Sudden Slashes To Solar Incentives Make It Harder To Go Green

Larry Veray had a plan to bring cheaper, cleaner energy to his townhome complex in Pearl City at no cost to residents.

As president of the Waiau Gardens Kai B homeowners’ association, Veray prides himself on keeping association fees low while building reserve funds, and he wasn’t about to ask homeowners to bear the cost of outfitting the complex with solar panels and battery storage units.

Instead, Veray found a way to save the planet and cut electricity costs for homeowners without asking them to pay more.

But Waiau Gardens Kai’s seemingly perfect deal came crashing down on May 8, the last day of the legislative session. Lawmakers put a $40 million cap on the state’s solar energy tax credit program, which normally awards about $100 million annually. Making matters worse, the cap is retroactive to 2026, meaning projects that got underway with the promise of a tax credit to make things pencil out face uncertainty.

“What the state did was basically shoot the project in the head,” Veray says.

The solar energy industry is now rallying to save large commercial and industrial projects like the one proposed for Waiau Gardens Kai and hundreds of others like it. The industry’s trade group has called for a special session so lawmakers can fix at least the part of the bill that makes it retroactive to 2026.

Cuts to the solar tax credits fly in the face of Hawaiʻi state law, which requires all of the electricity sold in the state to be produced with renewable resources by 2045. Gov. Josh Green has promised to do something, but administration officials say it’s too early to say exactly what.

Rocky Mould, executive director of the Hawaiʻi State Energy Association, said he’s encouraged by Green’s promise to help. But he said investors need answers soon.

“We need a clear assurance to the market that the tax credits will be there for projects that already started this year,” he said. “We’re in an emergency, and we need help.”

Taxpayers Have Paid $1.36 Billion Since 2006

Officially called the Renewable Energy Technologies Income Tax Credit, the solar tax credit lets taxpayers subtract 35% of the cost of a solar system from their income tax bills. It includes large solar systems for commercial and industrial facilities, like shopping centers and warehouses that produce the electricity, but not the so-called utility-scale solar farms that produce electricity and sell it to Hawaiian Electric Co.

Credits for rooftop residential properties are capped at $5,000 per property.

While the credit is just one of nine the Legislature established to encourage certain industries or economic activities, the solar credit is by far the largest. The state has awarded $1.36 billion in credits since 2006, according to the Hawaiʻi Department of Taxation, including more than $100 million in 2023, according to the department’s most recent data. That compares to $43.5 million in credits to support film and television production.

So when lawmakers were looking for ways to avoid raising income taxes this past session, they capped the solar tax credit at $40 million per year through 2030, after which it will be eliminated entirely.

The move came as a shock to the solar industry, Mould said, particularly the provision that makes the $40 million credit cap retroactive to 2026. That means projects recently completed or placed under contract almost certainly won’t get what they were expecting.

The eight largest solar companies alone had lined up 265 commercial projects in 2026, Mould said, and had locked in $436 million in private capital. Now projects are simply pulling out, and solar industry proponents worry many will follow.

“That’s just a sample,” Mould said. “We’re not even talking about the residential market.”

In the case of Waiau Gardens Kai, Veray turned to Ted Peck, a former director of the Hawaiʻi State Energy Office, to craft a deal: A private investor agreed to pay for a large solar system, which Peck’s Holu Hou Energy LLC would install, and lease it to Waiau Gardens Kai for 25 years. Residents who signed up — Veray says 88 out of 114 residents joined — would lock in a 20% discount on their electric bills for the life of the lease.

Following the legislative action, Veray says, the investor has pulled out.

As chief executive of the Hawaiʻi Primary Care Association, Emily Chung manages 14 federally qualified health centers providing essential healthcare to more than 160,000 Hawaiʻi residents annually on Oʻahu and all the neighbor islands.

The association in 2026 had plans to install solar with battery systems to power five health centers, including Waimānalo Health Center and Wahiawā Health on Oʻahu. Working with Collective Energy Co. LLC, the association had plans to roll out the initiative to all of its centers over time, Chung says. But the Legislature’s budget bill put that in jeopardy.

“It’s going to be really difficult for us,” she said. “We’re trying to adjust to the new reality if there’s no special session to fix it.”

While the solar industry was hardly the only loser this past session, the tax credit change not only strikes a targeted blow to the state’s renewables mandate but runs against the intent of another of the governor’s policies.

In 2025, Green issued an executive order establishing a state policy “to maximize distributed solar energy paired with battery storage, with the goal of dispatchable solar generation on every rooftop and parking area on land constrained Oʻahu by 2045.” That included facilitating installation of at least 50,000 solar-plus-battery storage installations by 2045.

With all of that now at risk, Green’s administration is looking for answers.

“We’re definitely working on it,” said Mark Glick, director of the Hawaiʻi State Energy Office. But, he added, “It’s too early to share details.”

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This story was originally published by Honolulu Civil Beat and distributed through a partnership with The Associated Press.