our free quotes, and one of our expert partners in your area will contact you ASAP.

The consensus on O’ahu solar power rebates and incentives

All in all Hawaii is doing a pretty decent job encouraging residents to switch to clean and efficient solar power systems. We love that state solar power rebate (though the cap could come up a bit), and the Honolulu’s property tax exemption. On the other hand, an exemption from the General Excise Tax could go a long way to reduce up-front costs for homeowners like you, and Hawaii, and O’ahu with it, is missing a golden opportunity to have the most successful solar RPS carve-out in the nation, given the other factors that encourage residents to switch to solar power.

The dominant other factor, of course, is energy prices. None of the state’s policies are really at the heart of solar incentives in O’ahu. For that we look no further than how darn much you pay for electricity. You hate those higher rates now, but you’ll be basking in the glow of huge savings once you switch to your own solar power system. Trust us on this one. You’ll thank us if you do, and so will the planet.

Our older archived O’ahu Solar Power costs and savings breakdown images for reference:

O'ahu Solar Power - SummaryO'ahu Solar Power - Panel Payback

Last modified: February 17, 2017

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