Aloha! As a resident of these beautiful Hawaiian islands, you probably already realize that home solar panels represent an excellent investment in self-sufficiency, sustainability, and long-term savings on your electric bills.
Overview of the Financial Benefits
Currently over 17% of Hawaii‘s power is generated from solar energy, and that number is rapidly rising thanks to decreasing solar costs combined with the country‘s highest electric rates – now averaging $0.33 per kWh.
In fact, according to research by the Hawaii State Energy Office, the average Hawaii homeowner can expect over $39,000 of energy bill savings over 25 years by going solar.
And thanks to generous federal, state, and county initiatives, there has never been a better time to go solar in our island paradise.
By combining upfront tax credits with innovative financing programs, you could get over $9,141 "cash back" in the first year alone!
Keep reading to unlock all the ways you can maximize savings on your solar panel investment.
Combining Federal + State Tax Credits
The federal government offers a nationwide investment tax credit (ITC) equal to 30% of your solar installation costs. For the typical Hawaiian home system running $2.85 per Watt, that‘s nearly $4,275 "cash back" from your federal taxes!
To complement this, Hawaii also offers a state tax credit up to $2,250 or 35% of costs. So for that same 6 kW, 20 panel system, you could realized credits and savings of $6,525 in year one.
My friend Kai, who recently installed solar on his West Oahu home, said:
"I calculated my federal and Hawaii state tax credits to be over $7,000! That covered nearly half the cost of my panels upfront – it was a no brainer financial move."
To qualify for these credits, you must own your solar panel system outright rather than leasing. But as we‘ll explore later, new financing programs make this extremely affordable.
Favorable Regulations to Incentivize Solar Growth
On top of upfront tax credits, Hawaiian solar panel owners can benefit from forward-looking government initiatives aimed at incentivizing renewable adoption:
1. Property Tax Exemption
- Any increased property value from installing solar panels is 100% exempt from higher property taxes in Hawaii for 25 years. This can avoid thousands in taxes over decades.
2. Renewable Portfolio Standard of 100% by 2045
- With the state committed to fully transitioning to renewable energy, greater incentives for solar adoption will continue as we progress towards those goals.
Solar Panel Installation Cost and Payback Period Analysis
Based on up-to-date data from solar providers in Hawaii, the average range of costs per Watt runs from $2.50 to $3.00 depending on your specific home parameters.
For a typical 6 kW system size that can cover nearly all your electricity usage, that translates to $14-18,000 gross price.
But after applying the 30% federal tax credit and 35% Hawaii state tax credit, your true out-of-pocket cost is only $7,056 – $9,241.
And thanks to Oahu‘s 277 days of sun per year, that 6 kW of solar capacity should produce about 8,736 kWh annually, lowering your annual electric bills by approximately $2,883 per year.
This means the system pays for itself in full through electric bill savings in just 6-8 years depending on exact system size and efficiency.
And the panels will continue generating free renewable energy for another 15-20 years beyond that point!
Let‘s break this down into an easy-to-read solar investment analysis:
| System Size | 6 kW |
|---|---|
| Cost per Watt | $2.85 |
| Gross Cost | $17,100 |
| Federal Tax Credit (30%) | $5,130 |
| State Tax Credit (35%) | $2,170 |
| Out-of-Pocket Cost | $9,800 |
| Est. Annual Output | 8,736 kWh |
| Year 1 Savings | $2,883 |
| Payback Period | 6 years |
And that doesn‘t even factor in increased home value from going green or the 25-year property tax exemption!
Buying vs Leasing: Which is Better Financially?
A common question new solar shoppers have is whether to purchase panels outright or lease them monthly.
Typically buying solar panels is recommended in order to capture all the tax credits and reap the full long-term financial dividends.
However, Hawaii‘s extremely high electricity rates paired with new $0 down financing programs actually flip this model on its head!
Rather than paying over $9,000 out of pocket after solar credits, you could finance a purchase for roughly $150 a month over 12 years with today‘s low interest solar loans.
At the same time, you‘d be offsetting an electricity bill likely exceeding $300 per month. So you still pocket over $1,500 per year in immediate savings despite the monthly loan payments.
Whereas leasing solar often provides little immediate savings.
So when doing an apples-to-apples comparison on total 25 year costs, buying solar panels with $0 down financing crushes leasing.
Creative Financing Programs to Access Solar Savings
While buying solar panels is clearly the optimal path financially, not everyone has $8-10K to put down upfront.
Luckily there are a variety of solar financing programs in Hawaii offering creative paths to homeownership with little to no money down, allowing you to reap the full benefits of tax credits and long-term savings.
Low Interest Solar Loans
Whether you tap into home equity or find a great low-interest solar loan rate, borrowing against future electric bill savings allows you to maximize financial returns.
For instance, I was able to finance 75% of my system at only 3.99% APR over 12 years. That kept my out-of-pocket costs below $3K while saving nearly $300 per month!
Power Purchase Agreements
With a PPA, a solar company installs a system on your home at no cost. You then purchase the solar electricity generated from that system at a fixed rate well below your current utility pricing.
So while technically the solar company owns the system, you receive lower cost solar power with no installation expense. And the system often transfers over to full homeowner ownership after 6-7 years.
Future Policy Changes
One last tip to truly maximize solar savings – move quickly to grandfather yourself into the most favorable policy incentives!
While Hawaii already provides generous solar subsidies, upcoming changes to be aware of include:
-
Federal Tax Credit – phases down from 30% to 22% for systems placed in service after 2021
-
State Tax Credit – expires completely on December 31, 2035
-
Net Metering – eventually rules will ease to increase compensation for excess solar power sent back to the grid
So act fast to lock in the strongest savings. That said, even after incentives decline, Hawaii‘s electric rates ensure solar remains a money saver for decades to come.
Real World Example: Kona Couple Goes Solar
To make these solar savings figures less abstract, let me introduce you to Kim and Kale.
This young couple from Kona, Hawaii was fed up with their ever-rising electricity bill reaching $375 per month last year.
After calculating costs vs savings with their solar installer, they decided to finance a 6.2 kW system with 18 panels covering 95% of their home electricity needs.
Between the 30% federal tax credit and 35% state tax rebate, their net out-of-pocket cost was only $3,564 after incentives. Their $150 monthly loan payment still gave them over $200 per month savings from day one!
And thanks to producing over 50% more power than they actually use, they could expand into a EV vehicle in the future while still maintaining net zero utility costs.
"We couldn‘t justify wasting any more money to the electric company," Kim explained. "Now we can channel those savings each month into our dream of opening a food truck business!"
I hope those real world solar success stories demonstrated how making the switch can unlock new life possibilities while protecting the special island environment we all cherish here.
Here I‘ve compiled a quick reference visual of all Hawaii‘s solar incentives and programs in one place for easy referral:
Now I‘d be happy to answer any other questions you have about maximizing solar savings for your unique situation! Just ask below in the comments section.
A hui hou (until we meet again)!
