Posted on: Friday, November 26, 2004 - Honolulu Advertiser

Critics Say State Should Do More for Alternative Energy
by Jan TenBruggencate

Hawai'i has the highest fuel and electricity prices in the nation,
and critics say that should make the state among the most aggressive
in promoting alternative energy technologies — but it's not. Keith Cronin, of Island Energy Solutions, says Hawai'i needs to be as aggressive in promoting alternative sources of energy as it is in urging residents to conserve power. Cronin's own home is loaded with alternative power sources, such as these solar panels.

"The state and the utilities are very active in (controlling the
amount of power used), but the generation pieces never get discussed.
I think the state has a long way to go," said Keith Cronin, of Island
Energy Solutions, whose own home is loaded with alternative energy
technology.

Even in the oil-producing state of Texas, critics say, the electric
utility Austin Energy pays customers a rebate of $5 per watt for
energy generated by solar power. The utility estimates that covers 50
percent to 80 percent of the cost of installing a solar photovoltaic
system.

But in Hawai'i, a residential photovoltaic system gets a $1,750 tax
rebate—perhaps 5 percent of the cost of the system. It's not nearly
enough, said Marco Mangelsdorf, president of ProVision Technologies, a
Hilo-based solar power firm.
Hawai'i energy sources
Sources of primary energy in Hawai'i in 2002:
• Oil: 89.12 percent
• Coal: 5.6
• Biomass: 1.82
• Municipal solid waste (H-Power): 1.52
• Solar water heating: 1.31
• Hydroelectric: 0.34
• Geothermal: 0.25
(Does not add up to 100 because figures are rounded.)
Source: State Department of Business, Economic Development and Tourism.

"The residential market is kind of the holy grail for alternative
energy," said Mangelsdorf, who recommends the maximum residential
rebate for solar, wind, hydroelectric or other alternative energy
systems be upped to $8,000. He also suggests the state should support
having utilities give other alternative energy rebates like the ones
given for solar hot water systems.

He and other critics say Hawai'i has a long way to go.
Said Rick Reed, president of the Hawai'i Solar Energy Association,
"Look, if you put in a 4-kilowatt solar system and a solar hot water
system, it's going to cost $30,000 to $40,000, but you're done (with
paying power bills). If oil goes to $150 a barrel, you're still done."

The state is providing adequate incentives, said state Strategic
Industries Division chief Maurice Kaya. He said record power prices in
the Islands mean many existing programs already should be sufficient
incentives.

"There are contrasting points of view on this matter," Kaya concedes.
Either way, the state has no plans to bring major alternative energy
initiatives before the 2005 Legislature.

Kaya said he anticipates some fine-tuning of existing alternative
energy incentives, and perhaps some new programs promoting
conservation and energy efficiency.

Lowell Kalapa, president of the Tax Foundation of Hawai'i, said he
doesn't object to the idea of government helping support alternative
energy, and is himself a strong supporter of conservation and
alternative energy. He said he has cut his home power bill to about
$34 a month by using solar water heating, gas cooking, no air
conditioner and drying his wash on a clothesline.

Support programs:
Here are some Hawai'i programs that support alternative energy:

• Residents installing alternative energy systems, whether solar water
  heating, solar photovoltaics, wind or hydroelectric, can claim tax
  credits of 35 percent of the cost of the system up to a maximum of
  $1,750. Businesses can get 35 percent of the cost up to a maximum of $250,000.
  
• Residential applications of solar water heating can also get utility
  rebates of $750 to $1,000, depending on the island on which they live.
  
  
• The state's net metering law allows residents to install alternative
  power systems up to 50 kilowatts in size, and to hook up to the
  utility grid — essentially running their electric meters backward when
  they're providing more power than their households use.
  
• The state's renewable portfolio standards, strongly supported by
  Gov. Linda Lingle, require that the state's electric utilities be
  providing 20 percent of the state's power from alternative or
  renewable sources by the year 2020. That's the same thing Austin,
  Texas, required of its utility by 2020. In New York state, the goal is
  more aggressive: 25 percent renewable by 2013.
  
• Under a state law known as Act 96, alternative automotive fuels
  avoid 75 percent of highway taxes. Biodiesel, a fuel that runs in
  diesel vehicles but is made from recycled vegetable oil, is being
  manufactured on Maui and O'ahu and qualifies for the tax break.
  
• The state has mandated that 85 percent of the gasoline sold in
  Hawai'i be 10 percent ethanol by April 2006. Ethanol manufacturers can
  get an annual tax credit of 30 cents per gallon of plant capacity,
  which they can take each year for up to eight years or until the tax
  break reaches the total cost of the plant. Ethanol blends are also
  exempt from the state 4 percent excise tax.
  
