Hawaii has some of the highest electricity rates in the United States, which makes solar energy less of a luxury and more of a necessity for many homeowners. While most people are familiar with the federal solar tax credit, far fewer understand that Hawaii offers multiple solar-related incentives and utility programs that can significantly reduce costs and improve long-term savings.
On top of that, Hawaii has introduced the Battery Bonus Program, a unique utility-backed incentive that rewards homeowners for pairing solar with battery storage and supporting the grid. Contact BlueSky Energy, and let’s find the best Solar Incentives.
Why Hawaii Offers More Than Just the Federal Solar Tax Credit
Hawaii’s energy landscape is very different from most mainland states.
- Electricity prices are 2–3x higher than the U.S. average
- Much of the power is generated from imported fossil fuels
- The islands have limited grid flexibility
- Solar adoption is already very high in many neighborhoods
Because of this, Hawaii’s goal is not just “more solar,” but smarter solar systems that reduce strain on the grid, store energy locally, and support long-term energy independence.
Read Also: Residential Solar Tax Credit Available for Homeowners
1. Federal Residential Clean Energy Credit (IRA)
- What it is: A federal tax credit that lets you deduct a percentage of your solar system cost from your federal taxes.
- Benefit: Reduces the upfront cost of solar installation significantly.
- Example: If your solar system costs around $20,000, you could save several thousand dollars through this tax credit.
- Key Points: It applies to equipment, installation, permits, wiring, and any related labor costs, making it a substantial financial advantage. This means almost every part of your solar project: panels, inverters, batteries (if eligible), mounting hardware, and professional installation, is included. By claiming this credit, you can significantly lower the effective cost of going solar, improve your return on investment, and make the payback period much shorter. Additionally, this credit can sometimes be combined with state and local incentives for even greater overall savings.
2. Hawaii Renewable Energy Technologies Income Tax Credit (RETITC)
- What it is: A state tax credit that reduces your Hawaii state income taxes when you install solar panels.
- Benefit: Covers a portion of your solar system cost, lowering your overall investment.
- Example: You calculate 35% of your solar system cost. If the result is below $5,000, you can claim the full amount. If it exceeds $5,000, the credit is capped at $5,000. This credit reduces the amount of state tax you owe in the year you install the system.
If Solar System Costs:
- Solar system cost: $15,000
- Credit: 35% of $15,000 = $5,250
- Cap applies → You can claim $5,000 maximum on your state taxes.
or
- Solar system cost: $10,000
- Credit: 35% of $10,000 = $3,500
- Under the cap → You can claim $3,500 on your state taxes.
Carryforward: If your state tax liability is lower than the credit, in some cases, you can carry the unused portion forward to future years to maximize benefits.
- Key point: It has a maximum limit, but any unused credit can sometimes be carried forward to future years.
3. Honolulu Solar Property Tax Exemption
The Honolulu Solar Property Tax Exemption allows homeowners to install solar panels without increasing their property taxes. Normally, adding a solar system increases your home’s assessed value, which could raise property taxes. This exemption ensures that 100% of the added value from solar improvements is excluded from your property tax assessment. In other words, homeowners can enjoy the benefits of solar without paying extra taxes on the increased home value.
For example, if a homeowner installs a solar system that adds $20,000 to the home’s assessed value, the exemption prevents this $20,000 from being included in property tax calculations. If the local property tax rate is 0.35%, the homeowner avoids paying an extra $70 annually on property taxes, and these savings continue for many years. Over the lifetime of the solar system, this can add up to several hundred dollars in savings while the system continues generating electricity.
This exemption is particularly valuable when combined with federal and state tax credits. While tax credits reduce the upfront cost of the system, the property tax exemption ensures that your long-term financial savings are not eroded by higher property taxes. For homeowners in Honolulu, this incentive makes solar installation more financially attractive, encouraging clean energy adoption while maintaining predictable home ownership costs.
4. Utility Export or Net Billing Programs
Hawaii utilities offer programs that allow solar system owners to export excess electricity back to the grid and earn credits on their monthly electricity bills. While traditional net metering has largely phased out, net billing or export credit programs are still available for many residential and commercial customers. The utility measures how much electricity your solar panels send to the grid during specific periods, often during peak hours in the evening, and credits you at a predetermined rate, which is usually close to the retail electricity rate.
The exact amount available depends on your system size and the electricity your system produces beyond what your home consumes. For example, if your solar system produces 1,000 kWh more than you use in a month, and the utility credit is roughly $0.25 per kWh, you could receive $250 in export credits for that month. While rates and rules vary by utility, these programs provide a valuable way to offset your monthly electricity bills, making solar not just an environmental choice but a financially smart investment over time.
