Hawaii: Commercial Solar Financing + Government Incentives 0

Many solar projects in Hawaii often face delays due to challenges in securing adequate financing. Fortunately, there are now more commercial solar financing options available for Engineering, Procurement, and Construction (EPC) firms and organizations in Hawaii. Whether you’re dealing with projects that are on hold or planning your next steps, we’ll provide an overview of the various financing options you can choose from.

We’ll explore all the key options, from both private and public sources, including solar Power Purchase Agreements (PPAs), solar leases, and Commercial Property Assessed Clean Energy (C-PACE) financing. We’ll also cover the specific government incentives available in Hawaii that can help turn your stalled solar projects into successful, energy-producing assets, advancing the state’s renewable energy goals.

Commercial Solar Financing Options in Hawaii

Solar Power Purchase Agreement (PPA) 

A Solar Power Purchase Agreement is a financial arrangement where a third-party developer installs, owns, and maintains a solar energy system on a commercial property, and the property owner buys the power generated at a predetermined, often reduced rate. This setup allows businesses to benefit from solar energy with no upfront capital expenditure and minimal risk.

Types of C&I Projects a Solar PPA Is Good For 

Ideal for large-scale projects such as manufacturing plants, resorts, or large office complexes in Hawaii, a Solar PPA allows organizations to avoid upfront costs while benefiting from lower energy rates. This is particularly attractive for businesses looking to mitigate financial risks associated with solar investments.

Solar Lease 

Similar to renting a property, a solar lease allows businesses to use a solar energy system installed by a third-party provider for a fixed monthly payment. This payment remains consistent regardless of how much power the system produces, and all maintenance is the responsibility of the provider, not the business.

Types of C&I Projects a Solar Lease Is Good For 

Solar leases are well-suited for medium-sized commercial properties, such as retail stores, small manufacturing units, or multi-tenant buildings. These businesses can benefit from solar energy without the need to invest capital in purchasing systems, while also avoiding maintenance responsibilities.

Solar Loan 

A solar loan is a traditional financing option where a business borrows money specifically to pay for the purchase and installation of a solar energy system. The business owns the system outright and benefits from all tax credits and incentives. Loans are paid back over time, typically with interest.

Types of C&I Projects a Solar Loan Is Good For 

Solar loans are perfect for businesses that prefer ownership to take advantage of the tax benefits, such as the Investment Tax Credit (ITC). They are ideal for commercial entities with good credit facilities and include operations such as corporate offices, hotels, or hospitals that plan to use the property over a long period.

Commercial Property Assessed Clean Energy (C-PACE) 

C-PACE is a unique financing tool that allows commercial property owners to finance qualifying energy efficiency and clean energy improvements through a voluntary property tax assessment. The financing is provided by the state or local governments and repaid over a long-term schedule, typically 10-20 years, which often aligns with the useful life of the installed system.

Types of C&I Projects C-PACE Is Good For 

C-PACE financing works best for commercial properties undergoing significant renovation or retrofitting projects that include sustainability upgrades. This can include shopping malls, older office buildings, or hospitality venues looking to enhance energy efficiency and increase property values through sustainable improvements.

Energy Service Agreements (ESA) 

In an energy service agreement, a service provider installs and maintains an energy system on a property at no upfront cost to the property owner. Instead, the property owner pays for the energy used at a rate typically lower than the local utility. This agreement can often include performance guarantees where the payment is linked to the amount of energy saved compared to a predetermined baseline.

Types of C&I Projects an ESA Is Good For 

ESAs are a great option for energy-intensive businesses like data centers, large supermarkets, or industrial facilities that want to reduce energy costs without upfront expenditure or ongoing maintenance hassles. These agreements provide a way to stabilize energy expenses while focusing on core business operations.

C&I Solar Financing Companies in California

Hawaii Pacific Solar

Hawaii Pacific Solar offers Power Purchase Agreements (PPAs), solar operating lease, and solar capital lease to commercial, government, and non-profit businesses and entities.

CleanCapital

CleanCapital specializes in distributed energy and storage projects in commercial and industrial projects and finance projects around the US.

Independent Energy Hawaii

The company was founded on the belief that customers wanting to go solar needed a transparent, fair, and simpler way to make the transition. They provide commercial financing options depending on project needs. 

Sunwest Bank (US-Wide)

Sunwest Bank offers commercial solar loans, commercial solar leases, and commercial solar PPAs for commercial buildings across the US.

Greentech Renewables (US-Wide)

Their team administers dependable funding solutions for commercial solar projects across the nation. They coordinate the acquisition of products and materials, oversee the procurement and maintenance of loans, and facilitate interactions with lending partners.

Sustainable Capital Finance (Multiple States)

Sustainable Capital Finance provides Power Purchase Agreements (PPAs) and takeout financing options for commercial and non-profit solar projects nationwide, specifically for installations of 100 kW or larger. Their services have been used by a diverse range of clients, including municipalities, tribal communities, non-profit organizations, religious institutions, and educational facilities.

