Solar Financing Options
Financing OPTIONs
Net Metering
With net metering, the individual owns the solar hardware and any excess energy is pushed back into the grid and stored as credits with the utility company. (Think of it as rollover minutes on your cell phone.) Depending on system size and energy needs, a property’s utility bill can be reduced or eliminated entirely. The maximum return is a $0.00 bill, with no cash back from the utility.
Power Purchase Agreements (PPA)
With no up-front cost, PPAs are an attractive option for those with little or no capital to invest. The solar company owns and maintains solar hardware on your property and sells you the electricity produced at a fixed rate, which is significantly discounted from standard utility rates.
Feed-In Tariff
The property owner covers all installation costs and owns the solar system entirely. Under the feed-in tariff (FIT), the utility company buys all electricity produced by solar panels on your property to redistribute through the grid, paying the owner a fixed rate, guaranteed for 20 years.
Power Purchase Agreement/ Feed-in Tariff Hybrid
Like a traditional FIT, the utility company buys all electricity produced by solar system on your property, but in this scenario, the solar company owns and maintains the hardware. Profit sharing occurs between the solar company and the individual, providing an immediate and lasting income stream with zero up-front and continuing costs.
Hawaii State Level Tax Credits, Incentives and Rebates
Tax Credits
First, it is important to understand that tax credits differ depending on the type of solar electricity system. For tax purposes, there are two types of systems: Solar Thermal Systems (solar water heaters) and Photovoltaic Systems (solar electricity panels).
Photovoltaic Systems
The Hawaii Energy Tax Credit allows solar customers to claim an income tax credit of 35% of the cost of equipment and installation of a solar photovoltaic system. A credit that exceeds the taxpayer’s income tax liability may be carried forward to subsequent years until exhausted. Credits are capped based on property and system type as follows:
Single-family PV installations: credit is capped at $5,000 per system
Confusion over individual “systems” has recently been clarified through new definitions released from the state Department of Tax. These clarifications can be found at this address. www6.hawaii.gov/tax/tir/tir10-03.pdf
Commercial property: 35% of actual cost or $500,000, whichever is less.
Multifamily PV installations: credits for multi-family PV systems are capped at $350 per system
Multiple owners of a single system (solar thermal, PV, or wind) are entitled to a single tax credit that shall be apportioned between the owners in proportion to their contribution to the cost of the system.
Commercial property: 35% of actual cost or $500,000, whichever is less.
Solar Thermal Systems (Solar Water Heating)
Single family residential property: 35% of actual cost or $2,250, whichever is less.
Multi-family residential property: 35% of actual cost or $350 per unit, whichever is less.
Commercial property: 35% of actual cost or $250,000, whichever is less.
Hawaii Energy
Hawaii Energy's Hot Water, Cool Rates program provides financial institutions with incentives that enable them to offer low-interest loans for the installation costs of solar hot water systems by participating contractors. This incentive will buy down the loan interest up to $1,000. See list of lenders. Visit Hawaii Energy's website for more information.
Hawaii State Refundable Tax Credit
The state of Hawaii offers a 35% tax credit (maximum $2,250) on solar water heaters.
Federal Level Tax Credits, Incentives, Rebates
Tax Credits
The Energy Policy Act of 2005 (H.R. 6, Sec. 1335) established a 30% tax credit for the purchase and installation of residential solar electric systems. Individuals may take a 30% credit for each photovoltaic system. The credit is scheduled to expire at the end of 2016. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. To be eligible for the credit, a system must be "placed in service" or activated on or after January 1, 2009, and on or before December 31, 2016.
5-Year Depreciation
Businesses may further recover costs for investment in solar power and solar thermal systems by taking advantage of 5-year accelerated depreciation on all generating equipment and its installation under the IRS's Modified Accelerated Cost Recovery System.
Changes to Alternative Minimum Tax (AMT)
Law Businesses may now apply the Investment Tax Credit toward money owed to the Internal Revenue Service under the Alternative Minimum Tax (AMT).