5. Low-Income or Financing Programs (GEM$)
The Green Energy Money Saver (GEM$) Program is a financing option designed to make solar systems more affordable for eligible low-to-moderate income homeowners in Hawaii. Instead of paying the full system cost upfront, homeowners can finance 100% of the solar system cost through their utility bill, typically at a low fixed interest rate. While the exact percentage of cost covered can vary, most participants can finance the entire cost of installation, reducing the immediate financial burden.
The program works by adding a small, fixed monthly charge to your electricity bill. This payment covers both the repayment of the system cost and the interest. Because the program offers low-interest rates and long repayment periods, homeowners can often start saving on electricity bills immediately, even while making monthly payments. For example, a homeowner with a $15,000 solar system could spread the cost over 20 years with manageable monthly payments, often offset by the energy savings generated by the solar system itself.
The benefits of GEM$ go beyond just financing. Eligible homeowners can access solar without high upfront costs, reduce monthly electricity bills, and contribute to Hawaii’s clean energy goals. Over time, combining this financing option with federal and state tax credits and any utility export credits can make solar installation highly affordable, even for households with limited initial funds. This program ensures that clean energy is accessible to a broader range of Hawaii residents.
What Is the Battery Bonus Program? A Solar-Dependent Storage Incentive
The Battery Bonus Program is not a traditional solar incentive.
Instead, it is a utility-backed incentive that rewards battery performance, and it requires solar to participate.
Its goal is simple:
Encourage homeowners to store solar energy and support the grid during peak demand.
The Battery Bonus Program pays homeowners for installing qualified battery storage systems that can:
- Store solar energy
- Discharge energy during critical grid periods
- Reduce reliance on fossil fuel power plants
Key Benefits of the Battery Bonus Program
1. Upfront Financial Incentives
The Battery Bonus Program offers direct financial incentives that help reduce the upfront cost of installing a battery storage system. Homeowners receive payments for enrolling qualifying batteries that meet utility requirements. This makes solar-plus-battery systems more affordable and improves overall return on investment. For many households, these incentives help close the cost gap that would otherwise delay battery adoption.
2. Performance-Based Rewards for Grid Support
Participants are rewarded for allowing their batteries to discharge energy during peak demand or grid stress events. These performance-based incentives compensate homeowners for supporting Hawaii’s electrical grid when it needs it most. Instead of relying on fossil fuel plants during peak hours, utilities use stored solar energy from homes. Homeowners benefit financially while contributing to a cleaner energy system.
3. Reliable Backup Power During Outages
Battery systems enrolled in the Battery Bonus Program provide dependable backup power during outages, which are common in island environments. When the grid goes down, stored solar energy can keep essential appliances running, such as lights, refrigerators, and medical equipment. This added resilience offers peace of mind and improves household energy security. The incentive program makes this benefit more accessible.
4. Better Use of Solar Energy and Higher Savings
Without batteries, excess solar energy is often exported to the grid at lower credit rates. The Battery Bonus Program encourages homeowners to store that energy and use it later, especially during evening peak hours. This reduces reliance on grid electricity and increases self-consumption. Over time, this leads to lower electric bills and stronger long-term savings.
Eligibility Requirements for the Battery Bonus Program
To qualify, homeowners must meet all utility requirements.
Basic Eligibility Criteria
- Must have a grid-connected solar system
- The battery must be paired with solar
- The system must be installed by an approved contractor
- Home must be within utility service territory
A typical example is a homeowner on Oahu who already has rooftop solar or plans to install solar along with a battery like a Tesla Powerwall, Big Island, Hawaii. When the system is installed by a certified installer and meets HECO’s technical requirements, the homeowner can apply for the Battery Bonus Program through their installer. After utility approval and inspection, the battery becomes eligible to participate in grid support events. In return, the homeowner receives incentive payments while also benefiting from backup power and improved solar energy usage.
Program Duration and Commitment Period
The Battery Bonus Program is designed as a long-term incentive, not a short-term rebate. Most participating utilities require homeowners to commit their battery systems for a multi-year contract period, typically lasting up to 10 years. During this time, the battery must remain operational and enrolled in the program. This long-term structure allows utilities to plan grid support reliably while giving homeowners predictable benefits.
Application Requirements for Battery Bonus Program
Applying for the Battery Bonus Program requires careful coordination between the homeowner, installer, and utility provider. Most of the process is handled by the installer, but accurate documentation and compliance with utility rules are essential to avoid delays. Meeting all application requirements ensures the battery system qualifies for incentives and is approved for grid participation.
Required Documents
- Solar system design plans
- Battery specifications and technical datasheets
- Installer licensing and certifications
- Interconnection application submitted to the utility
Approval Process
- The installer submits the complete application package
- Utility reviews the system for technical and safety compliance
- Conditional approval is issued by the utility
- Battery and solar system installation is completed
- Final inspection, testing, and system activation
In a typical scenario, a homeowner applies for the Battery Bonus Program through their solar installer, who submits the required solar and battery system documents to the utility. After reviewing the battery specifications and system design, the utility grants conditional approval. Once the installation is completed and the system passes final inspection, the battery is activated and officially enrolled in the program. Incentive payments begin after activation, provided all program requirements continue to be met.
