Hawaii’s solar industry slump continues, but representatives are hopeful batteries connected to solar energy systems will help the number of installations rebound.

The number of permits issued for residential rooftop solar systems in the first six months of this year was down 56 percent from 2016, according to a recent report released by the state Department of Business, Economic Development and Tourism. From January through late June, 1,046 permits for residential rooftop solar systems were issued compared with 2,375 in the same period of 2016.

“The local PV industry is still deep in the hole over the first six months of this year as far as new sales compared to 2016,” said Marco Mangelsdorf, who compiles the rooftop solar permit data and is president of Hilo-­based ProVision Solar.

The number of issued rooftop solar systems saw a drop of 37 percent in June compared with the year before. The Honolulu Department of Planning and Permitting issued 231 rooftop solar permits compared with 368 in 2016, Mangelsdorf said.

The state’s decision to end an incentive program in 2015 has been pointed to by the solar industry and others in Hawaii’s energy community as the reason for the declining permit numbers. In 2015 the state Public Utilities Commission replaced a program that credited residents the full retail rate for the excess energy their systems sent out to the grid. The PUC created two alternative programs. One is grid-supply, which credits customers for excess energy but at a lower rate than the previous program. The other is self-supply, which prohibits solar systems from sending excess energy into the grid.

To meet the requirements of the self-supply program, customers are encouraged to buy batteries to absorb the excess energy produced by the system. The self-­supply program saw little interest initially because of the additional cost of a battery, but the solar industry says it is slowly picking up.

Solar representatives said the requirement to include batteries when installing a solar system has the industry seeing similar numbers to those of the years when solar was gaining popularity here.

“From our perspective, 2017 looks a lot like 2007,” said Colin Yost, principal at RevoluSun. “Consumers are just beginning to understand the savings and power backup benefits offered by solar (systems attached to) batteries. Once the word gets around, the industry will likely have another period of exponential growth.”

There were 73 solar systems installed on Oahu in 2007. In July 2009 the state began offering a solar tax credit of 35 percent of a solar energy system’s cost. Following the tax credit, the number of installed systems climbed each year in 2010, 2011 and 2012 with solar companies installing 1,327; 3,424 and 8,625 solar systems, respectively.

In 2013 the solar industry peaked with 14,010 solar systems installed for the year.

“This is a new market, nonexport PV plus battery storage, with unprecedented challenges,” said Rick Reed, president of Hawaii Solar Energy Association. “I’m just as optimistic today as I was in 2009 about where we are headed.”

Solar industry representatives advocated for an energy storage tax credit, but the bills that would provide incentives didn’t survive the legislative session. In one of the final conference committees of the session, state Rep. Sylvia Luke (D, Punchbowl-Pauoa-Nuuanu) refused to release the funds for House Bill 665, which would have ramped down the solar energy tax credit. Had the bill passed, it would have reduced the credit amount for solar energy systems and included energy storage to qualify for the credit.

The building permit process by the DPP also has held up the installation of solar systems connected to batteries, with solar companies saying it was taking up to six months to get a system permitted. Timothy Hiu, DPP deputy director, said the lag was because the city wanted to be certain the new technology was safe before approving units. Hiu said the DPP’s review process will speed up after the city launched an online permitting system in May.

Since then the industry has seen a record number of solar systems connected to batteries.

“The good news is that (DPP) approved a record number of photovoltaic system permits, 111, including battery storage over the past two months,” Mangelsdorf said. “With E-Gear, Tesla and LG Chem leading the way, a number of battery systems have now received preapproval by DPP, which makes permitting easier.”