UPDATED 11/17/10 12 p.m.

Editor’s Note: Read Part 2 of this investigation, which explores how developers are flouting the intent of the solar mandate.

Hawaii was touted a couple of years ago as the first state to mandate solar water heaters for new homes.

In reality, that’s not the case.

Passed in 2008, the Solar Roofs Act was hailed by environmentalists like the Sierra Club as a “landmark measure … that would make the state the first in the nation to require solar water heaters as a standard feature on all new homes.”

But in the first 10 months that the law was in effect, the state granted more than 300 variances. What was intended to be a solar mandate has a gaping loophole.

Half the new homes on the Big Island permitted this year — 243 of 505 — will not have solar water heating. On Kauai, more than 60 percent of new homes are forgoing solar.1 Instead, they’re installing special gas-powered heaters.

“Our people can’t afford all of these extra state mandates,” said Steve Menezes, a contractor building a spec house in the Puna District. “We on the neighbor islands always grumble about the Legislature being Oahu-centric. And even though we have representatives and they’re sometimes in some powerful positions, I don’t know, they kind of overlook what we say.”

Across the state, 1,462 new single-family-home building permits were issued in the firsts nine months of this year, according to U.S. Census Bureau data. By early November, the number was 1,530, according to the counties. More than 20 percent of new homes sought the variance, with the vast majority of exemptions occurring on the neighbor islands.

County Permitted Seeking Variance Pct
Kauai 136 85 62.5%
Hawaii 505 243 48.1%
Maui 169 5 3.0%
Oahu 720 18 2.5%
Total 1,530 351 22.9%

Source: County Departments of Planning or Public Works and Hawaii Department of Business, Economic Development and Tourism list [pdf]

State Energy Administrator Ted Peck, the person in charge of the solar water heater program, called the decision to go with gas systems “penny wise and pound foolish.”

“Solar water is always the most cost-effective solution, unless you have a house that doesn’t get any sun,” Peck said.

Explicit Exemptions

The act requiring solar water heating for new single-family homes, Senate Bill 644, carved out explicit exemptions. For homes where solar power is impractical, such as forested properties, the mandate would be voided.

Homes that use wind, solar thermal or photovoltaic systems as the primary energy source for heating water also do not need dedicated solar water heaters. This fits with the bill’s stated purpose: “to increase the use of renewable energy to protect our environment, reduce pollution, make housing more affordable, and enhance Hawaii’s local economy.”

But those weren’t the only exemptions. “Demand” systems — gas-tankless, instantaneous water heaters that provide hot water only as needed — were allowed in lieu of solar if the applicant’s home includes at least one other gas appliance. Though generally thought of as greener than traditional gas-powered heaters, the systems would still rely on fossil fuels, which must be shipped to the islands.

Of the 351 new homes seeking a variance from the Hawaii Department of Business, Economic Development and Tourism as of Monday, all but six identify “instantaneous gas” as their reason for the request, according to a list [pdf] published by the department. Of those requests, 327 were approved by the state. The 21 newest — received by DBEDT in the last few weeks — remain pending. One application was canceled and one was determined to be not applicable because the home was built before the law went into effect. Just one application has been denied — because it was deemed to be incomplete.

Concerns Were Raised About Solar Requirement

State Rep. Hermina Morita, a Democrat of Kauai’s North Shore and Eastside and chair of the House Energy and Environmental Protection Committee, says the gas exemption was a compromise necessary to get the bill passed.

An earlier version of the bill drew opposition from The Gas Company. Vice President Steve Golden said in written testimony [pdf] that the law “would unfairly restrict our company’s ability to compete for water heating load in the new residential housing market.”

Other industries saw a solar mandate as a threat to their profit margin. Building Industry Association of Hawaii CEO Karen Nakamura wrote that the law “would increase the cost of homes and make them less affordable.”

Perhaps most surprisingly, though, was the testimony in opposition from the Hawaii Solar Energy Association, which argued against eliminating $2,000 to $3,000 income tax credits for solar water heating for existing homes. Without government subsidies, it would be hard for the solar installers to compete with contractors and plumbers on new home construction.

One homeowner who went the gas route said she did it because it was cheaper and easier.

Faith LeLievre, who was granted a variance this year, said she and her family made a conscious decision to install a gas-powered water heater on their new Big Island home after using solar and gas in the past.

“As far as the solar goes, I liked the solar when I had it, so it was no problem there,” LeLievre told Civil Beat. “But I did find in terms of installation cost and time involved in inspections, there was just a bit more to it in the construction phase.

“If people are looking at both options, and I think a lot of people like the solar idea,” she said. “But if it adds a lot more money to their construction costs, that would be a factor.”

Use of Loophole Increases Dependence on Fossil Fuel

The gas-powered heaters may be the best option for some homeowners, but they only increase Hawaii’s dependence on fossil fuel at a time when the government has made clear it wants to kick its costly oil habit.

Tal Ziv of Sopogy, a solar energy company that works not on residential installations but on large-scale commercial solar power projects, worries that while synthetic natural gas is less costly in the short-term, it won’t be in the long-run.

“Even if it’s cheaper today, that’s not the right calculus,” Ziv said. “It doesn’t take into effect the total cost of the propane in terms of the carbon effect to the island and to the world.”

Hawaii has no natural gas deposits, so all the fuel used today in any gas-powered appliances is a synthetic alternative derived when crude oil is processed at one of Hawaii’s two refineries, operated by Tesoro and Chevron.

The refining industry’s hold in Hawaii is so tenuous that Gov. Linda Lingle felt compelled to step in on its behalf in September when proposed Environmental Protection Agency emission standards threatened their survival.

“Compliance would cost millions of dollars; costs that cannot be borne based on the current small size and fiscal condition of each of these facilities,” Lingle wrote in her Sept. 17 letter [pdf] to the EPA. “I believe it is not unreasonable to conclude that given no alternative, both of the parent companies might elect to cease refining in Hawaii, eliminating critical high-paying jobs and creating serious dislocations for our state.”

The EPA agreed with Lingle, and will weigh her concerns as it finalizes its emissions standards. In her Oct. 25 letter [pdf] to Lingle, EPA Administrator Lisa Jackson went so far as to say that the final standards “will most assuredly differ from the ones originally proposed.”

The EPA rules may not put the refineries out of business, but the episode speaks to the risks of a continued, or expanded, dependence on gas.

If the refining operations were to stop or slow down, Hawaii might need to import propane tanks on ships — hardly the green future lawmakers and proponents envisioned when they worked on the solar mandate.

The Gas Company said last year [pdf] that it hoped to use animal fats as a means to generate half of its gas by 2015, but 50 percent is still far less than the 100 percent renewable option of solar water heating.

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