Developing private-sector initiatives such as on-bill financing to help Hawaii residents pay for rooftop solar systems makes more economic sense than relying on tax credits, which are a burden on taxpayers, according to a study released today by the University of Hawaii Research Organization.
UHERO researchers estimate that installing a photovoltaic system on every owner-occupied single-family home statewide could theoretically cost the state $1.4 billion in uncollected tax revenue based on newly imposed limitations on the state’s renewable energy tax credit. Under the old rules lost tax collections could have been as high as $2.1 billion. The study did not take into account technical constraints on PV installations, such as circuit capacity issues.
The amount of time it takes for a PV system to pay for itself in electric bill savings depends on a variety of factors, including the cost of utility-provided electricity and the size of the tax credit, according to the report. Even in the worst-case scenario with no tax credit the average payback period for a PV system in Hawaii is 10 years or less, according to the report. In the best-case scenario the payback can be as quick as 3 1/2 years, the report said.
“Because systems are warrantied for 25 years or more a payback period of 10 years or less makes the PV installation a very lucrative investment,” according to the report. “Given the magnitude of the estimated taxpayer burden, the relatively short payback period for household investors, and the large potential for rooftop PV and its subsequent greenhouse gas emission reduction benefits, a more appropriate role for state policy is to facilitate PV deployment rather than make direct payments (tax credits),” the report’s authors wrote.
“One approach to facilitating private decisions to install PV is on-bill financing. This ‘pay-as-you-save’ mechanism is a way to potentially deploy PV to a wider population while limiting the state’s tax credit expenditures.”