Today, Governor Neil Abercrombie announced a drastic, potentially devastating cut to the Hawaiʻi's successful tax credit for solar energy. The proposal would reduce by approximately 50 percent the tax credit for homeowners and businesses that install solar energy systems. The solar industry is one of Hawaiʻi's strongest growth sectors, and the state’s proposal threatens the future of thousands of workers and jeopardizes recent progress in weaning Hawaiʻi off dirty, imported fossil fuels.
"The governor should not slam the breaks on solar energy in Hawaiʻi," said Sierra Club Hawaiʻi Chapter Director Robert D. Harris. "The solar industry has been a tremendous success story in our efforts to achieve a clean energy future. A sudden, extreme reduction in the tax credits for residents trying to save money on their electric bills is misguided. It sends the signal that this administration no longer supports aggressive renewable energy adoption in Hawaiʻi."
The Abercrombie administration has invoked the Department of Taxation’s authority to issue temporary rules (rules in effect for up to 18 months). The new rules would limit the solar tax credit to $5,000 for the average residential solar power system, effectively cutting the current 35 percent credit in half. This sudden reduction would put solar out of the reach of many families and business owners. The state made the proposal without giving the public and stakeholders the opportunity to weigh in.
"Less well-off groups are currently the most significant installers of solar technology, as opposed to historically, when more affluent groups were installing these systems," said economist Thomas Loudat. "By dramatically cutting the tax credit, the Department of Taxation's imposed price increase will make it more expensive for these local households who will not install solar systems and enjoy their benefits. Such households will to continue to purchase electricity generated from increasingly expensive and dirty fossil fuels and not be part of achieving the State's clean, renewable energy goals."
"We've just gotten to the point where the cost has come down enough for the less well-off to be able to afford or lease solar panels," said Harris. "This will hurt folks who are trying to save money, while being green."
The legislature refused to pass a similar reduction to the solar credit last session.
"Having failed to convince the legislature to slash the solar tax credit, the administration is attempting an end-run by issuing—without public input or process—draconian rules," said Earthjustice attorney David Henkin. "The legislature makes clean energy policy, not the Department of Taxation. These rules are blatantly illegal."
Governor Abercrombie's hasty proposal to slash the renewable tax credit would jeopardize Hawaiʻi's economy and threaten the state's status as a leader on solar.
"By suddenly and dramatically clamping down on the solar tax credit, the administration will damage a significant engine of economic growth," said economist Thomas Loudat. "The solar industry accounts for over 15 percent of all construction expenditures in the state. A lower tax credit means fewer solar system installations which will lead to local company closures, unemployed workers and fiscal costs in the form of unemployment insurance."
The Abercrombie administration deliberately refused to work with stakeholders in drafting the temporary rules.
“We and other clean energy stakeholders repeatedly offered to work with the administration, but were rebuffed,” said Harris. “Senator Mike Gabbard even formed a working group to explore possible legislative revisions and carefully craft sound policy, but Governor Abercrombie and his staff were unwilling to hold a public dialogue on one of the state's key renewable energy programs.”
"Thousands of jobs like mine are at stake," said Steve Mazur, a solar energy employee and Sierra Club member. "We don't want to see companies destroyed and livelihoods threatened because Governor Abercrombie simply wasn't willing to discuss a rational updating of the tax code."
Photos of the Solar Panel Installations in Hawaiʻi: