Installations of solar photovoltaic systems in Hawaii dropped for the third consecutive quarter, according to a report from the Solar Energy Industry Associated that attributed the decline to new utility guidelines for connecting to the grid and stricter rules for claiming renewable energy tax credits.

Homes and businesses installed a total of 24.7 megawatts of PV generating capacity in the third quarter, down 17 percent from 29.7 megawatts installed during the previous three-month period, the SEIA said in a report to be released today. Both residential and commercial installations declined.

PV system installations have fallen in every quarter since peaking at a record 53.6 megawatts of installed capacity in the fourth quarter of 2012, according to the report.

The SEIA is expecting installations to increase in the fourth quarter from the third quarter as a result of homeowners and businesses pushing to get their projects done to claim state and federal tax credits for the current tax year, said Cory Honeyman, a solar analyst for GTM Research, which conducted the study for the SEIA.

"We still expect a bump up in the fourth quarter, but relative to the fourth quarter of 2012, we aren’t likely to see the same increase," Honeyman said.

The Hawaii solar market was dealt a blow early in the year when the state Department of Taxation put in place new rules that effectively reduced the ability of homeowners and businesses to claim multiple tax credits for the same PV installation. Tax Department officials said they believed that in some cases the tax credits were being abused.

That was followed by Hawaiian Electric Co.’s move in September to revise its interconnection requirements for homeowners seeking to hook their PV systems into the utility’s grid in areas with high penetration of PV panels. HECO said it made the changes to deal with potential safety and reliability risks in areas due to excessive solar power generation. In some cases, homeowners in areas saturated with PV panels have been told they may have to pay for equipment upgrades if they want to connect to the grid. HECO also has undertaken studies about the effect of solar energy on the grid, which has caused delays for some utility customers who want to install PV systems.

"The primary disruptive challenge to growth has been utilities’ management of distribution circuits where PV grid saturation levels are dangerously approaching or have already reached 100 percent of minimum daytime load," the SEIA report said.

Honeyman said the SEIA has heard anecdotal reports from PV installers that HECO is having difficulty processing the large number of requests from customers who want to install PV systems.

"We’re hearing they’re getting about 50 to 60 applications a day," Honeyman said.

The levels of PV penetration in Hawaii are the highest in the nation, Honeyman said. SEIA data show that 8.2 percent of all homes in Hawaii have PV systems compared with 1.4 percent in Cali­for­nia. For businesses the level is 2.8 percent in Hawaii versus 0.6 percent in California, he added.

"What’s really important about the Hawaii market is that it has become an inflection point for PV saturation. It is experiencing levels like no other market in the U.S. has had to deal with. Hawaii can take leadership and come up with a suite of solutions."

On Oahu, the largest market in the state for the solar industry, the number of building permit applications for PV systems has fallen in each of the past seven months when compared with the same month a year earlier, according to data compiled by Marco Man­gels­dorf of ProVision Solar.

From January through November the city Department of Planning and Permitting issued 12,163 PV permits, down 18 percent from the 14,790 permits issued during the same period in 2012, according to Man­gels­dorf.