Let me start out by giving you some context on the solar landscape here in the beautiful Hawaii Islands. As of 2023, 17% of our state‘s power already comes from solar – that‘s top 5 in the entire U.S!
With average sunlight levels of 5 to 6 kWh/m2/day and electricity rates hitting 34.54 cents per kWh, it‘s no wonder so many Hawaiians are choosing to go solar.
In fact, by installing a moderately sized 6 kW solar panel system, homeowners like yourself could save a whopping $39,723 over 25 years!
I know that upfront cost of solar may still give you pause. But don‘t worry, Hawaii offers 3 fantastic incentives to dramatically cut your installation cost.
**You can save big in Hawaii by taking advantage of:
- Federal tax credit of 30%
- State tax credit of 35%
- Property tax exemption for 25 years**
Let me break down exactly how these work to put dollars back in your wallet if you go solar…
How Much Does a Solar Panel System Really Cost in Hawaii After Incentives?
The average cost to install a 6 kW solar panel system in Hawaii is around $16,020 or $2.67 per Watt.
While that number may sound steep at first, you have to consider all the incentives and long-term utility savings you‘ll enjoy.
Run the numbers with me:
- 6 kW System Cost: $16,020
- Federal Tax Credit (30%): -$4,806
- Hawaii State Tax Credit (35%): -$5,607
- New Out-of-Pocket Cost: $5,607
As you can see, by stacking the federal and Hawaii state tax credits, you can immediately slash 65% off the cost of going solar!
And don‘t forget – you‘ll also be exempt from paying ANY property tax increases due to your new solar system for the next 25 years.
With power bills in Hawaii averaging $178 / month, your new solar array would pay for itself in full in just over 7 years!
That‘s when the real long-term savings kick in…
Federal Solar Incentive – Up to 30% Off and Counting
The federal solar investment tax credit (ITC) offers a dollar-for-dollar reduction in your income taxes when you go solar.
For systems installed before December 31, 2023, this equates to 30% back. The credit applies to both materials and labor costs too.
While the percentage drops over next decade, the credit remains intact at 22% from 2024 through 2034 before phasing out completely.
- 2024-2032: 26% credit
- 2033: 22% credit
- 2034+: Expires
To receive the ITC, you must own your solar panel system rather than leasing from a third-party.
You‘ll submit proof of your installation costs with your taxes to redeem this incentive.
For a $16,000 system today, you‘d get nearly $5,000 off your federal tax bill!
Up to $2,250 Back from the State of Hawaii
On top of the federal credit, Hawaii also offers a 35% tax credit on solar installation costs, up to $2,250.
Like the federal version, you must own the solar panel system on your primary residence. Submit the tax credit application within 3 years of installation date.
$2,250 may not seem like much compared to the federal credit. But hey, why not double down and maximize your savings?
This incentive drops each year, so act fast to get the full 35% credit if you go solar soon.
- 2025 – 30%
- 2026 – 25%
- 2027 – 20%
Lower Property Taxes for 25 Years
Owning a home in Hawaii isn‘t cheap, with median property taxes around $2,238 per year.
Luckily, the state passed Act 155 that exempts any increased property value from your solar system from being taxed for 25 years after installing it.
Considering most solar arrays add approximately $15,000 to your home‘s value, that could mean over $5,700 in tax savings for Hawaiians over 25 years.
This regulation serves as a nice cherry on top of the sundae with the two sweet tax credits you‘ll also receive.
And given solar panel warranties last 25 years themselves, this exemption perfectly matches your system‘s usable lifespan.
Interconnection Rules: Limited Net Metering in Hawaii
With abundant sun and sky-high electric rates, selling excess power back to the utility via net metering would be lucrative in Hawaii.
Unfortunately, the state ended traditional net metering back in 2015 for solar customers.
Now they use "customer self-supply" and "customer grid-supply" models instead.
This means any extra power your system produces gets used on-site first rather than being sold back. Once your home‘s instantaneous load is met, excess generation feeds to the grid uncompensated.
For now, net metering savings aren‘t reliable as homeowners can‘t bank kWh credits each month in Hawaii.
That said, the state is constantly reevaluating its interconnection policies as renewable adoption increases. More favorable rates for excess solar may come back in the future.
Okay, before your head spins on all those regulations – here‘s a quick summary of the solar incentives available now:
| Solar Benefit | Credit/Savings | Expires |
|---|---|---|
| Federal Tax Credit | 30% of system cost | 2034 |
| Hawaii Tax Credit | 35% up to $2,250 | 2027 |
| Property Tax Exemption | 25 years | – |
| Net Metering | Limited | – |
I want to note too that while LEASING solar panels can reduce your monthly costs, leased systems sadly DON‘T qualify for these awesome tax credits and exemptions.
Here‘s a comparison showing why buying beats leasing overall in Hawaii if your budget allows:
| Decision Factors | Buy Solar Panels | Lease Solar Panels |
|---|---|---|
| Upfront Costs | $5,607 after incentives | $0 |
| Ongoing Payments | $0 | $100-$200 per month |
| Tax Credits & Exemptions? | YES | NO |
| Warranty Length | 25 years | 10-20 years |
| Lifetime Savings | $39,723 | $18,723 |
| Own Equipment? | YES | NO |
Okay, let‘s shift gears and talk about a few other ways Hawaiians can take advantage of renewables beyond solar…
Further Reading on Green Energy in Hawaii
With so many natural resources, Hawaii aims to be at 100% renewable electricity by 2045. Ambitious, I know!
Beyond solar incentives, you should also look into:
Buying an electric vehicle – With so much solar power soon to be online, EVs like the Nissan Leaf or Chevy Bolt can save Hawaiians big on gas costs driving around the islands. The state offers some generous electric car incentives too!
Investing in residential battery storage – As net metering policies shift, batteries let you bank excess solar generation during the day to power your home overnight. Expect costs to fall over the next 5-10 years.
Improving home efficiency – Whether going solar or not, do an energy audit and seal up any leaks or drafts wasting your AC. Smart thermostats and LED lights also trim waste for very little upfront investment.
I‘m happy to chat more about any of those options in the islands!
Now to wrap things up, here are answers to a few common questions Hawaiians have asked me about solar panels:
How long does it take for solar panels to pay off in Hawaii?
For a $16,000 system with 65% covered by tax credits, you‘d break even in just over 7 years thanks to $178 monthly utility bill savings.
What direction should my solar panels face in Hawaii?
South is best for grid-tied solar panels in Hawaii to maximize generation, but west-facing can work too. Avoid too much east/west as it stresses equipment with morning/evening sun extremes.
What happens if I replace my roof after installing solar panels?
No worries there! Any licensed solar company will know to properly detach and re-attach panels during any re-roofing. It may carry an extra cost but protects your existing investment.
Thanks for sticking with me here to the end! As you can see, homeowners can save BIG on upfront solar panel costs in the Aloha State thanks to incredible federal and state tax credits.
And I didn‘t even mention the 25 years of property tax exemptions you‘ll enjoy!
By acting now before incentives decrease, you can maximize your lifetime utility savings with solar while Hawaii continues on its renewable energy mission.
I know going solar seems intimidating. But with returns outpacing stock market indexes, that sunshine will pay you back over and over in the coming years.
Let me know if you have any other questions! Aloha for now 🙂
