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I'm a San Francisco Bay Area-based independent journalist specializing in energy and the environment, with a focus on energy and climate policy. My work has appeared at Yale Environment 360, the Guardian, MotherJones.com, Smithsonian.com, GreenBiz.com, Chinadialogue, and the Christian Science Monitor, among others. I've reported from France, Germany, Switzerland, and Denmark. For the 14 months leading up to COP15, I reported from Copenhagen for Monday Morning and the Copenhagen Climate Council. Follow me on Twitter at @JustinGerdes and Circle me at Google+. Send comments or pitches to: justingerdes [at] gmail.com

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Green Tech 6,553 views

Why Hawaii Just Became An Even Better Market For Solar

Already one of the most attractive markets for solar power in the United States, Hawaii recently made it easier for underserved residents to invest in clean energy. Last month, Gov. Neil Abercrombie signed a bill authorizing the state Energy Office to establish a green infrastructure financing program.

Central to the program is the use of on-bill financing, which will enable property owners and renters in Hawaii to install energy-saving improvements without the upfront costs that are a burden for those without deep pockets.

Hawaii is an ideal market for solar power. There is the abundant sunshine, of course, but also important are the economic drivers. Because Hawaii burns expensive imported oil to generate over 75% of its electricity, residential customers pay the highest average retail electricity rates in the country ($0.37 per kilowatt-hour), double the rates in Alaska ($0.185/kWh), the runner-up.

The average monthly residential electricity bill in Hawaii, $203, is the nation’s highest [PDF]. Because of the high retail electricity prices, Hawaii residents can install solar, without incentives, for less than the cost of grid electricity.

Combine the ample sun, high energy costs, state and federal tax incentives, and general U.S. market shift from solar ownership to leasing and it’s no wonder Hawaii ranks No.3 nationally for cumulative solar electricity capacity per capita.

But the solar bounty hasn’t been harvested equally. Some 40% of Hawaii residents are renters who have no incentive to purchase a PV system for a home likely to be left within a few years. Low-income homeowners may not be able to qualify for a conventional loan to invest in solar. And non-profits aren’t directly eligible to take advantage of solar tax credits.

Senate Bill 1087, which Gov. Abercrombie signed on June 27, makes solar photovoltaic systems, as well as solar thermal water heaters and big-ticket energy efficiency upgrades, available to all these underserved customers by eliminating the thorny issue of the upfront costs.

On-bill financing enables residential or commercial property owners or renters to avoid the initial out-of-pocket expense to install energy improvements. Upgrades are instead financed with loans paid back via a line item on the customer’s monthly utility bill. If the property is sold or transferred, the loan stays with the meter and would be taken over by the new property owner or tenant.

(Regular readers of this blog know that on-bill financing, also known as on-bill repayment, is something of an obsession of mine. See here, here, here, and here for my reporting on efforts by the Environmental Defense Fund to launch an on-bill repayment program for the commercial sector in California.)

When Hawaii's on-bill financing program launches next year, residents, including renters and non-profits, will be able to install rooftop solar panels without upfront costs. Credit: Kenneth Kelly, NREL

The Hawaii on-bill financing program, as with a South Carolina program I wrote about earlier this week, is designed to be “bill neutral” – that is, the monthly energy savings should at least match, and usually exceed, loan payments. Participants in the South Carolina program are saving an average of nearly $300 annually after loan payments now, and will pocket more than $1,100 on average each year after loans are repaid.

“GEMS’ [Green Energy Market Securitization] objective is to make clean energy improvements accessible and affordable,” Noreen Kam, Communications Officer, Hawaii State Energy Office, told me in an e-mail. “In the first phase, we will target financing for distributed solar, especially in the underserved markets (low to moderate income, renters, nonprofits), to bring cost savings to consumers and to contribute to the state’s clean energy goals.” Hawaii expects to meet 70% of its electricity demand with clean energy (40% renewables, 30% energy efficiency) by 2030.

When Hawaii’s on-bill financing program launches next year, interested customers will hire certified contractors to install energy-saving equipment. The projects will be paid for by private investors who have purchased state-issued bonds. Bondholders are repaid via the monthly loan payments collected from the utility bills of participating customers. This Blue Planet Foundation flowchart [PDF] helpfully explains the on-bill financing framework.

To be sure, the steep upfront cost is not the only barrier preventing Hawaii residents from installing solar. In a recent report, John Farrell, a researcher with the Institute for Local Local Self-Reliance, described other barriers, including required electrical upgrades and interconnection study costs. But, if on-bill financing launches as expected next year, lack of means need not prevent Hawaiians from investing in solar power.

The Hawaii Public Utilities Commission must sign off on the GEMS program, said Kam, but the state expects to launch on-bill financing after the first quarter of 2014.

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