SunRenu (Multiple States)

Their team provides robust funding solutions for commercial solar initiatives throughout the country. They handle the procurement of products and materials, manage the acquisition and upkeep of loans, and ensure effective communication with lending partners.

Free Solar Panels Hawaii Through Solar PPA Partnership

UVcell Solar offers an exceptional opportunity for Hawaii commercial property owners to get free solar panels, inverter, and battery energy storage systems by becoming a  Solar Power Purchase Agreement (PPA) partner

Our network of project funders are looking for spaces to host their solar systems and can lease your property. Once the system is installed, you will secure lower electricity rates for 20 years, which is a win-win for everyone! 

Contact us to see if you are eligible to become a Solar PPA partner

Solar Equipment Provided

  • Tariff-Free, High Quality Tier 1 Solar Panels: Our partnership ensures the installation of top-tier solar panels that are tariff-free, guaranteeing high performance and reliability.
  • Inverter: We supply advanced inverters that convert solar energy into usable electricity, maximizing the efficiency and output of the solar system.
  • Battery Energy Storage System: To further enhance energy independence and resilience, our PPA includes a battery energy storage system. This allows for energy storage during peak production times, providing backup power and ensuring a continuous energy supply.

This not only promotes the adoption of renewable energy but also supports the long-term sustainability and financial stability of your projects.

Learn more about solar PPAs in Hawaii.

Hawaii Incentives and Federal Solar Tax Credits

What Is the Commercial Solar Tax Credit in Hawaii? (Renewable Energy Technologies Income Tax Credit

Renewable Energy Technologies Income Tax Credit (RETITC) allows businesses to claim up to 35% of the total installation costs for solar energy systems and up to 20% for wind energy systems, with a maximum tax reduction of $5,000. By taking advantage of this incentive, businesses not only lower their initial investment but also benefit from ongoing savings on energy expenses and contribute to Hawaii’s sustainability goals.

Example of How Much a Business Can Save Using RETITC

Let’s consider a hypothetical example of a business in Hawaii that installs a solar system costing $50,000. By leveraging the Renewable Energy Technologies Income Tax Credit (RETITC), the business can significantly reduce its net costs.

The RETITC allows for a credit of up to 35% of the total installation cost for solar PV systems. Here’s how it would work:

  1. Total Cost of the Solar System: $50,000
  2. RETITC Percentage: 35%
  3. RETITC Amount: 35% of $50,000 = $17,500

The business can claim a tax credit of $17,500 against its state income taxes for the year in which the system is installed. This reduces the effective cost of the solar installation from $50,000 to $32,500 ($50,000 – $17,500).

Federal Solar Tax Credit

Organizations such as businesses and non-profits that own solar installations can take advantage of two federal tax credits for solar energy.

  1. Investment Tax Credit (ITC): This credit allows for a reduction in federal income tax liability equivalent to a percentage of the solar system’s installation cost within the tax year. For systems installed from 2022 onward, and whose construction begins before 2033, the ITC provides a 30% credit.
  2. Production Tax Credit (PTC): This credit offers a per kilowatt-hour (kWh) tax credit for electricity generated by solar and other eligible technologies during the first decade of the system’s operation. It helps reduce federal income tax liability and is annually adjusted for inflation. Solar systems installed from 2022 onward, starting construction before 2033, can qualify for a PTC of 2.75 cents per kWh if they meet specific labor requirements set by the Treasury Department or if the system is under 1 megawatt (MW) in capacity.

Project owners should be aware that they cannot simultaneously claim both the ITC and PTC for the same property. However, they can apply different credits to co-located systems, such as solar and energy storage, based on specific criteria outlined by the Internal Revenue Service (IRS) guidelines.

Example of Savings Using Investment Tax Credit (ITC)

Let’s consider a hypothetical example to illustrate the savings a business in Hawaii can achieve by claiming just the Investment Tax Credit (ITC).

Assume a business installs a solar system costing $100,000.

  1. Initial Cost of Solar PV System: $100,000
  2. ITC Percentage: 30%

Calculation of ITC Savings ($30,000)

$100,000 x 0.30=$30,000 (ITC Savings=Initial Cost×ITC Percentage)

By claiming the ITC, the business can reduce its federal income tax liability by $30,000. This significantly lowers the net cost of the solar installation.

Net Cost After the ITC ($70,000)

$100,000 – $30,000 = $70,000 

Therefore, the business effectively reduces its expenditure on the solar system to $70,000 after applying the ITC. This substantial saving makes the investment in solar energy more financially attractive, while also contributing to long-term energy cost reductions and sustainability goals.

Example of Savings Using the Production Tax Credit (PTC)

Let’s consider a hypothetical example of a business in Hawaii installing a solar photovoltaic (PV) system and leveraging the Production Tax Credit (PTC).

Assume the business installs a solar PV system with an annual production of 500,000 kilowatt-hours (kWh). The PTC rate is 2.75 cents per kWh.

