Reduce Cost of Solar Panels In Hawaii: Solar Incentives, Tax Credits, Rebates

And, thanks to both federal and local solar tax credits and rebates, more and more people are moving to some solar energy to power their homes and businesses.

This guide outlines the Hawaii solar incentives available, how they lower the cost of solar panels in Hawaii, and can help you save on your energy bills and reduce your energy emissions.

Hawaii Solar Incentives and Solar Plants in Hawaii

The evolution of solar panels in Hawaii has been motivated mostly by the high cost of electricity in the state and is becoming rapidly adopted throughout the region with the inclusion of Hawaii solar incentives.

Hawaii has one of the highest rates of solar power production within the continental United States and is committed to supplying up to 70% of its energy through renewables as soon as 2030.¹

Much of this reason is due to the fact that the import cost of petroleum and coal is up to four times higher than that of the mainland United States. This creates a steep motivation to move away from conventional energy methods and adopt renewables as their main source of production.

This heavy reliance upon imported energy resulted in some of the highest electricity prices within the United States, causing Hawaii to invest 3.8 billion by 2021 into the solar industry.² The movement towards solar energy has been born of necessity to avoid an energy crisis within the state.

Hawaii was also the first state to reach grid parity within the United States for solar energy,¹⁸ which refers to the ability to produce power at a cost less than or equal to the price off the grid. Much of this is thanks to the fact that Hawaii’s tropical location resides in one of the most solar-abundant zones across America.

The majority of Hawaii’s solar capacity is derived from the solar panels installed on individual homes and businesses. This situation is mostly unique to Hawaii and has led the state to develop new technology allowing the energy grid to balance in the influx of energy flows that account for large surges of power.

In 2017 there were over 900GWh produced within Hawaii and distributed through the electrical grid,¹⁹ of which was roughly 35% of all the renewable energy produced within the state. The largest solar farm within Hawaii is the Kawailoa Solar Project, which opened in September 2019 and produces 49 MW of power.³

There are companies that have established a virtual power plant on the island of Oahu that would collect and store the energy from solar panels into batteries located within individual houses that can deliver power to the grid during times of high consumption. These types of services will only add to the stability of the power grid.

Each Hawaiian island has a separate electrical grid which is relatively small compared to some of the continental builds.²⁰ According to the SEIA rankings, Hawaii is currently the 17th best state for installing solar panels, which uses a metric that includes solar investment, the percentage of solar power produced within the state, as well as the number of solar companies to shop from.

Peak Sun Hours in Hawaii for Solar Panel Installation

One of the first questions you would have if you’re planning on installing solar panels is, “How much are solar panels in Hawaii?” The cost of solar panels can vary from state to state, and Hawaii with its unique geography has some differences from other locations.

There are a series of advantages to installing solar panels within Hawaii, first of all, is their extremely high energy costs.

Other advantages include constant and abundant sunshine, enticing Hawaii solar incentives, as well as average low energy usage.

All of these things combined create inviting reasons for someone to install a solar panel array in their home.

When calculating the average cost of a solar panel installation, the range typically ends up around $10,000, resulting in a payback period of roughly six years. When going down the road of installing a solar panel system for your home it’s important to consider not only the brands of the solar panels, the overall cost of the system but also the warranties offered by the company.

The average price of solar panel system parts in Hawaii is roughly $19,250,⁴ coming out to $2.45 per watt. Of course, the size of your system and the types of solar panels will determine the overall cost, making it important to shop around amongst multiple installers to get the best price.

One of the worst states for solar energy is North Dakota, and while its average cost of a solar panel installation isn’t the highest, the state itself only accounts for two.

Moreover, North Dakota is almost not making an impact when it comes to the solar category with only 2 MW installed in its registered 149 households.

If you’re wondering “Are solar panels worth it in Hawaii?”, you need to take a look at the payback period, the time at which your solar panels have paid for themselves. In Hawaii, the payback period depends on a few things such as the cost of your system and how efficient it is, but on average the payback period for solar panels in Hawaii is 7 years.

If have a highly efficient solar panel system then your payback period could be even sooner, as a more efficient system will produce more energy and pay for itself even faster.