• Commercial firms that install renewable energy systems can take
  advantage of five-year accelerated depreciation, which, in addition to
  a 10 percent federal investment tax credit and other tax breaks, can
  pay 80 percent of the cost of a system.
  
  But "the problem with using the tax code to incentivize people to do
  it is that you don't have the same level of accountability," he said.
  "You don't know who's going to use it or how much it will be used
  until people apply.
  
  "The cost of photovoltaics is still rather expensive. What if, instead
  of doling out tax credits, the state used its bulk buying power to
  purchase solar panels, and perhaps subsidized the cost of systems.
  Then you have a better idea of the kinds of systems going in, and more
  accountability over the costs to government.
  "
  Hawai'i leads the nation in one area: per-capita installation of
  residential solar water heating systems. A state tax credit and
  utility rebates can cut a solar hot water system's cost of roughly
  $5,000 by half.
  
  But if a resident wants to put up a solar photovoltaic system capable
  of producing all of an average home's power, which can cost $30,000 to
  $40,000, the maximum state tax credit is $1,750 — the same as for a
  water heating system.
  
  By contrast, if a business wants to install photovoltaics or other
  alternative energy systems, it can get credits of 35 percent of the
  cost, up to a maximum of $250,000.
  
  Kaua'i resident Moksha McClure found a unique way to take advantage of
  that in developing her pet-sitting business, Whiskers Resort.
  McClure said her leased agricultural site at Kipu is far from the
  nearest utility pole.
  
  "For me, it would have been really expensive to bring in electricity.
  I estimated $40,000 cost," she said.
  She wanted to install a solar photovoltaic system, with a backup power
  generator that would burn biodiesel—fuel made from recycled vegetable
  oil. Total system cost, roughly $30,000, and total potential tax
  credit, $10,500. It would provide all her business's power
  requirements.
  
  But McClure said she did not expect her business to produce enough
  profit in its first years to take advantage of the tax credit. So she
  arranged for Bank of Hawaii to buy the system and lease it to her.
  This way, the bank could take the tax credit and would reduce her
  lease payments accordingly.
  
  "My lease rent is something like negative 18 percent," she said.
  Activities to promote renewable energy in many states is high, said
  Lewis Milford of the Clean Energy States Alliance, a states' group
  promoting renewable energy.
  
  When Peter Jones, a resident of South Burlington, Vt., put a $21,000
  solar photovoltaic system on his roof, the state government paid a
  third of the cost. He no longer has electric bills. Vermont pays up to
  $12,500 toward solar photovoltaic or windpower systems and $7,500
  toward solar hot water systems.
  
  New Jersey's Clean Energy program pays up to $5.50 a watt as a rebate
  for qualified solar power systems. The New York Incentives for
  Renewable Energy program pays up to $4.50 a watt. Florida Power and
  Light's Green Pricing Program in 2002 initiated a system paying $2 to
  $4 a watt.
  
  California offers a range of rebates for systems, depending on size
  and the technology used. Small photovoltaic systems qualify for $3.20
  a watt. Small hot water systems get $3.60 a watt. Small wind energy
  systems can get $2.10 a watt.
  
  Hawai'i's strong solar water heater program has been used in about
  75,000 residential units statewide. But the less aggressive solar
  electric program has produced only about 50 legal net-metered systems
  across the state, said Reed, the Hawai'i Solar Energy Association
  president.
  
  Gov. Linda Lingle has been supportive of alternative energy systems
  and has strongly backed the state's renewable energy portfolio
  standards, which require the utilities to produce 20 percent of all
  their power from nonifossil fuel sources by the year 2020. The state
  energy office estimated the state was at 8.2 percent renewable in
  2003.
  
  But that doesn't necessarily mean the state will dramatically expand
  the generation of renewable energy to reach that goal. It could also
  use conservation to get there.
  
  "Hawai'i also defines renewable energy as electrical energy savings
  brought about by the use of solar and heat-pump water heating,
  seawater air conditioning, district cooling systems, solar air
  conditioning and ice storage, quantifiable energy conservation
  measures, use of rejected heat from small-scale cogeneration, and
  customer-sited combined heat and power systems," the state energy
  office said in a report to the federal Department of Energy.
  
  Lingle said that both generation and reduced demand meet the goal. "It
  makes common sense to me that we do everything to reduce reliance on
  energy that's imported," Lingle said. "To sit here and stay as we are
  is not an option."
  
  Many in the industry are frustrated particularly by the state's
  failure to support increases in solar photovoltaics.
  "We would like to see the power of photovoltaics fulfilled," Reed
  said. He said that if the state fairly priced the costs of oil,
  including air pollution and the cost of carbon-dioxide emissions
  promoting global climate change, it would find solar cells to be a
  good investment.