  1. Annual Energy Production: 500,000 kWh
  2. PTC Rate: 2.75 cents per kWh (0.0275 USD)

Calculation of Annual PTC Savings ($13,750)

  1. Annual Energy Production×PTC Rate
  2. 500,000 kWh×0.0275 USD/kWh
  3. $13,750 

The PTC is available for the first 10 years of the system’s operation, so we calculate the total savings over this period:

Total PTC Savings Over 10 Years ($137,500)

  1. Annual PTC Savings×10
  2. 13,750 USD/year×10
  3. $137,500 

Commercial Property Assessed Clean Energy (C-PACE) Financing in Hawaii

Major Organizations that Provide C-Pace Financing

Hawaii Green Infrastructure Authority (HGIA)

HGIA administers the C-PACE program in Hawaii. This state-run organization aims to fill market gaps by providing low-cost financing to support the transition to clean energy. They work in collaboration with local counties and private capital providers to offer financing for a variety of projects, including energy efficiency upgrades, renewable energy installations, and water conservation measures.

PACE Equity

PACE Equity offers C-PACE financing in Hawaii, focusing on new construction, redevelopment, renovation, and renewable energy projects. They provide up to 30% of the capital stack for such projects or 100% for solar and other renewable energy projects. PACE Equity is known for its comprehensive support, from conducting energy audits to guiding clients through the entire application process.

Best Commercial Solar Financing in Hawaii

When considering commercial solar financing in Hawaii, businesses have multiple options to choose from, each catering to different needs and project types. Here are some key financing options and factors to consider for selecting the most appropriate one:

Power Purchase Agreements (PPAs)

Best for: Large-scale commercial projects

  • Description: PPAs allow businesses to install solar panels without any upfront costs. Instead, they agree to purchase the electricity generated by the system at a fixed rate, typically lower than current utility rates.
  • Advantages: No initial investment required, predictable energy costs, and maintenance handled by the PPA provider.
  • Considerations: Long-term contracts, typically 20-25 years, and the need to evaluate the reliability of the PPA provider.

Solar Leases

Best for: Businesses wanting fixed monthly payments

  • Description: With solar leases, businesses pay a fixed monthly amount to use the solar energy system. The lease provider owns and maintains the system.
  • Advantages: Lower upfront costs compared to purchasing, fixed monthly payments, and no maintenance responsibilities.
  • Considerations: Lease payments may increase over time, and there is no ownership of the system at the end of the lease term.

Commercial Property Assessed Clean Energy (C-PACE)

Best for: Projects aiming for energy efficiency and renewable energy upgrades

  • Description: C-PACE financing allows property owners to fund energy improvements through a property tax assessment. This financing can cover 100% of the project costs.
  • Advantages: Long repayment terms (up to 30 years), transferable to new property owners, and can cover a wide range of improvements including energy efficiency and resilience measures.
  • Considerations: Requires approval from mortgage holders and may involve higher administrative complexity.

Solar Loans

Best for: Businesses wanting to own their solar system

  • Description: Solar loans provide the capital needed to purchase a solar energy system, which the business repays over time.
  • Advantages: Ownership of the system, eligibility for tax credits and depreciation, and potentially lower total costs over the system’s lifetime.
  • Considerations: Initial qualification requirements, interest rates, and the need to manage and maintain the system.

Key Factors to Consider

  1. Upfront Costs vs. Long-term Savings: Evaluate your ability to pay upfront costs versus the potential long-term savings of owning the system.
  2. Ownership vs. Leasing: Determine whether owning the system (and benefiting from tax credits) is more advantageous than leasing or entering into a PPA.
  3. Contract Length and Terms: Consider the length and terms of the contract, especially for PPAs and leases, to ensure they align with your business’s long-term plans.
  4. Maintenance and Management: Assess who will be responsible for maintaining the system and any associated costs or responsibilities.
  5. Provider Reputation: Research and choose reputable financing providers with a proven track record in Hawaii’s solar market.

By understanding the various financing options and carefully considering these factors, businesses in Hawaii can select the most suitable financing solution for their specific commercial solar projects, ensuring both financial and environmental benefits.

Conclusion

Exploring the best commercial solar financing options in Hawaii reveals a range of solutions tailored to diverse business needs. From Power Purchase Agreements (PPAs) and solar leases that minimize upfront costs to C-PACE financing that supports comprehensive energy upgrades, businesses can find a financing strategy that aligns with their financial goals and operational requirements. Each financing method comes with its own set of benefits and considerations, making it crucial for businesses to assess their specific circumstances and long-term objectives when choosing a solar financing plan.

Ultimately, the right financing option not only helps businesses reduce their carbon footprint and energy costs but also contributes to Hawaii’s broader sustainability goals. By carefully evaluating factors such as ownership preferences, contract terms, and provider reputation, businesses can make informed decisions that maximize the financial and environmental benefits of their solar investments. As Hawaii continues to lead in renewable energy adoption, leveraging these financing options can drive both economic growth and environmental stewardship across the state.

Melissa brings over 20 years of communications and marketing experience, consistently delivering impactful contributions that strengthen organizational relationships, optimize operational efficiency, and increase sales. With a deep-rooted interest in environmental solutions, she loves applying her skills to increase the adoption of solar technology globally.
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