Hawaii’s solar companies could be in for a difficult legislative session as state auditors dig into whether state tax credits are being abused — financial incentives that have propped up the state’s fast-growing photovoltaic industry.

Recently, the state Department of Taxation said that it would be auditing homeowners who stretched single solar systems into multiple installations, allowing them to claim multiple refunds. Solar companies have been blamed for perpetuating the unscrupulous practice.

Concerns have also been raised about companies oversizing customers’ systems for financial gain and not informing them of energy efficiency measures and the importance of installing solar hot water heaters, which can greatly reduce the overall cost of photovoltaic systems.

Rep. Pono Chong, who proposed legislation last year that would cap state expenditures on renewable energy credits, said that the credits would likely be under review this session as part of the state’s budget priorities.

The credits have spurred the growth of dozens of companies and created hundreds of jobs throughout the islands in the past few years. They’ve also allowed homeowners and businesses who put in solar systems to eliminate or minimize electric bills, which in Hawaii can be double to triple the national average.

Solar is seen as playing an important role in meeting state mandates to switch to renewable sources of energy, but whether the credits — which amount to millions of dollars a year — will be maintained amid other budgetary concerns remains to be seen.

“It’s probably $30 million to $40 million annually in a time when we are taking people off Medicaid and the DOE is considering getting rid of bus service on Oahu for kids,” said Chong.

The tax credits have their supporters in the legislature, but solar executives say it’s a fight every year to ensure they survive, and with the threat of political fallout from the audits it could be that much harder this year.

“I’m going to have a huge fight on my hands this legislative session anyway, so we are already gearing up for it,” said Mark Duda, president of the Hawaii Solar Energy Association and an executive at RevoluSun.

At stake, if the credits are cut, are not only jobs, but millions of dollars in projects already in the works that could grind to a halt without the subsidy.

The credits allow customers to take a 35 percent credit for the system’s cost or a $5,000 refund, whichever is less. For commercial projects the refund is up to $500,000.1

Solar executives argue that under some circumstances, installing multiple systems is permitted and that any abuse is likely minimal.

“I don’t think it is pervasive,” said Alex Tiller, CEO of Sunetric. “I don’t think there are people out there intentionally trying to do things wrong.”

Mallory Fujitani, spokeswoman for the tax department, said that she couldn’t say how many homeowners may be audited or when.

“The impacts of that investigation are going to linger throughout the session,” said Darren Kimura, CEO of Sopogy, a solar thermal company that doesn’t do photovoltaic installations, but could be impacted if the credits are repealed. “The industry is playing defense right now and the economy is still not back yet, so it’s definitely still tight from a broader standpoint.”

DISCUSSION: Do you think the state should maintain its support for the solar industry through tax credits?*

1. A previous version of this story incorrectly reported that a $50,000 tax refund can be taken for commercial solar projects — it’s $500,000.

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