By HUNTER BISHOP
Tribune-Herald staff writer
The Sierra Club is challenging the state’s decision to cut tax credits for homeowners and businesses that install solar energy systems in Hawaii.
Represented by nonprofit environmental law firm EarthJustice, the Sierra Club filed a lawsuit Tuesday in state Circuit Court asking for a ruling on the validity of new rules for solar and photovoltaic credits that were announced by the Department of Taxation on Nov. 9.
The tax office rules set to take effect Jan. 1, will “drastically reduce the availability of the Hawaii renewable energy tax credit for solar photovoltaic systems and threaten Hawaii’s progress in promoting renewable energy and weaning itself off fossil fuels,” said a joint Sierra Club/EarthJustice media release on Tuesday.
Residents may no longer be able to afford to install solar panels on their roofs under the new rules, said Sierra Club President Robert D. Harris, and investors are abandoning large commercial projects because of the reduced amount of the credits being offered. “This goes completely against what the Legislature tried to accomplish in enacting and expanding the solar tax credits,” Harris said.
The solar power industry has boomed since the advent of the solar credits, becoming one of the fastest growing industries in the state, and the new rules conflict with Hawaii’s aim to encourage widespread adoption of residential and commercial solar energy systems, according to the lawsuit.
The state Legislature established a a goal of generating 40 percent of its energy from locally generated, renewable sources by 2030, and the solar tax credits were seen as an important means of reaching the goal. The new rules will result in fewer photovoltaic projects being put in service and will discourage investments in new photovoltaic systems, the lawsuit alleges.
Current rules allow multiple tax credits for solar installations that serve a single facility, which the tax office wants to end.
The Department of Taxation attempted to get the state Legislature to adopt its changes in the last session but failed. The department then changed its interpretation of the solar credit without legislation to adopt a similar reduction in the credit.
Gov. Neil Abercrombie issued a statement Tuesday disagreeing with the Sierra Club’s position.
“We want to move to alternative and renewable energy,” the governor said. “We have a plan to do it and will do it in a pono way. We are encouraging people to use solar wherever possible and we’re trying to maximize the capacity of people to be able to afford that.
“When some people put in systems that are double or triple in order to pretend that they need more than one system, it undermines our ability to keep the system fair for all,” Abercrombie said.
Currently a single family residence can get a state tax credit equal to 35 percent of the overall cost of the installation or $5,000, whichever is less. Commercial projects can also receive a 35 percent tax credit with a $500,000 cap.
The Department of Taxation reported concerns that the effect on the state’s general fund is increasing substantially with the popularity of the tax credits for new solar energy projects, citing a rise from nearly $35 million in 2010 to a projected cost of $170 million to the state budget this year.
Marco Mangelsdorf, owner of ProVision Solar Inc., a Hilo firm that’s been designing and installing PV projects across the islands since 2000, called the Sierra Club’s position “hypocritical” and praised the tax office for the new rules. “It’s about time they did this,” he said.
Mangelsdorf, who also teaches energy politics at University of Hawaii at Hilo, said that over the years it was the state that made it possible for homeowners to get multiple tax credits on their systems, while “the intent never was to allow for multiple dipping.”
Mangelsdorf acknowledges that his may be a minority opinion in the industry, but he’s been in the renewable energy field for 34 years and expects a fallout among some newer companies that may have started up in the past few years to take advantage of the current rules.
Currently there’s a “perfect storm” of demand for photovoltaic systems, Mangelsdorf said. It’s becoming more mainstream, HELCO is putting more limits on the installation of net-metering systems, and companies are engaging in very aggressive marketing of photovoltaic systems. “People are wanting to cash in before it’s too late. Some people just want it.”
Mangelsdorf said there have been as many solar installations in 2012 — nearly 10,000 — as there have been in the past 10 years.
“It’s the time to have a serious discussion on whether the rationale still exists to have a state taxpayer-funded subsidy for PV system purchasers and, if so, at a level that reflects a very different playing field compared to when the existing tax credit law was enacted years ago,” Mangelsdorf said.
Email Hunter Bishop at email@example.com.