Energy-tax-credit bill up for renewal

Maui News
Friday, May 09, 2003

By MARK ADAMS
Staff Writer

HONOLULU — Attention, all residents scrapping plans to install a solar-heating system and a few windmills on your property because a state tax-credit law expires next month: It's time to let the sun shine in. And tilt at all the windmills you want.

A bill that extends and expands substantial tax credits for homeowners and businesses that install renewable energy systems was passed during the recent legislative session and is awaiting Gov. Linda Lingle's signature.

Senate Bill 855, introduced by Maui state Sen. J. Kalani English, offers tax credits for solar-thermal systems, solar-photovoltaic systems and wind-powered energy systems.

"In Hawaii, renewable resources are abundant, with plentiful amounts of wind, sun and geothermal activity to fuel renewable efforts," English said Tuesday, which makes it essential to promote policies that encourage development and use of those resources.

"The current political climate around the world dictates a shift from dependence on imported fossil fuels to one of self-reliance and sustainability," English said. "We must support the development of renewable-energy technology."

A Makawao couple that has taken English's opinion to heart said they're pleased at the extension of the credits and think they'll go a long way toward encouraging further harnessing of the sun and wind in Hawaii.

"We're very much in favor" of the tax credits, Peter Adams said Tuesday.

Peter and Jane Adams have a dual solar-energy system on their property, one used to heat water and the other to generate electricity.

Adams estimated that he paid about $20,000 for the installation of the equipment. Under the tax credit law, he would be eligible for a $3,500 tax credit immediately and recoup the additional expense over time through savings on electrical bills in a household where "there's always computers and stuff on all the time."

The solar equipment is expensive, he acknowledged.

"Until it comes down in price, you need the tax credit to encourage people to use it," he said. The new legislation "is a very beneficial thing to have."

With fuel oil having to be shipped in from the Mainland to run Maui Electric Co.'s power plant, Adams agreed with English that Hawaii needs to do everything it can to move toward energy independence.

"That's the bottom line that we think about, especially in an island environment," he said.

The new bill establishes several tax credits, which come directly off any tax owed or are added to any refunds due taxpayers.

Two types of solar-energy systems are named in the legislation.

The first is solar-thermal energy, the familiar solar heater systems that use the sun to heat water, although the sun can also be used to heat a fluid that turns a generator and actually produces electricity.

The second is solar-photovoltaic energy, which uses the light from the sun interacting with photovoltaic cells to produce electricity.

Tax credits for the two categories are the same. They are:

• For single-family residential property, 35 percent of the solar system's actual cost or $1,750, whichever is less.
• For multifamily residential property such as apartment or condominium buildings, 35 percent of the system's cost or $350 per housing unit, whichever is less.
• For commercial property, 35 percent of the system's cost or $250,000, whichever is less.

For energy systems that use wind power, the tax credits are:

• For single-family residential properties, 20 percent of the system's actual cost or $1,500, whichever is less.
• For multifamily residential property, 20 percent of the actual cost or $200 per housing unit, whichever is less.
• For commercial property, 20 percent of the actual cost or $250,000, whichever is less.

"Actual cost" is defined in the bill as including any needed accessories and installation costs, subtracting any consumer incentives like rebates from a manufacturer or utility company.

Any federal tax credits that may be offered should also be deducted from the actual cost.

The state director of taxation is being asked to compile by December 2005 a report on the number of renewable energy systems that have qualified for the tax credits in the preceding tax year by type of system and type of taxpayer (either residential or corporate).

The Legislature also wants to know the cost of the tax credit to the state during that year, also broken down by type of technology and type of taxpayer.

If the bill is signed by Lingle, the tax credits would cover the period from July 1 of this year through Jan. 1 of 2008.

The state's energy resources coordinator is asked in the legislation to review and evaluate the tax-credit program prior to the Legislature's 2007 session.

That review is to include whether the tax credits should be continued or enhanced based on a cost-benefit analysis and "other public policy considerations."

Results of a similar review were released in January 2002.

The Energy Efficiency Policy Task Force found that since tax credits were initially approved for the 1990 tax year, about 75,000 Hawaii households had installed solar water-heating systems.

The task force estimated that those systems had saved more than 4 million barrels of oil and significantly reduced power-plant emissions that would have been otherwise created.

Hawaii residents saved $240 million in electricity costs, money they then had available to spend on other goods and services, the report stated.

The solar-heating industry also benefited through creation of 700 jobs, the report stated, and $15 million in utility rebates were paid.

In fiscal year 1999, energy tax credits amounted to $4.6 million, about 6.2 percent of total tax credits in the state, which amounted to $74 million. Energy tax credits represented just 0.42 percent of total income tax revenue in Hawaii.

English said he is disappointed with one facet of the legislation — the new bill removes tax credits that now exist for using heat pumps and ice storage systems.

Heat pumps use thermal heat to generate energy, while ice storage systems allow accumulated ice to be used for cooling needs during off-peak periods.

"It is extremely regrettable that other energy-conserving systems . . . were not approved for similar tax credits," English said. "Hawaii must turn toward self-reliance and away from ancient technologies if we are ever to secure our future in this volatile world."

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