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A Policy Analysis of Hawaii�s Solar Tax Credit Incentive

Author

Listed:
  • Makena Coffman

    (University of Hawaii at Manoa, Department of Urban and Regional Planning & University of Hawaii Economic Research Organization)

  • Sherilyn Wee

    (University of Hawaii Economic Research Organization)

  • Carl Bonham

    (University of Hawaii Economic Research Organization)

  • Germaine Salim

    (University of Hawaii at Manoa, Department of Urban and Regional Planning)

Abstract

This study uses Hawaii as an illustrative case study in state level tax credits for PV. We examine the role of Hawaii�s tax credit policy in PV deployment, including distributional and tax payer impacts. Hawaii is interesting because its electricity rates are nearly four times the national average as well as has a 35% tax credit for PV, capped at $5,000 per system. We find that PV is an excellent investment for Hawaii�s homeowners, even without the state tax credit. For the typical household, the internal rate of return with the state tax credit is about 14% and, without it, 10%. Moreover, the vast majority of installations are demanded by households with the median income and higher. We estimate that single-family homeowner�s in Hawaii may demand as much as 1,100 MW of PV. There are, however, significant grid constraints. Policy currently limits PV generation to no more than 15% of peak load for any given circuit, or approximately 3% of aggregate electricity demand. Tax credits are therefore not likely to increase the overall deployment of PV, but rather spread the cost of installation from homeowners to taxpayers and accelerate the rate at which Hawaii reaches grid restrictions.

Suggested Citation

  • Makena Coffman & Sherilyn Wee & Carl Bonham & Germaine Salim, 2013. "A Policy Analysis of Hawaii�s Solar Tax Credit Incentive," Working Papers 2013-11, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    • Handle: RePEc:hae:wpaper:2013-11
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    References listed on IDEAS

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