Why It Matters
Hawaii’s solar energy sector faced a significant disruption after state lawmakers capped the Renewable Energy Technologies Income Tax Credit at $40 million annually and applied that cap retroactively to 2026, putting more than a quarter-billion dollars in planned projects at risk. Gov. Josh Green stepped in with an executive order to protect solar investments already underway.
The move carries particular weight in a state legally required to generate all electricity from renewable sources by 2045 — a deadline that depends heavily on continued private investment in solar infrastructure.
What Happened
Gov. Green issued an executive order last Friday extending Hawaii’s solar energy tax credits for commercial and industrial uses through 2026, shielding projects that were completed or actively in progress before May 21 from the legislature’s retroactive cap.
The credit — which allows taxpayers to deduct 35 percent of a solar system’s cost directly from their state income tax bills — had been a cornerstone of Hawaii’s renewable energy buildout. When lawmakers capped the program at $40 million annually and applied it retroactively, the solar industry identified 256 projects valued at $436 million that were suddenly at financial risk.
Under the executive order, projects completed or in development before the May 21 cutoff are protected from the retroactive cap. Projects that missed that date must demonstrate their financing was structured around the availability of the credits in order to qualify for relief.
The $40 million annual cap, however, remains in place going forward. The legislature has set a sunset date of 2030, at which point the credits will be eliminated entirely.
By the Numbers
256 commercial and industrial solar projects — worth a combined $436 million — were identified as being at risk when the retroactive cap took effect.
The state has issued $1.36 billion in solar tax credits since the program launched in 2006. In 2023 alone, Hawaii awarded more than $100 million in solar credits — more than double the newly established annual cap. By comparison, the state awarded $43.5 million in tax credits for film and television production, illustrating the relative scale of the solar program.
The credit covers 35 percent of a solar system’s installed cost, a rate that has driven broad adoption across residential, commercial, and nonprofit sectors. Hawaii’s renewable electricity mandate runs to 2045, the same year Green has set as the target for rooftop solar and battery storage on every eligible structure on Oʻahu.
Zoom Out
Hawaii is not alone in reassessing the fiscal exposure created by open-ended renewable energy tax credits. Several states have moved to cap or restructure solar incentive programs as cumulative program costs exceeded initial projections. At the federal level, debates over the Inflation Reduction Act’s clean energy credits have similarly centered on the gap between budgeted and actual credit claims.
What distinguishes Hawaii’s situation is the combination of a statutory 100-percent-renewable mandate, a land-constrained geography, and an existing policy framework — established by Green in 2025 — to maximize distributed solar paired with battery storage. The legislature’s cap and the governor’s executive order now set the parameters for how that policy will be financed through 2030.
Rocky Mould, executive director of the Hawaii Solar Energy Association, noted the stakes for everyday ratepayers: “Families, businesses and non-profits with solar have been able to cut their electricity bills by hundreds of dollars per month.”
What’s Next
The solar credit program will operate under the $40 million annual cap through 2029, then expire at the end of 2030. Projects that believe they qualify under the May 21 cutoff provision will need to document their financing arrangements to claim the extended credit.
Broader questions remain about how Hawaii will sustain private investment in renewable energy infrastructure after the credit program ends, particularly as the 2045 mandate draws closer. Hawaii’s infrastructure challenges — including aging systems not designed for the stresses of a changing climate — add urgency to the question of how the state finances its energy transition in the years ahead.
The legislature’s decision to cap and ultimately eliminate the credit also raises longer-term questions about whether the nine tax credit programs it oversees will face similar reviews as the state manages its fiscal position heading into the next decade.