It can be difficult to determine if buying a solar panel system is worth it, and everyone will have their own criteria by which they conclude it is or isn’t. If your only objective is to lower your energy costs then it can be difficult to conclude as there are a variety of confounding factors you need to be aware of.

If one of the major factors is simply to reduce your carbon footprint, then it’s a far easier choice.

Hawaii Solar Incentives: Solar Panel Cost Calculator Hawaii

There is a myriad of websites that include a solar panel cost calculator (Hawaii included). This tool will help predict the cost of solar panels in Hawaii, how much area you’ll need to cover your consumption rates, and how soon it will be before you’re making money off your installation.

Depending on the type of inverters you decide on, the method of racking, and the number of solar panels, the final cost of the system will vary. You also need to factor in the daily amount of sunlight and the overall efficiency of your system which is mostly dictated by the quality of your solar panels.

The following steps will go over how you can calculate the amount of solar panels needed, as well as the costs.

Your first step will be to measure your annual kWh or the yearly electrical consumption of your house. If you’re looking for a general idea, then the American average for energy consumption per year is 10,649 kWh / year,⁵ but if you’re looking to be more accurate then you can consolidate a year’s worth of your monthly bills and divide them by 12.

The next step will be to determine your panel wattage, or how much electricity your panel produces. The ideal conditions for your panel will be used for this calculation.

Following this you’ll then estimate how much electricity your panel produces based on average sunlight. This number can be found by diving your system wattage by its electrical output within a year.

Ignoring that, you can take the U.S. average estimate of 1.3 to 1.6.

Now comes the formula: Panel number = kWh usage/ratio of production/watts.

As an example, if your house estimated 12,000 kWh consumption, with a production ratio of 1.6 and a 300-watt panel, you would require 12,000 kWh / 1.6 / 300 = 25 total panels.

If you’re planning on doing an installation, you might wonder “How many square feet of solar panels are necessary?”, and thankfully the solution isn’t too difficult. First, you’ll take the average size of a solar panel which is 17.5 feet, then multiply it by how many panels you need.

Based on the earlier numbers, if we took 25 panels and multiplied them by 17.5 feet, you get the square footage of 437.5. This is roughly how much space you’ll need.

Hawaii Solar Incentives: Solar Panels for Home in Hawaii

When it comes to determining what solar panels for home in Hawaii are the best fit for you, you’ll first need to learn what factors into that decision. Avoiding specific brands or companies, we’ll stick to the basics of what makes a good solar panel.

The first thing you’ll learn is how many different types of solar panels there are, with the most common being silicon, which is the bog standard for all panels. Next up you need to learn what factors affect the rating that’s given to your panel.

Power tolerance, efficiency, and temperature coefficient can all affect how good your solar panel is. Solar panels will typically reach an efficiency rating, or how well they absorb the sun and turn it into energy, of around 15-20%.

You’ll want to check the company’s warranties and insurances, customer service policies, and any reviews regarding their equipment’s durability. Hawaii’s hurricane season runs between June 1st to Nov 30th each year, which can cause severe damage to your panels, if not outright rip your system off the shingles.

Due to this, you’re going to want a sturdy installation designed to withstand this potential extreme weather.

Hawaii hasn’t had a billion-dollar disaster since 1992,^5,6 but in 2021 they had an extreme kona storm that produced winds powerful enough to tear trees from their roots,²¹ so you can only imagine what they would do to solar panel array atop your roof.

Solar Panel Installation (Steps)

Deciding to go ahead with a solar panel installation is one of the better ways to not only protect the environment but your wallet as well.

Hawaii allows you to sell the energy you produce through solar panels back into its system, reducing the reliance on fossil fuel input within the overall grid.

Going over some of the do’s and don’ts of solar panel installation, whether you’re installing it yourself or just want to know exactly what the professionals are doing on your roof, may alleviate some of the concerns you have.

First of all, solar panels can be installed during any season, any time of year. The one exception would be if your area has lots of snowfall, but thankfully Hawaii doesn’t fall under that category. It’s best to check with a solar energy consultant before any installation, whether you’re doing it yourself or hiring professionals, as they’ll provide you with all the information for a successful installation.

Next, you’ll want to make sure your home can even support a solar array. Does your roof have enough space or is it damaged?

Are there trees or branches in your roof’s way which may need to be trimmed to allow sunlight access to your new panels?

