Report Title:

Tax Credit; Renewable Energy Technologies

Description:

Provides a framework for energy self-sufficiency, focusing on: increasing renewable energy tax credits; installing photovoltaic systems in public schools; enabling compliance with the State's greenhouse gas and energy efficiency goals; incorporating green building practices for state-funded facilities; establishing a pay as you save program for solar water heating systems; establishing a bio-diesel preference in the state procurement law; and establishing a Hawaii renewable hydrogen program and hydrogen investment capital special fund. (SD2)

THE SENATE

S.B. NO.

2957

TWENTY-THIRD LEGISLATURE, 2006

S.D. 2

STATE OF HAWAII

  

 

A BILL FOR AN ACT

 

RELATING TO ENERGY.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that Hawaii's dependence on petroleum for about ninety per cent of its energy needs is more than any other state in the nation. This makes the State extremely vulnerable to any oil embargo, supply disruption, international market dysfunction, and many other factors beyond the control of the State. Furthermore, the continued consumption of conventional petroleum fuel negatively impacts the environment.

The legislature also finds that increased energy efficiency and use of renewable energy resources would increase Hawaii's energy self-sufficiency, achieving broad societal benefits, including increased energy security, resistance to increases in oil prices, environmental sustainability, economic development, and job creation.

Over the years, the legislature has worked steadily to encourage the deployment of renewable energy resources and energy efficiency initiatives. This includes establishing a net energy metering program, interconnection standards, and renewable energy tax credits; establishing greenhouse gas and energy consumption reduction goals for state facilities and requiring the use of energy efficient products in state facilities; and providing incentives for the deployment of solar energy devices. The legislature also established an enforceable renewable energy portfolio standard, under which twenty per cent of Hawaii's electricity is to be generated from renewable resources by the end of 2020.

To shape Hawaii's energy future and achieve the goal of energy self-sufficiency for the State of Hawaii, our efforts must continue on all fronts, integrating new and evolving technologies and providing incentives and assistance to address barriers. The purpose of this Act is to provide a comprehensive approach to achieving energy self-sufficiency for the State by:

(1) Increasing the renewable energy technologies income tax credit for certain solar thermal and photovoltaic energy systems and removing the tax credits' 2008 sunset date;

(2) Authorizing the issuance of general obligation bonds to develop and implement a pilot project to install photovoltaic systems at public schools on the islands of Oahu, Hawaii, Maui, and Kauai;

(3) Authorizing the issuance of general obligation bonds to bring state facilities into compliance with the purposes of Act 77, Session Laws of Hawaii 2002, which, among other things, establishes greenhouse gas and energy consumption reduction goals for state facilities;

(4) Requiring the incorporation of Leadership in Energy and Environmental Design silver standards for buildings constructed or substantially renovated with funding consisting of fifty per cent or more in state funds to enable the State to access creative engineering and design guidelines and promote green building practices;

(5) Establishing the Pay As You Save pilot project to provide a financing mechanism to make purchases of residential solar hot water heater systems more affordable;

(6) Establishing a biodiesel preference in Hawaii's procurement law; and

(7) Establishing a Hawaii renewable hydrogen program and hydrogen investment capital special fund and appropriating funds therefor.

SECTION 2. Chapter 235-12.5, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) When the requirements of subsection (c) are met, each individual or corporate resident taxpayer that files an individual or corporate net income tax return for a taxable year may claim a tax credit under this section against the Hawaii state individual or corporate net income tax. The tax credit may be claimed for every eligible renewable energy technology system that is installed and placed in service by a taxpayer during the taxable year. This credit shall be available for systems installed and placed in service after June 30, 2003. The tax credit may be claimed as follows:

(1) Solar thermal energy systems for:

(A) Single-family residential property: thirty-five per cent of the actual cost or [$1,750,] $2,250, whichever is less;

(B) Multi-family residential property: thirty-five per cent of the actual cost or [$350] $1,000 per unit, whichever is less; and

(C) Commercial property: thirty-five per cent of the actual cost or [$250,000,] $500,000, whichever is less;

(2) Wind-powered energy systems for:

(A) Single-family residential property: twenty per cent of the actual cost or $1,500, whichever is less;

(B) Multi-family residential property: twenty per cent of the actual cost or $200 per unit, whichever is less; and

(C) Commercial property: twenty per cent of the actual cost or $250,000, whichever is less; and

(3) Photovoltaic energy systems for:

(A) Single-family residential property: thirty-five per cent of the actual cost or [$1,750,] $7,500, whichever is less;

(B) Multi-family residential property: thirty-five per cent of the actual cost or [$350] $1,000 per unit, whichever is less; and

(C) Commercial property: thirty-five per cent of the actual cost or [$250,000,] $500,000, whichever is less;

provided that multiple owners of a single system shall be entitled to a single tax credit; and provided further that the tax credit shall be apportioned between the owners in proportion to their contribution to the cost of the system.

