SB644 HD2

SECTION 1. The legislature finds that Hawaii's economic viability is dependent on the availability of affordable energy pricing. In early 2008, the price of crude oil surpassed the $100 per barrel mark from the 2007 annual average of $65 per barrel, burdening Hawaii's residents and businesses with increasingly high electricity and gasoline costs.

Recognizing the critical importance of energy to the State, the 1976 legislature enacted Act 189 establishing state income tax credits to encourage private investment in renewable energy systems among other measures, and these incentives have proven successful, beneficial, and cost effective. The original Act has been amended 11 times, varying credit rates, applicability, and duration, demonstrating that past progress and prior accomplishments in energy sustainability confer no license for complacence. The legislature finds, in fact, fossil fuel imports now account for a greater impact upon Hawaii's economy than at any prior time in the past, substantially exceeding that of every other state despite the fact that we are blessed with the greatest number of renewable energy resources in the nation.

According to the January 2002 report of the energy-efficiency policy task force, in 2001 when oil prices averaged $23 per barrel, the State of Hawaii refunded an estimated $2,765,000 to 2,500 solar thermal system purchasers. This spending was estimated to have led to the following economic outcomes:

(1) Support for 300 jobs each year that the energy conservation income tax credit remained at a 35 per cent level and creation of 64 new jobs for every 2,500 new systems installed, a job impact that increased in relation to the number of systems continuously installed; and

(2) A return to the State of $5,200,000 in tax revenues for every 2,500 systems installed over the 25-year life of these systems, a revenue impact that increased in relation to the number of systems continuously installed. For example, if the number of systems installed each year grows to 5,000, it was predicted that $10,400,000 in tax revenue would be generated over the life of these systems at current tax incentive levels.

The task force also found that the historical relationship between the effective tax credit and number of solar systems sold indicated that the estimated number of solar systems sold would decrease to 287 with the elimination of the tax credit, thereby resulting in loss of jobs and decrease in tax revenues.

However, the legislature finds that, with crude oil prices rising from $65 to over $100 per barrel in less than one year and with no relief under the State's direct control and jeopardizing the State's economic viability, the State must seriously consider requiring the installation of solar thermal systems to heat water in all new single-family dwellings constructed after December 31, 2009, to accelerate the installation of this type of energy saving device to benefit the owners and renters of newly constructed homes. A government mandate of this technology in new home construction effectively shifts from government investment in this technology via tax credits to a required investment by the private sector that will result in greater benefit to the public at large through the prudent investment in this type of renewable energy saving device.

The legislature finds that a conventional electric water tank accounts for 30 to 35 per cent of a home's electric bill. It is estimated that the savings from a home's electricity bill through the installation of a solar thermal water heater could result in the system being paid off in eight to ten years without a state tax incentive. Furthermore, if the expense of the installation of a solar thermal water heater is included in the mortgage of a new home, given the high and unpredictable cost of oil, the savings from the lowered electricity costs may exceed the additional monthly payments for the solar thermal system, which itself has the added benefit of being an allowable tax deductible expense that may also be eligible for a federal renewable energy tax credit. Therefore, the legislature finds that with a solar thermal water heater mandate, and with a properly sized and installed solar thermal system, a household can increase its disposable income through this type of prudent, energy saving investment.

The legislature further finds that the favorable impact of this policy on the environment is undeniable. In 2006, there were 5,700 new residences constructed; assuming that the number of new single-homes constructed remains approximately the same, this would amount of over 10,260 tons of greenhouse gas emissions avoided per year.

Accordingly, the purpose of this Act is to increase the use of renewable energy to protect our environment, reduce pollution, make housing more affordable, and enhance Hawaii's local economy by:

(1) Requiring the installation of solar energy water heating devices, comparable renewable energy devices, or demand gas water heaters in all new residential development projects;

(2) Restricting the solar thermal energy system tax credit to pre-existing homes constructed before January 1, 2010, and reducing the credit to 20 per cent; and

(3) Making the credit available at 15 per cent, to homes constructed after January 1, 2010, conditioned on the continued applicability of Hawaiian Electric Company's solar water heater equipment, use, and installation standards program, including its 100-point rating scale for solar water heating units and rebate, to systems that qualify for this credit.

SECTION 2. Chapter 196, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§196- Solar thermal device required for new single-family residential construction. (a) Beginning with construction for which permits are issued after January 1, 2010, a solar thermal device shall be installed as the primary water heating system in the construction of every new residential detached single-family residence unless:

(1) Installation is:

(A) Impracticable due to poor solar resource; or

(B) Cost prohibitive; and

A substitute renewable energy device is installed; provided that if a substitute device is installed, the device shall be the most practical, energy-efficient device available, as determined by an architect or engineer licensed under chapter 464, and the architect or engineer shall attest in writing that a solar thermal device cannot be installed for the reasons stated in paragraph (1)(A) or (1)(B), and submits the written attestation on behalf of the building permit holder to the county building code authority;

(2) A demand water heater device approved by Underwriters Laboratories Inc., is installed. For the purposes of this paragraph, "demand water heater" means a tankless, instantaneous water heater that provides hot water only as it is needed through the use of a gas burner.

(b) Water heating devices required under subsection (a) shall be installed by a licensed installer in compliance with all manufacturer and industry standards. The licensed installer of the device, or the architect or engineer licensed under chapter 464 if the device is specified through building plans, shall submit a written attestation to the county building code authority stating that the installed device is suitably sized for the number of people expected to occupy the dwelling and meets the applicable county building code.

(c) Nothing in this section shall preclude any county from establishing procedures and standards required to implement this section."

SECTION 3. Section 235-12.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) When the requirements of subsection (c) are met, each individual or corporate 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 in the [~~State~~] state by a taxpayer during the taxable year. This credit shall be available for systems installed and placed in service in the [~~State~~] state after June 30, 2003. The tax credit may be claimed as follows:

(1) Solar thermal energy systems [~~for:~~] installed in:

(A) Single-family residential property: [~~thirty-five~~]

(i) Twenty per cent of the actual cost or $2,250, whichever is less[;], for a residence newly constructed as authorized by a permit issued on or prior to January 1, 2010; and

(ii) Fifteen per cent of the actual cost or $2,250, whichever is less, for a residence newly constructed as authorized by a permit issued after January 1, 2010; provided that at the time the system is installed and placed in service, Hawaiian Electric Company's solar water heater equipment, use, and installation standards program, including its 100-point rating scale for solar water heating units and rebate, applies to the system;

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

(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

(3) Photovoltaic energy systems for:

(A) Single-family residential property: thirty-five per cent of the actual cost or $5,000, whichever is less;

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

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 the 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 in the [~~State~~] state 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)."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon approval; provided that section 3 shall take effect on January 1, 2010.

THE SENATE	S.B. NO.	644
TWENTY-FOURTH LEGISLATURE, 2008		S.D. 3
STATE OF HAWAII		H.D. 2