For Makaha resident Rick Mendez, sunshine equals savings on his monthly electricity bill.

Mendez is one of hundreds of Hawai'i residents taking advantage of new tax credits, rebates and financing that have led to a surge in sales of solar water-heating systems.

"I've been saving $50 a month," said Mendez. "I don't regret it one iota."

Business is booming for some solar water heater contractors who say they haven't seen a growth spurt like this since just before prior federal tax credits expired 20 years ago. In January, a new 30 percent federal credit took effect, providing a boon for homeowners looking for relief from the nation's highest electric costs.

The credit came atop the 35 percent tax credit from the state and rebates of at least $750 offered by utilities throughout the Islands. That means an O'ahu homeowner winds up paying less than $2,000 for a $5,000 system.

At that price, the systems pay for themselves in less than three years for households of four people. The savings are even greater and the break-even period shorter on the Neighbor Islands, where utility rebates are more generous and electricity bills are higher.

"It's ridiculously cheap right now," said Steve Allen, owner of Allens Plumbing, and one of the state's bigger installers of residential solar water-heating systems.

In some cases where special financing packages are available, homeowners don't have to put any money down to get the systems installed.

"I got the entire system installed without pulling a penny out of my pocket," said Malcolm Turner, 54, who got a $6,400 system installed on his Kihei home late last month.

Working with Allens Plumbing, a contractor that installs systems on O'ahu, Maui and the Big Island, Turner took advantage of a zero-interest loan offered by Maui Electric Co. that was made possible by a $100,000 grant from Maui County.

INCREASED DEMAND

Turner said a $1,000 instant rebate from the utility helped bring down costs, and he will use the tax credits and utility savings to help pay off the loan. What's more, he got a roof-mounted water-heater tank, freeing up closet space where his house-bound heater tank used to be.

"It was the right thing to do with saving energy," Turner said. And "it gives me a place for my golf clubs."

Such deals have people dialing contractors. Some companies report business has jumped by 25 percent or more compared with the same time last year.

"Ever since the federal credit kicked in, things have gotten considerably better," said Paul Lucas, owner of Solar Engineering and Contracting. "This is the busiest we've been in a long, long time."

At Honolulu-based Alternate Energy, which installs systems on O'ahu and Maui, more workers are needed to keep up with demand, owner Bruce Ekimura said.

"We're working pretty much every day."

The federal 30 percent tax credit allows people to claim as much as $2,000 of the system cost, while claims under the state's 35 percent credit can go up to $2,250. Governments want to promote renewable energy use as part of their drive to wean America from dependence on foreign oil.

Solar installers can help homeowners tally how the credits apply to their purchases, and in some cases, put together financing packages that take the utility rebates into account. The electric companies offer the rebates for several reasons that include reducing customers' bills, environmental benefits and helping tamp down the need to build new generating capacity.

Hawai'i relies on oil to fuel or generate 89 percent of its energy, more than any other state, according to the U.S. Energy Information Administration. Gov. Linda Lingle has set a goal of having 20 percent of Hawai'i's energy from renewable sources by 2020.

The solar tax credit helps with that goal, as do electricity prices that have sent people scurrying for ways to reduce usage. Electricity costs about 21 cents a kilowatt hour on O'ahu, or more than twice as much as the national average.

LOWER UTILITY BILLS

Homeowners are well aware of the high costs, having seen their electricity bills go up 20 percent or more in the past year as crude oil climbed to more than $70 a barrel. That's got many people switching to more efficient compact fluorescent light bulbs and shopping for more efficient appliances.

Highest on the energy usage list is water heaters, which on average suck up 40 percent of household's electricity, according to Hawaiian Electric. In Mendez's case, his utility bill fell to about $115 a month from about $165 when he switched to a solar water-heating system.

"The cost drives a lot of consumer behavior," said Rick Reed, president of Inter-Island Solar Supply, a distributor of systems installed by contractors. He said his business has grown by as much as 30 percent this year, helped by homeowner demand and contractors building homes for the military.

"There's a lot of stars aligned right now, and I don't see that changing for quite a while."

Hawaiian Electric had forecast that about 1,400 people on O'ahu would take its rebate offer this year. As of the last week, 1,004 had. Utility officials now believe the O'ahu installations are on track to double last year's total of 1,331.

Statewide, there are more than 95,000 homes that have solar-water heater systems, said Howard Wiig, an energy analyst with the state Department of Business, Economic Development and Tourism. That works out to about a quarter of the state's housing units, including condominiums.

Wiig said Hawai'i probably ranks as having the most solar-water heater usage of any state, based on what limited information and statistics he's seen. While there is little chance solar heater penetration will reach 100 percent — some condominiums aren't designed to accept the equipment, and some homeowner associations don't like the panels on rooftops — Wiig said he expects the market will continue to be robust.

"To my knowledge, we are head and shoulders above other states," Wiig said. "Every time the price of fossil fuel goes up, people get the incentive to look at alternative energy."

Reach Greg Wiles at gwiles@honoluluadvertiser.com.