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The Honolulu Advertiser
Posted on: Thursday, May 13, 2010

Tax credit changes cloud solar sector

BY Greg Wiles
Advertiser Staff Writer

Companies that install solar panels on homes are worried their business may be damaged by confusion over new rules on solar tax credits.

"I've already got concerned customers who have said 'put my project on hold,' " said Alex Tiller, chief executive officer of Sunetric, one of the largest residential system installers in the state. "The customers are scared because there's a lack of clarity."

Hawai'i's solar panel industry has grown with the help of tax credits that encourage the installation of photovoltaic systems. At issue is how homeowners can claim the state tax credits, which amount to 35 percent or a maximum of $5,000 per system.

The state Tax Department earlier this month put out revised guidance on the tax credit, given what may have been an abuse of them. The new rules sought to define what constituted a system for the purposes of a tax credit.

Tiller said the new guidance is unclear when it comes to multiple systems on a single home and seemingly disallows more than one system per house. That's got customers balking at purchases.

For example, under the old rules a homeowner might order $30,000 worth of panels to handle all of the energy-generating needs, Tiller said.

The panels would be configured into two systems for a variety of legitimate reasons, including having redundant systems, Tiller said.

Having two systems also would translate into less wear and tear , allowing them to run cooler and have a longer life.

The two systems also would mean the homeowner would qualify for two separate $5,000 tax credits, lowering the overall systems cost to $20,000.

Under the new rules, such a setup would be considered a single system and the homeowner would get only a $5,000 credit, Tiller said. Besides the lower credit, the break-even period on the systems also would be lengthened.

"It will really hurt the industry and cost a lot of jobs," Tiller said.

State Tax Director Kurt Kawafuchi would not comment yesterday. But state Energy Administrator Ted Peck said he, the industry and others are trying to resolve the issue.

"We're working very hard to get this clarified," Peck said.

He said the tax ruling had nothing to do with a change in the state's renewable energy policy, which has been to encourage as much of the photovoltaic power as possible. The state has set a goal of getting 40 percent of its electricity from renewable sources by 2030.

Peck said the situation may be resolved through adding additional examples in the tax guidance of how the tax credit may be used.