Now that you’ve determined your home is compatible with a solar array, decide the extent to which your solar panels will provide energy. Some people may only be interested in a slight energy boost, powering a few appliances, while others may want to generate a surplus of energy with the intent of selling it back to the energy companies.

Following this, you’ll want to see if you need to apply for permits – Hawaii doesn’t require permits for solar panel installations – as well as the incentive programs.

These Hawaii solar incentives may include federal energy credits, grants, or rebates which will help offset the cost, and which will be further covered later on.

There may be components to your solar panel installation that are unique and dependent on your needs and locations, so be sure to order the proper parts from a retailer. Once it’s all arrived, you’re ready to go.

You will have to put an emphasis on safety when it comes to your installation. The panels themselves are bulky and unwieldy, coupled with the fact that you’ll be installing them typically on a roof is a recipe for disaster.

Once you’ve made the purchase, the first component to be installed is the solar panel racking system. These are the bones that hold up the panels and are generally drilled directly into your roof.

Once these are installed, you’ll have to repair any holes made to prevent water from leaking into your home.

Following this you’ll need to install the solar panels themselves. Connect them to the rack, then wire each panel to the next one in line, creating a daisy chain.

Next in line is the heat sink. This is a device that is used to significantly reduce the heat generated by the panels.

This will also increase the efficiency of the array. Many solar panels have integrated heat sinks, and for all others, an external heat sink will be required.

The next step will be the charge controller. This component sends the electricity into your system and where it needs to be.

It will automatically allow the electrical current to flow into your home or into a battery if you intend on storing it for later. This will be installed between the panels and the battery bank.

The power inverter is another key component that will need to be installed. The power generated from your solar panels is direct current (DC) electricity.

Your homes will run on alternating current (AC) which means it requires the power inverter to convert it to use within household wiring. This will be installed after the batteries and charge controller and directly before the connection to the house.⁷

An optional step will be the installation of an energy meter, though most solar systems will automatically include it. This device gives you an accurate representation of how much electricity you are generating or using.

Alternatively, it can be used to determine how much energy you’re sending back into the electrical grid.

If you’ve reached this point, then be sure to double-check all the wiring throughout the whole system, ensuring that the system is grounded at the panels. Unless you’re an electrician by trade, I would strongly recommend hiring a municipal inspector to perform an electrical inspection.

The final step will be to connect your electrical panel, wiring the power inverter directly to your electrical panel, and voila, you’re ready to start saving the environment.

Cost of Solar Panels in Hawaii: Solar Panel Installation Cost Hawaii

It’s commonly believed that the cost of solar panels in Hawaii makes up the bulk of a solar panel installation cost: Hawaii, but the truth is that it only makes up roughly 1/3rd of your total cost. What really costs the most is the labor and overhead, taking up the other two-thirds of the investment.

This is why researching the purchase ahead of time and shopping around for the best deal can save you thousands of dollars on your installation. Another factor that’s worth mentioning is that by adding a solar panel array to your home you can drastically increase both the home value and curb appeal of your property.

The reduced energy costs are a visible benefit to anyone looking at your property.

When it comes to the cost of going solar, you may be glad to hear that the cost of solar panels in Hawaii has decreased, while the economy surrounding clean energy has increased. This leads to a far smoother consumer experience with additional benefits after installation.

Marketplace competition, government-based incentives,²² and the promotion of clean energy jobs have all lowered the costs for customers.

You’ll need to use the previously covered way to calculate the number of solar panels you’ll need to give you an estimate on material costs. If you’re unable to pay for the costs upfront but still want to contribute to the renewable energy revolution, then there are companies that offer solar loans or leases.

Just remember that you will not be the “owner” of these systems, and only the owner can claim the solar rebates from the government.

The cost of solar panel installations will vary from city to city. The average cost of solar panels per watt in Hawaii is roughly $2.67, which is very close to the national average of $2.66.⁸

This places Hawaii almost dead center in terms of how much value you get for your money when investing in a solar panel array.

Another interesting factor when considering the cost of installation is that Hawaiians use less energy than the population of any other state,²³ and will therefore need smaller systems than that of other states to offset their energy needs.

Getting to the numbers, the national average of a solar panel installation is $22,378 dollars, whereas the total installation price in Hawaii, before your credits and incentives, will cost you only $14,685, making it roughly 35% cheaper to purchase a system in Hawaii.

