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The Honolulu Advertiser
Posted on: Tuesday, July 16, 2002

Solar industry fears tax credit cut

By Jan TenBruggencate
Advertiser Science Writer

Hawai'i leads the nation in solar water heating, but the solar industry and the state say its continued growth is at risk with the pending loss next year of a longstanding tax credit.

The credit cuts 35 percent off the cost of installing most residential systems, and is believed to be a major factor in expanding the home installation of solar hot water systems.

"There's not going to be an industry if the tax credit goes away," said Rolf Christ, vice president of the Hawai'i Solar Energy Association and head of R&R solar, the state's only manufacturer of solar systems.

The credit will cover as much as $1,750 per system. According to an industry estimate, a $4,500 system on O'ahu, with a $750 rebate from Hawaiian Electric and a tax credit of $1,313, would cost the consumer about $2,438.

The state Energy Office estimates that solar hot water saves an O'ahu family of four $626 per year; the savings would be considerably higher on the Neighbor Islands, where power costs more.

The O'ahu consumer's system would thus pay for itself in four years.

"I think the tax credit is a pretty big incentive," said Bill Anderson, owner of Andersun Solar, which installs the systems in Honolulu.

Hawai'i is home to eight of the 10 U.S. communities with the highest percentage of solar heating, according to the U.S. Census. ('Ewa Villages and Lahaina are at the top of the Hawai'i list.)

Another Census statistic shows that 2.25 percent of Hawai'i households have solar heating, far outstripping the next state, New Mexico, at one third of one percent.

Hawai'i's solar industry believes that those figures are conservative, and that there are 60,000 to 70,000 solar hot water systems in the state, or 14 percent of the 460,000 housing units.

The solar tax credit legislation expires June 30, unless the Legislature restores it and the new governor signs it.

The industry has had trouble convincing Gov. Ben Cayetano of the importance of the tax break, said Inter Island Solar's Rick Reed, president of the Hawaii Solar Energy Association.

Cayetano threatened to kill the credit several years ago, but then allowed it to stand.

If it gets through the Legislature next year, it will face a newly elected governor.

"All we want is to have a chance to make a case to someone who is open-minded," Reed said.

An economic study for the industry found that for every dollar the state loses to the tax credit, it takes in $1.81 over the life of the hot water system, Christ said.

"Opponents are saying that the state doesn't have the money now to make that investment, but they get most of the money back in the first year in sales taxes and employment taxes from the installation," he said.

When a federal tax break was dropped in 1985, the sale of solar systems in Hawai'i dropped from 6,740 units to 592 units the following year.

Raising the state tax credit from 10 percent to 35 percent, plus rebates from electric companies, boosted sales to nearly 3,000 a year, Christ said.

The state Energy Office is a major supporter of the credit.

"We're trying to tell people to place calls to their legislators to extend the credit," said energy program specialist Dean Masai.

"It's using the sun's energy to heat water. It just makes sense in Hawai'i."