Hawaii Solar Tax Credits, Incentives and Rebates (2024)

Hawaii has a 35% state tax credit for wind and solar energy systems. Honolulu provides its residents who are solar owners with a property tax exemption.

The state has no solar rebates as of 2023. However, Hawaiian Electric has a rebate program for battery systems that gets added to new or existing solar arrays.

Renewable Energy Technologies Income Tax Credit

Incentive Value: 35% of solar PV installation costs, up to $5,000

Frequency: Single-use

The Renewable Energy Technologies Income Tax Credit (RETITC) is the primary incentive for Hawaii taxpayers who own solar panels. The federal government introduced this benefit in 2009, and it covers solar and wind energy systems that have up to 5,000 kW of capacity. Solar water heating and photovoltaic systems qualify for a 35% income tax credit, while wind turbines qualify for a 20% tax credit.

Solar photovoltaic systems used in single-family homes receive a maximum tax credit of $5,000, which homeowners can combine with the 30% federal tax credit. For example, a 6-kW solar PV system with a price of $16,740 would get:

• A federal tax credit of $5,022
• A Hawaii state tax credit of $5,000

In this example, the total tax incentive is $10,022 and the net cost of the PV system reduces to $6,718. Multi-family properties also qualify for the Hawaii solar tax credit, but in this case, the maximum incentive is $350 per dwelling.

You can claim the RETITC by submitting the N-342 Forms, which you can download from the Hawaii Department of Taxation website.

Real Property Tax Exemption for Alternative Energy Improvements

Incentive Value: Equivalent to the Honolulu property tax rate of 0.35%

Frequency: Annual tax exemption for a duration of 25 years

Honolulu has a property tax exemption for several types of alternative energy systems. If you install solar panels, you are not taxed for the increase in property value for the following 25 years.

As a quick example, assume you own a home in Honolulu with an assessed value of $600,000. The local property tax rate is $3.5 for every $1,000 of assessed value, which means you pay $2,100 per year.

• If the value of your home increases to $630,000 after installing a solar PV system, your property taxes stay the same.
• Without the exemption, the $30,000 increase in home value would raise property taxes by $105.

The Honolulu property tax exemption was introduced by the city and county. In other parts of Hawaii, the government taxes you normally for the increase in home value after going solar. But most Hawaii residents have access to this benefit: 70% of the state’s population lives in Honolulu.

Hawaiian Electric Battery Bonus Program

Incentive Value: $850 per kilowatt upfront, $5 per kilowatt per month for 10 years

Frequency: Single-use and continuous

Hawaiian Electric (HECO) provides electricity to 95% of the state, and it is working to increase the distributed storage capacity connected to its grid. If you add energy storage to a new or existing solar system, the HECO Battery Bonus Program offers a cash incentive of $850 per kilowatt. You also get a monthly incentive of $5/kW for 10 years.

• For example, if you install a battery system with a rated power output of 5 kW, you can get an upfront rebate of $4,250 and ongoing payments of $25 per month.
• To get the incentive, you must commit to using battery capacity during a two-hour period between 6:00 p.m. and 8:30 p.m.

You can participate in the program without committing 100% of your solar battery capacity. For example, you can install a 10-kW battery and commit 5 kW to the program. In this case, you’re free to use the other 5 kW. However, you only get incentives for the storage capacity that participates in the program.

The HECO solar battery program is available in the islands of Oahu and Maui, which means most of the Hawaiian population has access. The program ends when the cumulative storage capacity reaches 40 megawatts in Oahu and 15 megawatts in Maui.

Green Energy Money Saver (GEMS) On-Bill Program

Incentive Value: Solar loans with a 5.5% interest rate and a term of up to 20 years

Frequency: Single-use

The Green Energy Money Saver (GEMS) program offers low-interest loans for homeowners and renters who are HECO customers. Borrowers can use GEMS loans for solar energy systems and several types of energy efficiency measures. Loans have a fixed interest rate of 5.5% and a repayment period of up to 20 years.