Why are solar panels so expensive? Once the system is up and running, your solar power array is typically self-sufficient.

You won’t need to hop on the roof and make adjustments any time soon, and the maintenance throughout the year is usually minimal except for cleaning and inspections.

Regular upkeep will keep your system running smoothly, though, removing any debris like leaves and twigs that may make their way onto your panels will help your panels run at peak efficiency.

Hiring professionals to clean your solar panel arrays will typically run you between $3 and $10 per panel, and while you can clean the panels yourself, it’s best to discuss it with a professional before attempting to do so.

Annual inspections can cost roughly $150 per year, where the inspector will check for cracks, deficient parts, and other issues with the system. If a solar panel is found to be damaged, the cost of repairs can average around $650.

Thankfully much of these additional costs are often covered by warranties, covering things such as damage from weather, or other faulty hardware.

If you’re wondering “Does solar increase home value?”, you may be happy to know that it was recently found that the average U.S. home with solar panel installations will have a 4.1% increase in home value when compared to similar homes that lack renewable energy.⁹

How To Get Solar Panels for Free

The facts regarding free solar panels Hawaii are that there really are none.²⁵ How to get solar panels for free?

You may be able to find some through solar panel recycling programs, but they’ll need to be tested to determine if they’re still functioning, and they also need to be compatible, as a single panel out of sync can cause damage to your system.

Hawaii Solar Program

The Hawaii solar program is broken into three parts: the Green Energy Money $aver (GEM$) program, Hawaii Energy’s Energy Smart 4 Homes program (ES4H), and Hawaii Energy’s Clean Energy Allies.

The GEM$ program provides financing for solar systems and energy efficiency. The offered financing is available to eligible renters, homeowners, nonprofit organizations, commercial tenants, small business owners, and state agencies.¹⁰

The ES4H program is available to specific residents including those who live within Hawaii, Honolulu, and Maui counties. The program is designed to improve the energy and water efficiency of those who participate by providing their homes with free LED light bulbs, efficiency shower heads, and faucets, as well as advanced power strips with the goal of reducing wasteful energy consumption.

This program has an estimated value of over $150 and can reduce the energy costs of each tenant by $160 annually.¹¹

Hawaii Energy provides a database of the “Clean Energy Allies”, who are local contractors that are trained to help residents navigate their way around the various incentives and rebate programs offered by Hawaii Energy, the state’s energy company.¹²

Hawaii Solar Tax Credit (Hawaii Solar Rebates)

To help incentivize the purchase and installation of solar panels, the Hawaii solar tax credit was initiated by the local government. These incentives are available to assuage the cost of Hawaiians turning to solar energy systems while simultaneously developing a sustainable and environment-focused energy source for the islands.

The Renewable Energy Technologies Income Tax Credit (or the thankfully shortened RETITC), will give credit to Hawaiian residents, including a tax break of 35% for all residential solar array installations up to $5,000.²⁴

While adding a solar panel system will typically increase your home value, thanks to the Honolulu Solar Property Tax Exemption, it won’t increase your property taxes.

There may also be tax credits and incentives specific to your city. In Oahu, residents who store their energy within a solar battery can actually earn a cash incentive and bill credits.¹³

Solar Investment Tax Credit (ITC)

The Solar Investment Tax Credit (ITC) has greatly helped support the growth of renewable energy in the United States and is considered one of the most important federal policies in regard to bettering the environment.

A tax credit is a dollar reduction in your income taxes that a company or a person would have otherwise paid the federal government through the IRS. The ITC bases the reduction on the amount of investment in solar materials and property.

The ITC was enacted in 2006, and since then the U.S. solar industry has boomed over 200 times, creating untold amounts of jobs and leading to the investment of billions of dollars into the U.S Economy.

The Solar Energy Industries Association (SEIA) has successfully advocated for the further promotion and extension of this valuable tax credit, including the passing of the Inflation Reduction Act.¹⁴ SEIA also helped promote the passing of other important tax adjustments in the IRA, including the addition of energy storage to the ITC, which led to further solar manufacturing tax credits.

There are some important facts concerning the ITC that you should be aware of.

