SB2934

SECTION 1. The legislature finds that Act 204, Session Laws of Hawaii 2008 (Act 204), required that new homes utilize solar water heating except in narrowly limited circumstances, to benefit consumers. This is known as the "solar water heater mandate."

The legislature further finds that the variance provision in the solar water heater mandate is being substantially abused to circumvent the objectives of Act 204, to the detriment of consumers and to the detriment of the State's progress toward renewable energy. This Act provides amendments to close this loophole and protect consumers, while promoting the State's energy security and sustainability.

In Part I of Act 155, Session Laws of Hawaii 2009 (Act 155), the legislature noted that the Act presented "a range of measures to reach aggressive energy goals while balancing the interests of various stakeholders." Part VII of Act 155 focused on the solar water heater mandate. Act 155 explained that in passing Act 204, the legislature "found that retrofitting a home for a solar water heater after [the home] was constructed was more costly, and that such upfront costs . . . were substantial barriers for the average consumer. The financial barriers can be addressed, however, by including the installation of a solar water heater into the purchase price and mortgage of a home, where the cost of the system may pay for itself immediately."

The solar water heater mandate included a variance process by which a single family dwelling can be built without a solar water heater if:

(1) Installation is impractical due to poor solar resource;

(2) Installation is cost-prohibitive based upon a life cycle cost-benefit analysis;

(3) A renewable energy technology system, such as a solar photovoltaic system, is substituted for use as the primary energy source for heating water; or

(4) A demand water heater device approved by Underwriter Laboratories, Inc., is installed; provided that at least one other gas appliance is installed in the dwelling.

In this context, a demand water heater means "a gas-tankless instantaneous water heater that provides hot water only as it is needed." In Hawaii, the gas used for this type of tankless water heater is typically ninety-seven per cent to one hundred per cent derived from fossil fuels.

The legislature finds that until the State's gas infrastructure can supply consumers with a more renewable fuel, allowing variance exceptions for gas-fired demand water heaters is inconsistent with the State's transition to renewable energy.

In Act 155, the legislature found "that it [was] necessary to clarify the intent of the variance provision that allows for a demand water heater device. There is a potential that this provision may be used to allow a developer/builder, the purchaser of a water heating device, of a single-family dwelling, to circumvent the policy objectives of Act 204." The legislature noted that it "intended for a consumer to have the option to use gas appliances with the full knowledge that such a system may be more costly and less efficient. To obviate any attempt to circumvent Act 204, then, the legislature intends that if the potential variance applicant is not the party who will ultimately pay for the energy cost consumption, then only [variance exceptions (1), (2) or (3)] should apply."

Furthermore, the legislature intended "that the variances provided for in Act 204, Session Laws of Hawaii 2008, (Act 204) will be rarely, if ever, exercised or granted because the burden of proof will lie with the applicant to demonstrate that a solar water heater system, regardless of location or circumstance, is not cost effective in the context of a thirty-year mortgage term."

Despite Act 155's clarification of the legislature's intent, it is apparent that the variance process is being used to circumvent the objectives of Act 204. Variances have not been as rare as intended. Through December 2016, 4,450 variance requests were filed. More than ninety-nine per cent (approximately 4,425) of those variances were granted. The vast majority ‑ nearly ninety-four per cent (approximately 4,173) ‑ of the variance requests were for demand gas water heaters. More than 1,750 of the variance requests were submitted by a single architect. It is clear that variances requests are often not being submitted by the end consumer as the legislature intended.

The legislature finds that it is necessary to amend the solar water heater mandate to implement the intent of Act 204 and Act 155 and to protect consumers. This need is particularly acute at a time when substantial new residential tracts are being developed, and where the solar water heater mandate must be implemented as intended.

The purpose of this Act is to ensure that the variance for a demand water heater may only be granted if solar water heating is cost-prohibitive or if a renewable energy technology system is substituted for use as the primary energy source for heating water. Where a variance request is granted on this basis, consumers may utilize grid-interactive water heaters, which, unlike demand water heaters, will help to balance renewable energy in the State.

