Veto feared
on solar tax break

The industry says jobs
are on the line

By Jerry Tune
Star-Bulletin

Two bills that would extend tax credits for homes and businesses using solar energy are sailing through the state Legislative, but proponents worry that a veto by Gov. Ben Cayetano would lead to major job losses.

The state's tax credit for solar energy systems is scheduled to end in December. House and Senate bills would extend the credit for 41/2 years. The credit allows buyers to deduct 35 percent of the cost of a solar-power system from their taxes.

Rolph Christ, president of the Hawaii Solar Energy Association, said that as many as 300 to 400 workers could lose their jobs as early as February if the tax credit is not extended. The industry employs about 500 workers currently.

Last year, Gov. Cayetano vetoed a 10-year extension of the tax credits. He has not commented on this year's bills but let his tax director speak in opposition at hearings last week.

Despite this, legislative sponsors say a bill with a 41/2-year extension will pass.

"The bill looks like it's headed for passage," said Sen. Brian Taniguchi (D, Manoa), a key sponsor of the Senate version. "We amended it to meet some of the governor's concerns. I'm hopeful it won't be vetoed this time."

But state Tax Director Ray Kamikawa had strong words against the tax credit when he testified against the bills.

"In the department's view, the savings generated from installing and using energy saving devices should be sufficient incentive for businesses and other customers to consider installing the system," Kamikawa said. "We do not believe tax policy is the proper way to promote the industry."

If incentives are needed, he added, "perhaps energy surcharges or other energy charges that impact users of traditional electrical energy would be more appropriate."

Kamikawa said Hawaii is one of only six states with energy tax credits. He said this favors families who can afford to install a solar-power system "and possibly they would have installed the systems anyway."

He suggested that low-cost loans for solar systems would be a better approach to promote the solar programs. The administration didn't send up a bill for low interest solar loans because legislators did not show any support for it, Kamikawa said yesterday.

Loss of the tax credit also would lead to elimination of the $800 rebate program used by the Hawaiian Electric Co., Hawaii Electric Light Co. and Maui Electric Light Co.

Ron Richmond, a Heco energy analyst, testified last week that without the tax credits "the residential water heating programs will no longer be cost-effective and would have to be discontinued."

The $800 rebate per system was used on about 2,600 installations statewide last year, he said.

The average cost of a solar hot water system is about $4,600, Christ said. When the 35 percent state tax credit is coupled with the $800 rebate it reduces the solar system cost by nearly a half, he said.

Energy savings can pay for a solar-power system in about four to six years, Richmond said.

In vetoing last year's extension in June, Cayetano said that the state cannot afford the up to $3 million annually it loses from the tax credits.