• The ITC gives taxpayers a 30% tax credit for individuals who install solar systems on their residential properties. (This is found under Section 25D of the tax code.)
• The commercial and residential solar ITC has helped promote the U.S. solar industry to grow by more than 200 times since its implementation. There has been an annual growth of 33% in the last decade alone.
• In 2022, the extension of the ITC provided market certainty for companies that help promote and drive competition in technological innovation, that in turn lowers the energy costs for consumers.
• Despite all the benefits and progress, solar energy still only accounts for roughly 3% of all energy production within the United States.

The ITC can be attributed to being one of the more important federal policies and mechanisms used to incentivize clean energy throughout the United States. The rapid distribution of solar deployment, both in residential and commercial, has boomed across the country, bringing long-term stability in the form of renewable energy.

The ITC bringing down the cost of solar has made it more enticing than ever before to join those fighting for the good of the planet and its future.

Residential homeowners are able to claim the 30% federal tax credit as part of their tax liability under section 25D. Section 25D of the ITC allows homeowners to apply the credits to their personal income taxes. Section 48 discusses how the business that installs or finances the project will claim that credit.

This essentially means that if a homeowner purchases a house with a solar panel system already installed and they own the property outright, then they’ll be eligible for the ITC rebate as soon as they move in.

On the other hand, if the solar system is leased or rented, or if there’s a Power Purchase Agreement (PPA) already in place, then the ITC is claimed by whoever owns the equipment.

To be eligible for this credit, you also must be a homeowner, as renters do not count for the credit.

To take the ITC in Hawaii, complete IRS Form 5695 with your standard Form 1040.¹⁷

How Does the Solar Tax Credit Work if I Don’t Owe Taxes?

How does the solar tax credit work if i don’t owe taxes? The solar tax credit will only come into play to lower your tax liability.

If you owe no taxes, then the solar tax credit won’t mean the federal government owes you money.

Hawaii Solar Incentives: Solar Loans Hawaii

When it comes to solar loans Hawaii, one of the first avenues you should explore is the PV Loan program. This program is available exclusively for photovoltaic systems installed by their participating contractors.

The highest loan amount available is $75,000 and will require approval.¹⁵

A contractor’s participation in the PV loan program does not automatically imply endorsement of the contractor, as they’ll have to be personally vetted by the Hawaii State FCU. It’s also important to know that the PV loan program won’t be applicable for the refinancing of existing PV loans, and is subject to change.

These types of programs are always subject to the constant shifting of bureaucracy and may be changed without prior notice.

Net Metering Hawaii

Net metering is an incentive created to grant customers a financial reprieve by being credited for the electricity they generate, typically through renewables. There is usually an allotment of energy that will be purchased by the utility company.

When wind, solar, and in some niche instances hydro, are non-dispatchable (meaning not coupled to storage), then benefits such as net metering are extremely important in incentivizing the installation of solar power.

The ability to add monthly net metering to your carbon solution gives consumers the ability to use surplus solar power generated over the day. There are even annual solar power rollovers that will credit you solar power generated in summer months to be used during winter months when the sun isn’t as plentiful.

Most net metering has laws pertaining to monthly rollovers of kWh credits, giving you a small monthly connection fee, as well as requiring constant monthly deficits, and the settling of any residual credit. These policies have helped design and foster private investment in the renewable energy sector.

The mechanisms for net metering originated in the United States. It started with small wind turbines and solar panels being connected to the electrical grid, but consumers wanted to be able to use what they generated at different times from when it was added to the grid.

The first projects created to take advantage of the novel concept of net metering were a solar test house and an apartment complex in Massachusetts in 1979.¹⁶

The first net metering law is commonly attributed to Minnesota, in 1983, giving the ability to anyone who generated less than 40 kW to either roll the credits over to the next month or be paid for the surplus. In 2000 this legislation was amended to the compensation “at the average retail utility rate”.

This is the most general and simplest interpretation of net metering, allowing smaller producers to sell electricity at the retail rate.

The policies of net metering vary significantly from state to state. The sad fact is that Hawaii no longer participates in any net metering policies for new customers, only those grandfathered in from previous legislation.

With that being said, the other Hawaii solar incentives which help lower the cost of solar panels in Hawaii still make it an enticing option.

Frequently Asked Question About Hawaii Solar Incentives