Hawaii’s renewable energy tax credit in danger of phase out

The latest draft of SB3125 amends Hawaii’s Renewable Energy Technologies Income Tax Credit by adding an aggregate cap amount, setting income thresholds, a sunset date and a certification requirement.

May 11, 2026 Anne Fischer

Image: Hawaiian Solar Energy Association

Hawaii holds first place in the nation for residential solar capacity per capita. However, the market is under threat as Senate Bill 3125 marches toward a final floor vote.

The bill, introduced by Sen. Ronald Kouchi (D), is intended to provide tax relief but by amending Hawaii’s Renewable Energy Technologies Income Tax Credit (RETITC), The Hawaii Solar Energy Association (HSEA) warns that it’s detrimental to the state’s solar market. The latest draft of the bill amends the RETITC by adding an aggregate cap amount, setting income thresholds, a sunset date and a certification requirement.

The new aggregate cap is $40 million statewide on all RETITC claims from 2027 to 2030 before going to zero. Instead of the cap being an “offramp for four years,” HSEA noted that, in reality it will “freeze the market starting immediately”. The challenge is that solar customers won’t know if they qualify or how much credit they can count on until May 31 of the following year, making it difficult for homeowners as well as banks to finance the systems.

The final conference draft does not simply phase out the RETITC but “imposes an administrative structure so unworkable it would effectively freeze the solar market upon enactment, while reaching back retroactively to 2026,” HSEA said in a statement.

Changing tax credits retroactively may affect those who have already installed systems and understood, when they signed the contract, that they would receive a credit.

“This is not a phase-out. It is an immediate shutdown,” said Rocky Mould, HSEA executive director. “Rooftop solar and storage is one of the most effective tools for Hawaii families to protect themselves from high electricity rates, volatile fossil fuel prices, and weather-related grid outages. This bill makes that protection harder to access and more expensive at exactly the moment Hawaii families need it most.”

The RETITC which dates back to 2009, has helped Hawaiian ratepayers reduce monthly utility costs. This can be significant in the state that has the highest average electricity price, more than triple the U.S. average price, according to the Energy Information Administration. According to HSEA, on Oahu alone, rates have increased approximately 36% in just the last two months, and additional increases are expected.

Hawaii currently has over 121,473 rooftop installations statewide, Mould told pv magazine USA. Not only does residential solar help defray these high costs for ratepayers, but it reduces demand on the grid.

If the current draft of SB3125 passes, it may be a double whammy for some residential solar owners as the federal residential solar tax credit (Section 25D) was already eliminated effective January 1, 2026. As a result of the federal tax change alone, solar permit activity is already down nearly 30% year over year in early 2026, HSEA reports.

HSEA warns that, if passed, installations will stop and it is urging legislators to vote no, or the Governor to veto this bill if it reaches his desk. “The budget can be revisited through a special session if necessary but sacrificing Hawaii’s energy future and economy is too high a price to pay.”

This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.