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The Honolulu Advertiser
Posted on: Sunday, March 7, 2010

Hawaii may depend on bonds to help finance home solar systems

 •  How major bills fared at the Capitol

By Derrick DePledge
Advertiser Government Writer


The state House passed a bill — HB 2643 — that authorizes general-obligation bonds to finance a loan program to help homeowners afford the upfront cost of installing solar systems. The loans would be repaid through assessments on county property tax bills.

The bill will now go before the state Senate.

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Trying to nudge homeowners to convert to solar power and reduce dependency on electricity, Gov. Linda Lingle and state lawmakers may authorize state bonds that would finance loans to cover the upfront cost of installation.

Cost is a barrier for many homeowners interested in solar, despite federal and state tax incentives and utility rebates available to help make renewable energy more affordable.

A solar heating water system costs about $6,500 to $7,000, according to the Hawai'i Solar Energy Association. The out-of-pocket expense for homeowners, after the tax credits and rebates, is about $2,000. A more extensive photovoltaic system costs between $15,000 and $60,000, with the out-of-pocket expense about half that amount after tax credits.

Under the bond-financing program, homeowners would get loans that would be repaid through assessments on their county property tax bills. The loans would be attached to the property, not the homeowner, and would remain if the property is sold.

"We have a problem getting financing for middle-class homeowners for photovoltaic systems," said Mark Duda, the president of the Hawai'i Solar Energy Association.

Hawai'i, dependent on imported oil for 90 percent of its energy, has set a goal of having 70 percent of its energy from renewable sources by 2030.

One in four Hawai'i homeowners is on a solar water heating system, according to the Blue Planet Foundation. The state received national attention for a law that took effect in January that requires solar heating water systems on most new single-family homes.

Lingle, a Republican who has made renewable energy a focus of her second term, included the bond-financing program in her State of the State address in January. State House and Senate Democrats will consider a bill that passed the House last week that authorizes general-obligation bonds to finance loans for both residential and commercial property owners.

Under the bill, proceeds from the bond sales would go into a revolving loan fund under the direction of the state Department of Business, Economic Development and Tourism, which would issue loans to property owners in counties that agree to collect the loan repayments for the state.

Homeowners could get loans for solar heating water systems, photovoltaic systems, small wind systems, and biogas systems.

Other energy-efficiency improvements, such as air sealing and ventilation, insulation, and reflective roofs, would also be covered.


While there is support from Lingle and several leading Democrats, there are concerns, including the expansion of state debt from the bonds given the state's projected $1.2 billion budget deficit through June 2011.

The Senate dropped its version of the bill because of the concern about debt.

The Tax Foundation of Hawai'i, meanwhile, said property owners who get the loans should not be able to qualify for state tax credits — which can offset 35 percent of installation costs — because then the "projects would be granted a double subsidy by the taxpayers of the state."

Duda, of the Hawai'i Solar Energy Association, suggested that the program be available only to homeowners. Commercial property owners, he said, are often able to find bank financing and the program may duplicate efforts in the private market.

Many environmentalists see the bond-financing program as a potential breakthrough. The concept, known as Property Assessed Clean Energy, started in Berkeley, Calif., in 2007 and has been sampled in several other cities and counties.

Cisco DeVries, the president of Renewable Funding in Oakland, Calif., who was the mayor's chief of staff in Berkeley when the idea was being developed, said the upfront cost of renewable energy systems is a real obstacle for property owners.

"How many of us would have cell phones if we had to buy 20 years of minutes up front?" he asked, calculating the hypothetical cell phone bill for his family at $28,000.

Ted Liu, the director of the Department of Business, Economic Development and Tourism, told lawmakers in written testimony that as demand for installation increases, private contactors would likely have to hire new employees and local entrepreneurs may create new clean-energy businesses.

"DBEDT is confident that this program will create jobs at a time when they are sorely needed," he said.


State Rep. Hermina Morita, D-14th (Hanalei, Anahola, Kapa'a), the chairwoman of the House Energy and Environmental Protection Committee, said she is optimistic lawmakers will move the bill.

"It's a tool in the kit," she said. "I think another thing we have to look at is how this would affect the tax credit, because some people will view this as double-dipping."

State Sen. J. Kalani English, D-6th (E. Maui, Moloka'i, Lāna'i), said that while he backs the bond-financing concept, he believes the state should be creative and look at private investors. He said the Senate has tried to hold the line on new bond programs.

"I think it has a great chance of survival, except we have to be really real about it," he said. "I don't think the bond part will survive."

State Sen. Mike Gabbard, D-19th (Kapolei, Makakilo, Waikele), the chairman of the Senate Energy and Environment Committee, believes the concept has great potential.

"Right now, for the masses, this whole idea of energy self-sufficiency, it's not real. It's very abstract ," he said. "This makes it real."