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Hawaii lawmakers vote to cut the state solar credits: What does that mean for you?

How the reduction in the Hawaii state tax credit will impact homeowners
Hawaii lawmakers vote to cut the state solar credits: What that means for you?


On April 13, 2021, the Hawaii state voted to reduce the state's residential solar credit from $5,000 to $2,500. This reduction of the state's tax credit can have dramatic implications for homeowners in Hawaii who plan to add solar and energy storage to their homes. Let's dive into the history of the Hawaii solar tax credit and what the reduction means for homeowners in Hawaii.

History of the Hawaii Renewable Energy Technologies Income Tax Credit (RETITC)

Utility consumers in Hawaii are charged the highest rate in the nation for electricity. Not only are homeowners charged more than anyone else in the nation, but the electricity produced in Hawaii on a per kilowatt basis releases some of the most carbon dioxides of any state in the nation. The carbon released has had dramatic implications for pollution in the state.

As a result of the environmental impact of shipping fossil fuel to the islands, Hawaii historically has been proactive about supporting renewable energy. In 2018 Hawaii pledged to switch to 100% renewable energy by 2045.

The focus on renewable energy extended to statewide support for residential solar. In 1976, the state of Hawaii implemented the Hawaii Energy Tax Credit. The Hawaii Energy Tax Credit was designed to allow homeowners to claim a state income tax credit of 35% of the cost of installing a photovoltaic (PV) solar system. The maximum credit that a homeowner could claim was $5,000 per "5 kW system". Multiple systems could be installed on the same home, allowing the credit to increase above $5,000 in certain situations.

When combined with the high electricity rates, the federal solar tax credit (ITC), and Net Energy Metering policies, the Hawaii solar tax credit helped make Hawaii one of the nation's solar panel leaders. When these policies worked together, it helped reduce the cost of installing solar and allowed homeowners to save tremendous amounts of money on electricity and reduce the use of dirty carbon-producing electricity.

Why do the Hawaii Senators want to reduce the Hawaii Solar Tax Credit, and what would it mean for the solar industry in Hawaii?

Hawaii Senate Proposes Decrease of Solar Tax Credit from $5000 to $2500
Hawaii State Solar Tax Credit Proposed Decrease

The Covid-19 Pandemic that has dramatically impacted so many people worldwide has had severe implications on the state budget of Hawaii. A Senate committee added language to an unrelated film tax credit bill, House Bill 1174, that would reduce the Hawaii Solar Tax Credit from $5,000 to $2,500.

No notice was made to solar advocates, or expert's in the clean energy sector about the addition of the language. Though the tax credit reduction might provide some tax relief for the state, it might also have unintended financial implications for the state's economy.

Solar companies across the state employ around 2,500 people, and the state has installed around 1,400 MW of solar. Reducing the tax credit would increase the cost of installing solar and energy storage for homeowners. The increase in cost for homeowners could have implications on how many people end up installing solar.

This potential reduction in solar installations could have implications on local solar installers to keep people employed and reduce the taxable funds available for the state. As the executive director, Rocky Mould of the Hawaii Solar Energy Association, said, "Now is not the time just as we are trying to pull ourselves off the mat from the Covid- 19 pandemics".

What would the reduction in the Hawaii Solar Tax Credit mean for homeowners?

The increase in the cost of any product will impact how many people can afford it. This fact will be familiar to anyone who took Economics 101! In the real world, for many homeowners, this change in the Hawaii state solar tax credit will have severe negative impacts on the economics of homeowners switching to solar. For solar installers who lack financial flexibility, the decrease in the savings a customer will see could reduce the contractor's ability to standby the warranties that it provides homeowners.

How Sunrun can help customers with the proposed Hawaii State Solar Tax Credit Decrease
Sunrun helps limit harm of Hawaii Solar Tax Credit Step Down

Fortunately for our customers, Alchemy Solar partners with Sunrun, the nation's largest solar installer, to provide our customers with solar and home batteries. Because of the logistical expertise and financial backing, Sunrun can undertake a process known as Safe Harboring.

Safe Harboring is a policy that allows the solar installer to purchase equipment ahead of time to help ensure that homeowners can take advantage of the tax credit before it steps down. Regardless of if a homeowner selects to purchase the solar system or go with a Monthly Power Purchase Agreement, our customers who work with us can still see the savings of the full tax credit if they sign up ahead of time because of our relationship with Sunrun.

Not only does our work with Sunrun help homeowners see the best savings possible, but they also have the best battery backup solutions. With Sunrun's Brightbox solution, our customers in Hawaii can get battery backup and better savings on their utility bills while paying nothing upfront.


The reduction in the Hawaii Solar Tax credit will have substantial implications for savings that homeowners in Hawaii can see when switching to solar and energy storage. Fortunately, at Alchemy Solar, we can help our customers maximize savings from the Hawaii State Tax Credit because of our relationship with Sunrun.

If you are interested in taking advantage of the full Hawaii State Tax Credit before it goes away, schedule a free solar consultation with Alchemy Solar today!

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