Battery Bonus Program Incentives & How It Works
The Battery Bonus Program is designed to reward homeowners and businesses for storing and using electricity during peak hours, helping to stabilize Hawaii’s grid while reducing energy costs. Participants can earn substantial financial incentives while contributing to a cleaner, more reliable energy system.
Incentives Overview:
- One-time cash incentive: Receive $850 for every kW of battery capacity you commit to the program. For example, a 10 kW battery could earn $8,500 upfront.
- Ongoing monthly credit: Earn $5 per kW per month for the full 10-year program duration. For a 10 kW system, that’s $50 per month, totaling $6,000 over 10 years.
- Export bill credit for non-NEM customers: If you’re not part of the Net Energy Metering Program, you’ll get a monthly credit for electricity exported to the grid during a specific two-hour peak window (6–8:30 p.m.), calculated at the retail electricity rate. These rates are updated quarterly, ensuring fair compensation as market conditions change.
How the Program Works:
To participate, your battery system must store and/or export electricity during a two-hour peak period daily (6–8:30 p.m.), including weekends and holidays. The amount of committed capacity (kW) determines your incentive, giving flexibility to align the program with your energy needs and battery size.
Example Scenario:
- A household with a 12 kW battery could earn $10,200 upfront ($850 × 12 kW) plus $720 annually in monthly credits ($5 × 12 kW × 12 months), totaling over $17,000 across 10 years.
- If the household exports energy to the grid during the peak window, additional monthly export credits could add hundreds of dollars per year, depending on electricity rates and solar production.
Solar + Battery: Why This Combo Makes Sense in Hawaii
In Hawaii, installing solar panels alone is no longer enough to maximize savings and energy independence. Due to limited net metering and high electricity rates, pairing solar with battery storage offers far greater control and long-term value. Batteries allow homeowners to store excess solar energy and use it when electricity is most expensive or unavailable.
Frequently Asked Questions (FAQs)
What solar incentives are available in Hawaii?
Hawaii homeowners can benefit from multiple solar incentives, including the Federal Solar Investment Tax Credit (ITC), the Hawaii State Solar Tax Credit, and various utility solar programs like NEM+, CGS, and Smart Export. These incentives work together to reduce upfront installation costs and improve long-term savings. The exact incentives available depend on your island, utility provider, and system design.
How much can Hawaii solar incentives reduce the cost of a solar system?
When combined, Hawaii solar incentives can reduce the total cost of a solar system by 40–50% or more. For example, a $30,000 solar system may qualify for a 30% federal tax credit and up to $5,000 in state tax credits. Additional savings come from reduced electricity bills over time.
Am I eligible for Hawaii solar incentives?
Most homeowners are eligible if they own their home, install a grid-tied solar system, and use a licensed installer, like Bluesky Hawaii. You must also own the solar system (not lease it) to claim tax credits. Eligibility may vary slightly based on your utility provider and interconnection program.
Is the Battery Bonus Program a solar incentive?
Not exactly. The Battery Bonus Program is a battery storage incentive that requires solar, rather than a direct incentive for solar panels. While it works in conjunction with Hawaii solar incentives, it specifically rewards battery performance and grid support, rather than solar energy production alone.
Who is eligible for the Battery Bonus Program?
To qualify, homeowners must have a solar-connected battery system, live within a participating utility service area (such as HECO, HELCO, or MECO), and use an approved battery model. The system must meet minimum capacity and technical requirements set by the utility.
What incentives does the Battery Bonus Program offer?
The program provides financial incentives for enrolled battery systems, which may include upfront payments and performance-based compensation. These incentives are paid in exchange for allowing the utility to discharge stored energy during specific grid events, helping reduce strain on the system.
How long does the Battery Bonus Program last?
Most Battery Bonus Program agreements run for up to 10 years. During this period, homeowners commit to keeping their battery system enrolled and operational. In return, they continue receiving incentive benefits while enjoying backup power and energy savings.
Is there a limit on Battery Bonus Program enrollment?
Yes. The program has a limited enrollment capacity based on the total megawatts approved by each utility. Once capacity is filled, new applications may be paused or closed. This makes early enrollment important for homeowners considering solar-plus-storage.
How do I apply for Hawaii solar incentives and the Battery Bonus Program?
Most applications are handled by your solar installer, who submits system designs, permits, and interconnection documents to the utility. Tax credits are claimed separately when filing federal and state taxes. Working with an experienced installer helps ensure no incentives are missed.
Final Thoughts
Hawaii’s solar incentives go far beyond the federal tax credit. When homeowners understand how state tax credits, utility programs, and the Battery Bonus Program work together, solar becomes far more affordable and far more powerful.
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