Renewable energy credits benefit Hawai‘i economy
Once a rare sight, solar panels have sprouted on Hawai‘i rooftops in the past few years, quickly becoming a familiar part of our island landscape. Solar is increasingly affordable—aided by the state's renewable energy tax credit—and is becoming more accessible to businesses and Hawai‘i families. Unfortunately, some lawmakers are pushing to severely limit the tax credit, perceiving that the credit’s success encumbers the state budget. But a recent economic analysis shows that this is largely an error in perception. The solar that is powering homes and businesses statewide—spurred by the credit—actually has a positive effect on Hawai‘i's budget and overall economy.
It’s no surprise that solar energy is good for our environment and good for the homeowner seeking relief from uncontrollable, rising electricity costs. What’s often overlooked, however, is just how good solar is for our state in terms of job creation, additional dollars circulating within our economy, tax revenue generation, and other benefits.
Blue Planet commissioned former University of Hawai‘i economist Dr. Thomas Loudat to take a hard look at the costs and benefits of Hawai‘i’s renewable energy tax credit. Dr. Loudat’s earlier analysis of the credit was presented in a report to the state legislature in 2002.
What we found was remarkable: The existing tax incentive yields a clear, significant net fiscal benefit to the state. Each tax credit dollar invested in a commercial photovoltaic (PV) system yields more than $7 that stays in Hawai‘i rather than being sent out of the state to pay for oil. By keeping that money in the state, each credit dollar yields $55 in additional sales, and $2.67 in new tax revenue. For a typical 118 kW commercial PV installation, the state gains 2.7 local jobs each year over the 30-year lifetime of the system.
Residential PV creates similar benefits. For each tax credit dollar invested in a typical 5.27 kW system, $5.71 stays in Hawai‘i, yielding over $34 in additional sales and nearly $2 in new tax revenue. Over the life of the system, the result is $106,000 in new local labor income.
According to the state Department of Business, Economic Development, and Tourism (DBEDT), solar accounts for 15% of all construction expenditures in Hawai‘i. The solar industry employs more than 2,000 people locally.
Any stimulation in solar installations also brings federal dollars (from the 30% federal renewable energy tax credit) into our local economy. These dollars have a full multiplier effect similar to tourist dollars coming to Hawai‘i.
The price of PV systems has dropped dramatically—some 50% over the past few years. So it is sensible to consider decreasing the state’s share in incentivizing the systems. But it’s essential that we maintain the right tax credit 'nudge' to help more and more families and businesses put solar to work for them—with positive economic benefits for everyone. That’s why Blue Planet Foundation supports proposed changes to the law that decrease the tax credit while eliminating the “system” caps which have led to confusion and charges of “gaming” the credits.
Every solar installation not only reduces our dependency on oil but adds a lasting benefit to the state budget and economy that pays off year after year. Hawai‘i's solar tax credits are effective in stimulating private investment, drawing federal dollars into our local economy, and putting people to work. It's a smart investment in a better, cleaner tomorrow, a future we value beyond dollars and cents.