Whether you’re an owner, buyer, seller or renovator of real property, in these volatile economic times you may be thinking about the long-term benefits of energy efficiency improvements. Current legislation could dramatically reduce the upfront cost of installing new “green” systems, which can provide savings and benefits for years to come.

It’s no secret that installation of solar panels can offer significant savings on monthly energy bills. For many homeowners and some condo owners, federal and state tax credits of up to 26% and 35%, respectively (for systems purchased before the end of 2022), could make purchasing a photovoltaic (PV) system less costly than expected. Many solar companies have leasing programs that make the upfront cost to owners even lower, though in such cases the company, not the homeowner, typically receives the tax credit. Credits are also available in many circumstances for installation of new solar hot water heaters and attic fans. Additionally, Hawaiian Electric has incentives available to homeowners on Oahu and Maui for the installation of new residential battery storage systems, whether added in connection with a new PV system or to an existing net metering system.

Homeowners should know that even if they don’t see solar panels in their neighborhood, it doesn’t mean that panels are not allowed by their homeowners association. Under Hawaii law, an HOA cannot prohibit installation of rooftop solar panels, though HOA approval for the appearance and placement of the system still may be required. Owners of most townhouses and stand-alone condos with roof ownership should know that they are also legally entitled to install rooftop PV systems, subject to permitting and HOA guidelines.

When it comes to buying and selling properties with PV systems, the value of the system should be factored into the sales price, and, where applicable, transfer of any maintenance or net metering agreements should be properly documented upon sale. Buyers are warned to do their diligence in verifying ownership and permitting, and to exercise caution when purchasing properties with systems that are not owned outright by the seller.

Commercial and multifamily property owners also can benefit from making energy-efficient improvements. Increasing energy efficiency of commercial properties can reduce operating expenses and could increase value. For example, if the owner of a 48,000-square-foot office building with $3 per square foot in energy costs can achieve just a 10% reduction in energy consumption through upgrades, that could translate to an additional $14,400 of net operating income. At a cap rate of 8%, this could mean a potential increase of $180,000 in the value of the property.

There are also numerous state and federal incentives that make the initial cost of incorporating energy-efficient features into new or existing commercial buildings less burdensome. For example, section 179D of the Internal Revenue Code provides tax deductions of up to $1.80 per square foot for owners of commercial buildings, including hotels and some multifamily properties, that incorporate energy-efficient elements that allow the building to meet certain efficiency benchmarks. Eligible improvements include building envelope elements (e.g., roofs, windows or doors), lighting, HVAC (heating, ventilating and air conditioning) or hot water systems. Even certain contractors on public building projects may be able to take advantage of this tax deduction with the cooperation of the public land owner.

Installation of electric vehicle charging stations at commercial properties is another option that may be good for both the planet and business. Hawaii state law currently provides rebates for the installation of charging stations at commercial or multifamily buildings, which vary in amount based on station output. Funding for the incentive should be released soon. (Note that owners constructing some types of new buildings may be obligated under state or local law to install a certain number of, or wired capacity for, charging stations.) Though some owners might seek to recover installation costs through per-kilowatt-hour user fees, there may be other benefits to putting in a charging station. Retail owners might find that the chargers attract new customers who spend more shopping time on-site, and employers might find that free or inexpensive charging is an attractive employee benefit.

A multitude of other alternative-energy and energy efficiency credits are in effect and may be available, depending on your circumstances and desired improvements. Consult with your tax adviser, and be advised that incentives change from year to year and some deductions have look-back periods, so timing is important.

Julie Mecklenburg is of counsel in Carlsmith Ball LLP’s Maui office and concentrates her practice in the areas of administrative and regulatory, banking and finance, corporate, and real estate and project development. She can be reached at Jmecklenburg@carlsmith.com.