State Sen. Mike Gabbard is hoping informal discussions he is coordinating outside the glare of the legislative spotlight will lay the groundwork for passage of a bill reforming Hawaii's renewable-energy tax credit when lawmakers return to work next year.
The chairman of the Senate Committee on Energy and the Environment has pulled together a range of stakeholders for a series of meetings, including representatives from the solar and wind energy industries, state agencies, utilities and the Legislature.
Gabbard said he wants to avoid the situation that occurred last session when House and Senate members working to craft a compromise renewable-energy bill simply ran out of time in the turmoil of the closing days of the legislative session.
"The whole idea of this is to get folks together before the session starts up and things get crazy," Gabbard said.
The participants have met twice so far, and have a third meeting planned next week. "It's really been quite productive. I don't expect to achieve a unanimous consensus, but we want to have something everybody can live with," Gabbard said.
As was the case last session, Gabbard said his goal is to come up with a bill that balances the competing issues of encouraging the development of renewable energy with reducing the loss of tax revenue that results from the credits.
"We want to promote renewable energy without giving away the farm. We want to prevent taxpayers from gaming the system without pulling the rug out from under the solar industry," he said.
The main target of legislative efforts to curb renewable-energy tax credits has been solar photovoltaic installations, which have soared in recent years. The state Department of Business, Economic Development and Tourism in September reported to the state Council on Revenues that the amount of tax revenue foregone as a result of the tax credits has grown from $34.7 million in 2010 to $173.8 million in 2012.
The main legislative vehicle for tax credit reform last session was HB 2417. The last draft of HB 2417 up for consideration before the session ended called for a gradual reduction in the residential solar energy tax credit. Under the bill, the 35 percent credit would have dropped down to 30 percent in 2013, to 25 percent in 2014 and 20 percent in 2015.
The state tax credit can be combined with a 30 percent federal tax credit for PV installations, which is due to expire at the end of 2016.
Lawmakers also attempted to address the issue of taxpayers claiming multiple credits for a single household, but a proposal to restrict credits to one per tax map key number was dropped because it was deemed too restrictive.
The lack of legislative action was a factor in the state Department of Taxation's move last week to adopt temporary administrative rules that will effectively limit the ability of homeowners to claim multiple tax credits for the installation of PV systems. The rules go into effect Jan. 1 and last until May 16, unless the Legislature passes a law that supercedes them.
Leslie Cole-Brooks, executive director of the Hawaii Solar Energy Association, is one of the members of Gabbard's informal working group.
She said one of her concerns is that a rollback in tax credits is being proposed at a time when the decline in the price of PV systems is bottoming out and poised to begin climbing.
"Why ramp down the credit when it's going to become more expensive to install a system? Ramping down the credits? We don't think that is a good place to start," she said.
Cole-Brooks predicted solar installations would fall sharply without the benefit of the tax credit that makes systems affordable to a wider range of consumers.
Ed Stewart, a retiree who lives with his wife in Aiea Heights, said he probably would not have installed his PV system without the tax incentives.
The $24,000 price tag for his three-kilowatt system would have been outside his budget without the credits, he said. "That was a major deal for us, the 35 percent state and 30 percent federal credits. We saw the handwriting on the wall — we knew HECO was going to keep charging us more with oil prices headed north," Stewart said.
"We were pretty frugal anyway. We turn the lights out, and we only recently got a window air conditioner. We also availed ourselves of a solar water heater and fluorescent lighting. We did everything we could to get our bill down before putting in the PV."
Renewable-energy tax credits also play a major role in decisions by businesses pursuing solar and wind projects.
State and federal tax incentives allowed Alexander & Baldwin's six-megawatt utility solar project at Port Allen on Kauai to pencil out, said Christopher Benjamin, company president and chief financial officer.
"It's very much driven by the tax credit," Benjamin said during a recent conference call with analysts to discuss the company's earnings. "It's a significant part of the return."
A&B estimates it will be able to recapture 70 percent of the $23.5 million price tag by the end of 2013. The company's agreement to sell power to the Kauai Island Utility Cooperative for 20 cents a kilowatt-hour will generate a projected 20 percent internal rate of return, according to a company presentation.