The Hawaii Public Utilities Commission (PUC) ended the net metering program in 2015. However, homeowners with solar panels have two tariff options that offer compensation for providing electricity to the grid:

• Customer Grid Supply Plus Tariff (CGS Plus): Customers get a monthly bill credit for excess solar generation sent to the grid. The feed-in tariff varies by island, and the system must allow remote control by the utility company to ensure grid stability.
• Smart Export Tariff: This tariff is specifically for homeowners who have renewable generation systems equipped with energy storage. You get power bill credits for providing stored energy to the grid at times of high demand.

The state of Hawaii offered net energy metering from 2001 to 2015, and more than 60,000 solar owners participated in the program. Hawaii residents who joined the program when it was active can expand their home solar systems with more PV modules or battery storage. However, they can only use capacity expansions for on-site consumption and not for grid export.

The CGS Plus and Smart Export Tariffs are much lower than the retail rates charged in Hawaii. This means you achieve higher savings by using as much solar electricity as possible, instead of exporting to the grid.

• Hawaii had an average electricity price of 44.24 cents/kWh in February 2023, 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, depending on the island.

How To Enroll in Net Metering

HECO provides electricity to 95% of Hawaii residents, and the Kauai Island Utility Cooperative (KIUC) serves 35,000 customers on the island of Kauai. You can find detailed information about their rooftop solar PV programs on their websites:

• Hawaiian Electric (HECO) Private Rooftop Solar
• Kauai Island Utility Cooperative (KIUC) Rooftop Solar

The Clean Energy Investment Tax Credit (ITC) is available in all 50 states, and when you install solar panels in a home or business, you can claim 30% of project costs as a federal tax credit.

The federal tax credit applies to an owner and occupier of a property where solar panels get installed. The incentive is also available for secondary homes, but not for rental homes or other investment properties.

We conducted a solar cost survey across all states. As of 2023, the average cost of home solar systems in Hawaii is $2.79 per watt.

• You can expect to pay $27,900 for a 10-kilowatt solar power system.
• That makes the solar ITC $8,370, which puts the net cost of the system at $19,530.

You can claim the Solar Investment Tax Credit on your annual IRS filing that corresponds to the year when your photovoltaic (PV) system is installed. You must submit Form 5695 with the tax return.

Hawaii has abundant sunshine, thanks to its tropical location. If you install a 6-kW solar power system in Honolulu, you can expect to generate more than 10,000 kWh per year. If you consume 30% of this energy and export the other 70% to the grid, you can expect the following savings:

• The residential electricity price in Honolulu is 43.43 cents/kWh, and you save $1,302.90 in energy bills by using 3,000 kWh of solar electricity.
• The CGS Plus Tariff is 10.08 cents/kWh, and you get $705.60 for the other 7,000 kWh.

Adding direct savings and grid exports, a 6-kW solar panel system saves you $2,008.50 in annual electricity bills. 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 ($5,000), the net system cost is reduced to only $6,718.

With this net cost and annual savings of $2,008.50, the payback period calculates to 3.3 years. This assumes you use 30% of the electricity generated by your solar panels while exporting the remaining 70% to the grid. If you consume a higher percentage, annual savings increase and the payback period is shorter.

Keep in mind that the best solar panels have a service life of more than 25 years and are fully covered by a product warranty. That makes the payback period only a fraction of their lifespan.

Though Hawaii has a sky full of sunshine, local electricity rates are the highest in the country. Under these two conditions, solar panels achieve a short payback period. Hawaii also offers a state tax credit of up to $5,000 for solar owners, and Honolulu has a property tax exemption for renewable energy sources.

Although electricity prices are high in Hawaii, tariffs for sending excess solar power to the grid are low. You gain a higher return on investment if you optimize your solar panel system for your home. Using a solar battery is also viable: you can store surplus generation and save the full value of each kWh, instead of getting a low feed-in tariff.

The best solar companies can analyze your home’s energy needs and sunshine conditions. They can calculate the ideal combination of solar PV and battery storage capacity for any property. Get a quote from our top rated solar installer in Hawaii, SunPower, using the tool below.