In case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible renewable energy technology system that is installed and placed in service by the entity. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined pursuant to section 235-110.7(a)."

2. By amending subsection (c) to read:

"(c) [The] For taxable years beginning after December 31, 2005, the dollar amount of [any new federal energy tax credit similar to the credit provided in this section that is established after June 30, 2003, and] any utility rebate[,] shall be deducted from the cost of the qualifying system and its installation before applying the state tax credit."

SECTION 3. Act 207, Session Laws of Hawaii 2003, is amended by amending section 4 to read as follows:

"SECTION 4. This Act shall take effect on July 1, 2003[, and shall be repealed January 1, 2008]."

SECTION 4. The director of finance is authorized to issue general obligation bonds in the sum of $         , or so much thereof as may be necessary, and the same sum, or so much thereof as may be necessary, is appropriated for fiscal year 2006-2007 for the purpose of developing and implementing a photovoltaic, net energy metered pilot project in public schools. The department of education shall determine the project sites most suitable in meeting the pilot project's objectives. The project objectives are:

(1) To have, at minimum, a project site at one public school on each of the islands of Oahu, Hawaii, and Kauai, and one public school within the county of Maui;

(2) To allow installation of photovoltaic systems to be timed in conjunction with substantial roof repairs or roof replacement of buildings to further reduce project costs;

(3) To utilize the application of net energy metering to offset costs of the system;

(4) To recapture system costs within three-quarters of the useful life of the photovoltaic system; and

(5) When advantageous, to utilize energy-savings contracts such as third party lease/purchase contracts to maximize the objectives of this section.

The sum appropriated shall be expended by the department of education for the purposes of this Act.

The department of education shall submit an interim report on the pilot project to the legislature no later than twenty days prior to the convening of the regular session of 2007 and a final report to the legislature no later than twenty days prior to the convening of the regular session of 2008.

SECTION 5. Chapter 196, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§196-   Leadership in Energy and Environmental Design silver standards for newly constructed or substantially renovated facilities. All design that is initiated on or after July 1, 2006, for construction of a building or substantial renovation of a building, utilizing fifty per cent or more in state funds, shall incorporate Leadership in Energy and Environmental Design silver standards developed by the United States Green Building Council."

SECTION 6. The director of finance is authorized to issue general obligation bonds in the sum of $           , or so much thereof as may be necessary, and the same sum, or so much thereof as may be necessary, is appropriated for fiscal year 2006-2007 for the purpose of making improvements to state facilities to bring them into compliance with the purposes of Act 77, Session Laws of 2002; provided that priority for the energy conservation projects in existing public buildings shall be based on those buildings that result in immediate payback in cost savings and conservation. The sum appropriated shall be expended by the department of accounting and general services for the purposes of this Act.

SECTION 7. The appropriations made for the capital improvement projects authorized by this Act shall not lapse at the end of the fiscal biennium for which the appropriation is made; provided that all moneys from the appropriation unencumbered as of June 30, 2008, shall lapse as of that date.

SECTION 8. Chapter 269, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . ENERGY EFFICIENCY MARKET-BASED INITIATIVE

§269-   Definitions. For the purposes of this part:

"Certification process" means a process approved by the commission whereby a public utility approves the pay as you save financing method for the renewable energy technology measure to be installed in the dwelling unit as being cost effective and efficient.

"Commission" means the public utilities commission.

"Cost-effective renewable energy technology measures" means renewable energy technology measures with sufficient estimated electricity or gas savings, determined by rates in effect at the time of purchase, and other quantifiable non-energy savings that are sufficient to cover all costs, including financing charges and any program fees, by payments of no more than three-quarters of the estimated savings within a period no greater than three-quarters of the estimated useful life of the measure.