SECTION 2. Section 196-6.5, Hawaii Revised Statutes, is amended to read as follows:

"§196-6.5 Solar water heater system required for new single-family residential construction. (a) On or after January 1, 2010, no building permit shall be issued for a new single-family dwelling that does not include a solar water heater system that meets the standards established pursuant to section 269-44, unless the coordinator approves a variance. A variance application shall only be accepted if [~~submitted~~] signed by an architect or mechanical engineer licensed under chapter 464, who attests and demonstrates that:

[~~(1)~~ ~~Installation is impracticable due to poor solar resource;~~

~~(2)~~] (1) Installation is cost-prohibitive based upon a life cycle cost-benefit analysis that incorporates the average residential utility bill and the cost of the new solar water heater system with a life cycle that does not exceed fifteen years; or

[~~(3)~~] (2) A renewable energy technology system, as defined in section 235-12.5, is substituted for use as the primary energy source for heating water[~~; or~~

~~(4)~~ A demand water heater device approved by Underwriters Laboratories, Inc., is installed; provided that at least one other gas appliance is installed in the dwelling. For the purposes of this paragraph, "demand water heater" means a gas-tankless instantaneous water heater that provides hot water only as it is needed].

(b) If a variance is granted for a property that will be connected to an electric utility grid, a grid-interactive water heater or a heat pump water heater shall be used in place of a solar water heater. For the purposes of this subsection, "grid-interactive water heater" means an electric resistance water heater fitted with grid-integrated controls that are capable of participating in an electric utility load controls or demand response program.

[~~(b)~~] (c) A request for a variance shall be submitted to the coordinator on an application prescribed by the coordinator and shall include a description of the location of the property and detailed justification for the approval of a variance using the criteria established in subsection (a)[.], and the type of replacement water heater being used in accordance with subsection (b). The coordinator may exercise discretion in denying any variance application deemed incomplete or insufficient to satisfy the criteria in subsections (a) and (b). A variance shall be deemed approved if not denied within [~~thirty working~~] sixty calendar days after receipt of the variance application. The coordinator shall publicize:

(1) All applications for a variance within seven days after receipt of the variance application; and

(2) The disposition of all applications for a variance within seven days of the determination of the variance application.

[~~(c)~~] (d) The director of business, economic development, and tourism may adopt rules pursuant to chapter 91 to impose and collect fees to cover the costs of administering variances under this section[.] and to impose appropriate penalties or fines for false attestations in variance applications. The fees, fines, or penalties, if any, shall be deposited into the energy security special fund established under section 201-12.8.

[~~(d)~~] (e) Nothing in this section shall preclude any county from establishing procedures and standards required to implement this section.

[~~(e)~~] (f) Nothing in this section shall preclude participation in any utility demand-side management program or public benefits fee program under part VII of chapter 269."

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

"(b) The amount of credit allowed for each eligible renewable energy technology system shall not exceed the applicable cap amount, which is determined as follows:

(1) If the primary purpose of the solar energy system is to use energy from the sun to heat water for household use, then the cap amounts shall be:

(A) $2,250 per system for single-family residential property;

(B) $350 per unit per system for multi-family residential property; and

(2) For all other solar energy systems, the cap amounts shall be:

(A) $5,000 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section [~~196-6.5(a)(3),~~] 196-6.5(a)(2), the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;

(B) $350 per unit per system for multi-family residential property; and

(3) For all wind-powered energy systems, the cap amounts shall be:

(A) $1,500 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section [~~196-6.5(a)(3),~~] 196-6.5(a)(2), the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;

(B) $200 per unit per system for multi-family residential property; and

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

SECTION 5. This Act shall take effect on July 1, 2018.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2934
TWENTY-NINTH LEGISLATURE, 2018
STATE OF HAWAII