Solar photovoltaic or ‘PV’ systems produce electricity to power your home. The electricity comes from solar panels mounted on your roof that use the sun’s energy to produce DC power. An inverter then converts this DC power to AC power for use in your home.

Most Hawaii homeowners can eliminate their entire electric bill with a PV system, even though solar systems only make power during the day. This is possible because of the state’s net metering law, which allows customers to produce more power than they need during the day, export it to the power grid, and withdraw the same amount of power at night for no extra charge. The customer is credited at the retail rate for power exported to the grid so that the grid functions as the customer’s battery. In essence, the meter spins backward during times of power export and then forward again when power is withdrawn from the grid.

Both the state and federal governments support the adoption of PV with tax incentives. The federal tax credit is equal to 30 percent of a system’s installed cost, up to a maximum of $2,000. The state credit is worth 35 percent and is capped at $5,000. The table below shows the value of these incentives for systems of varying sizes. What is important to note is that the combined state and federal credits available for a given system remain at $7,000, regardless of the system’s cost. For this reason, many customers prefer to install their systems over a period of years (lower table), which allows them to access the credits more than once. This pushes the share of the system offset by tax credits to nearly 47 percent.