"Pay as you save model system" means the market-based system based on the "Pay As You Save" model:

(1) Whereby a residential electric and gas utility customer may purchase cost-effective renewable energy technology products or services with no upfront payment, pay the cost of the renewable energy technology over time on the customer's electric or gas bill, and bear no obligation to continue payments if the residential customer no longer can receive the benefit of the energy savings; and

(2) That contains the following three essential elements:

(A) A pay as you save model system fee that assigns repayment of permanent measures to the meter location;

(B) Billing and payment through a charge included in the energy utility distribution charges; and

(C) Certification that the measures and installations are appropriate and that estimated savings will exceed payments.

"Pay as you save model system fee" means the fee that is established by the public utility to defray costs of the program, subject to approval by the commission.

"Permanent measures" means renewable energy technology measures that are likely to remain in the premises where installed, notwithstanding the subsequent departure by occupants of the premises.

"Portable measures" means renewable energy technology measures that are susceptible of being removed by occupants upon their departure from the premises where these measures were installed.

"Renewable energy" means energy produced by solar energy conserved by passive solar design, or daylighting.

"Renewable energy technology" means technology that uses renewable energy to provide hot water to a dwelling unit.

"Residential consumer" means a residential tenant or property owner who resides in the dwelling unit in which the cost-effective renewable energy technology measure is installed and operated.

§269-   Pay as you save model system for residential consumers; established. No later than March 1, 2007, the commission shall adopt rules and procedures in accordance with chapter 91 to monitor a public utility's pay as you save model system program for residential consumers of electricity and gas utilities as required under this part.

§269-   Gas and electric utilities; pay as you save model system; established. (a) No later than July 1, 2007, each Hawaii gas and electric utility shall:

(1) Submit for approval by the commission a pay as you save model system, including the proposed fee to defray the costs of the program;

(2) Prepare and make available suitable agreements, releases, and other necessary forms for residential customers, landlords, capital providers, and vendors to make use of the pay as you save model system;

(3) Determine the methodology for certifying energy efficiency measures as appropriate for the intended use and cost-effectiveness;

(4) Identify the capital providers who pay the up front costs for these products, including vendors who finance the sale and installation of their products; and

(5) Prepare a plan to disseminate information concerning the pay as you save model system to the public, potential participating residential customers, vendors, financing entities, and other interested persons.

(b) The public utility may adopt the pay as you save model as modified by this part or any program that meets the objectives of this part.

(c) Payments made by utilities to administer the program required under this part may be offset by charges to residential consumers of renewable energy technology measures using the pay as you save model system; provided that for each residential consumer, this charge and all other program charges, except for interest costs, shall not exceed:

(1) One-half of one per cent of the total cost of the installed renewable energy technology product or service for projects less than $7,000; or

(2) One per cent of the total cost of projects greater than $7,000.

§269-   Certification of renewable energy technology measures. Only renewable energy technology measures certified as being cost effective and appropriate may be purchased using the pay as you save model fee. The utility may extend the term of a pay as you save model fee to the original or successor residential consumers at a location where permanent renewable energy technology measures have been installed until all costs for these measures have been recovered, including costs due to repairs and missed payments.

§269-   Participation in the pay as you save program; consumer contract simplification. In the interest of reducing transaction costs and simplifying the pay as you save model system for residential consumers, if requested by a residential consumer, an electric utility shall include gas saving measures under its fee, or the gas utility shall include electricity saving measures under its fee, so residential consumers who purchase renewable energy technology products under this program shall only have to sign one contract and pay a single pay as you save model system fee charge."

SECTION 9. The commission shall ensure that all reasonable costs incurred by gas or electric utilities to start up and implement the pay as you save model system are recovered as part of the utility's revenue requirement, including but not limited to necessary billing system adjustments and any costs for pay as you save model system efficiency measures that are not recovered via participating residential consumers' pay as you save model system bill payments or otherwise.

SECTION 10. Chapter 103D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§103D-   Biofuel preference. (a) Notwithstanding any other law to the contrary, contracts for the purchase of diesel fuel or boiler fuel shall be awarded to the lowest responsible and responsive bidders, with preference given to bids for biofuels or blends of biofuel and petroleum fuel.

(b) When purchasing fuel for use in diesel engines, the preference shall be cents per gallon of one hundred per cent biodiesel. For blends containing both biodiesel and petroleum-based diesel, the preference shall be applied only to the biodiesel portion of the blend.

(c) When purchasing fuel for use in boilers, the preference shall be cents per gallon of one hundred per cent biofuel. For blends containing both biofuel and petroleum based boiler fuel, the preference shall be applied only to the biofuel portion of the blend.

