Considering a Solar Photovoltaic System in Hawaii? 7 Questions that Homebuyers and Sellers Absolutely Need to Ask

Solar Electricity is a good thing, but not without some complexities.  Below are some things you absolutely need to consider when buying a solar system, or a home with a solar photovoltaic system already installed:

What is the difference between leasing and owning your solar photovoltaic system?

Ownership: The homeowner pays outright for the solar photovoltaic system with cash or a loan, and is responsible for the maintenance and repairs of the system.  You receive a bill from the electric company, but the bill is dramatically lower because you are generating most, if not all, of your own electricity.

Leasing:  The solar leasing company owns the solar photovoltaic system, assuming the costs of maintenance and repairs. “It’s essentially a utility company on top of your roof,” said Elena Panigada REALTOR-ASSOCIATE® with Prudential Locations, Maui. You are paying to use the hardware and the service.

A popular option offered when leasing a solar photovoltaic system is no money down, although this isn't the only option. This is a benefit for people who can’t pay upfront costs that range from $15,000-$25,000 (after rebates and incentives). A typical lease period lasts around 10-20 years, depending on the contract.    At the conclusion of the lease, options may include renewing, purchasing the system, or having it removed.

“Leasing” can also be associated with the terms “Power Purchase Agreement” or PPA, “Solar Lease”, or “power share agreements.” Homeowners may have the following options to consider when leasing:
•    Paying for the use of a solar photovoltaic system.
•    Paying a fixed rate for the electricity that is generated each month.
•    Paying for a rate for the electricity that may rise or vary on an annual basis.

Be absolutely sure and read the details of the agreement, as they can vary widely depending on the company. 

Are there tax benefits to having a solar photovoltaic system?

If you own the system, yes! 
Hawaii offers a solar tax credit of 35 percent of the system's cost, or $5,000, whichever ends up costing the government less. For example, if the system costs $20,000, 35 percent would save you $7000, but you would instead get a credit of $5000.

In addition to state tax credit, owners can also receive a Federal Investment Tax Credit (ITC) allowing individuals to deduct 30 percent of the cost of a solar photovoltaic system from individual federal income taxes.

If you lease the system, no!
Only those who own a solar photovoltaic system can benefit from tax incentives and rebates, not those who choose to lease. The company who owns the system gets the tax credit.

*Please check with your own tax expert for your personal tax impact.

What about “solar water heaters?”

Installing solar water heating in a home can save residents up to 40 percent on their electric bill per year. Hawaii Energy--the energy conservation and efficiency program for Hawaii, Honolulu and Maui counties-- offers a $1,000 rebate. Potential buyers should note that when you buy a home with a solar heating system already installed you aren't able to collect this rebate.

There are other benefits to solar water heating systems when compared to solar photovoltaic systems. Before installing a solar photovoltaic system, you need to have authorization from the utility company. But with solar heaters you don't.

According to Leslie Cole-Brooks, executive director of the Hawaii Solar Energy Association, "you don't need written permission from the utility to install solar hot water systems because these systems don't produce electricity and therefore aren't connected to the electrical grid." This makes solar water heating a great option for people to lower monthly bills and be more energy efficient.

Another short-term benefit of solar hot water versus solar photovoltaic systems, is the time constraints.  “Residents are facing challenges getting photovoltaic installed due to required interconnectivity studies and circuit upgrades, so we would like to encourage that they consider solar water heating as a first step towards big energy savings,” says Maile Alsup from Hawaii Energy.

I’m buying a home with a solar photovoltaic system installed and owned.
What should I know?

When you buy a home with a solar photovoltaic system that is owned, that ownership is transferable. Make sure you ask the seller for proof of ownership documents and that the system is fully permitted.

To make sure you aren’t at risk of inheriting the costs of unpermitted systems, or in danger because of improper installation, buyers should ask to see the building permit package and a copy of the contract from the photovoltaic installer.  On the Big Island, there are a number of homes “off the grid” where photovoltaic panels may have been bought cheaply and installed by an electrician.  Make sure the system is permitted.

If you’re a seller looking to install photovoltaic panels in your home, demand that your contractor get a permit. “Your life and property are not worth the minor cost savings,” says Brian Benton, BROKER-in-CHARGE (BIC) with Prudential Locations’ Diamond Head office.

I’m buying a home with a solar photovoltaic system installed and leased.
What should I know?

Ask for documentation from the leasing company with the exact terms of the lease. If you don’t understand the terms you will want to call the leasing company directly with questions. While an agent should be able to get information for you, they are not experts on these documents. According to Benton, “disclosure is critical” so you know exactly what you’re getting when you buy a home with a leased solar photovoltaic system. When it comes to leasing, you need to know what the contracts say.

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