(d) As used in this section, "biodiesel" means a vegetable oil based fuel that meets ASTM International Standard D6751, "Specification for Biodiesel Fuel Blend Stock (B100) for Distillate Fuels", as amended.

(e) As used in this section, "biofuel" means fuel from non-petroleum plant or animal based sources that can be used for the generation of heat or power."

SECTION 11. Chapter 196A, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§196A-   Hawaii renewable hydrogen program. (a) There is established, within the department of business, economic development, and tourism, a Hawaii renewable hydrogen program to coordinate the State's transition to a renewable hydrogen economy. The program shall plan, implement, and conduct activities, including:

(1) Strategic partnerships with the private sector, the federal government, national and international organizations, such as national laboratories and universities, other states, and Hawaii stakeholders for research, development, testing, and deployment of renewable hydrogen technologies;

(2) Engineering and economic studies to define Hawaii's potential for renewable hydrogen and evaluate near-term project opportunities presented by the State's available renewable resources;

(3) Electric grid reliability and security projects that will enable integration of extensive renewable electricity on the island of Hawaii;

(4) Hydrogen demonstration projects, including infrastructure for the production, storage, and refueling of hydrogen vehicles;

(5) A statewide hydrogen economy public education and outreach plan, focusing on the island of Hawaii, to be developed in coordination with Hawaii's public education institutions;

(6) The promotion of Hawaii's renewable hydrogen assets and project opportunities to potential partners and investors;

(7) A plan, for implementation during 2007-2010, to more fully deploy hydrogen technologies and infrastructure capable of supporting the island of Hawaii's fuel needs, including:

(A) Expanded installation of hydrogen production facilities;

(B) Development of integrated energy systems including hydrogen vehicles;

(C) Construction of additional hydrogen refueling stations; and

(D) Encouragement of building design and construction that fully incorporates clean energy assets, including reliance on hydrogen-fueled distributed generation;

(8) A plan, for implementation during 2010-2020, to transition the island of Hawaii to a hydrogen-fueled economy by 2020, and to initiate that model throughout the State; and

(9) An evaluation of policy instruments and development, in coordination with program partners, of policy recommendations to encourage the adoption of hydrogen-fueled vehicles, to continually replenish the hydrogen investment capital special fund, and to support investment in hydrogen infrastructure, including production, storage, and dispensing facilities."

SECTION 12. Chapter 211F, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§211F-   Hydrogen investment capital special fund. (a) There shall be established a hydrogen investment capital special fund into which shall be deposited:

(1) Appropriations made by the legislature to the fund;

(2) All contributions from public or private partners;

(3) All interest earned on or accrued to moneys deposited in the special fund; and

(4) Any other moneys made available to the special fund from other sources.

(b) Moneys in the fund shall be used:

(1) To seed private sector and federal projects for research, development, testing, and deployment of renewable hydrogen systems in Hawaii;

(2) To pay reasonable expenses incurred by fund advisory board members in the execution of their relevant duties; and

(3) For any other purpose deemed necessary to carry out the purposes of this section.

(c) Investment of the hydrogen investment capital special fund in hydrogen projects shall be made with the advice and assistance of an advisory board of experts and knowledgeable individuals who shall be appointed by the director of the department of business, economic development, and tourism to help the State develop projects and partnerships with industry and the federal government."

SECTION 13. (a) There is appropriated out of the general revenues of the State of Hawaii the sum of $ , or so much thereof as may be necessary for fiscal year 2006–2007, to carry out the purposes of this part, of which $        shall be allocated to three permanent full-time equivalent (3.0 FTE) professional positions namely, a hydrogen program manager, hydrogen program specialist, and hydrogen project specialist.

The sum appropriated shall be expended by the department of business, economic development, and tourism.

(b) There is appropriated out of the general revenues of the State of Hawaii the sum of $ , or so much thereof as maybe necessary for fiscal year 2006-2007, to be paid into the hydrogen investment capital special fund to carry out the purposes of section 11.

The sum appropriated shall be expended by department of business, economic development, and tourism.

SECTION 14. There is appropriated out of the hydrogen investment capital special fund the sum of $ , or so much thereof as may be necessary for fiscal year 2006–2007, to be used for the purposes of the hydrogen investment capital special fund.

The sum appropriated shall be expended by the department of business, economic development, and tourism.

SECTION 15. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 17. This Act shall take effect on July 1, 2050.