Low Income Electricity Tax Credits
Beginning in 1976 the State of Hawaii began offering solar tax credits to help the State reduce its dependence on oil. This was very far seeing for its time and at first few people, despite this tax incentive, were interested in spending the money to install solar hot water or solar panels on their homes. But interest among Hawaii homeowners increased significantly after 2006 when the Federal government offered a matching tax credit.
The purpose of the tax credit was purely renewable energy goals (100% by 2045). Access to energy or energy fairness was never a consideration.
Between 1990 and 2018 largely as a result of these efforts the amount of petroleum generated electricity fell 22% from 8736 GWH to 6749 GWH in Hawaii. It is a remarkable achievement in the effort to battle green house gases and climate change.
However, an unexpected consequence of this policy was that most of the financial benefit went to Hawaii’s wealthiest citizens. The tax credit incentives for renewable energy - generally $10,000 were necessary because it is generally assumed that for most people, without the tax credits, the cost of installing renewable energy upgrades would be unaffordable.
Those able to take advantage of the Net Energy Metering (NEM) Program (some 60,000 people) after an initial investment received low cost electricity for life, at a token cost of approximately $18 per month. But for renters and others who could not take advantage of this program - costs soared especially as temperatures have grown hotter and air conditioning has become more important.
On Oahu where the cost of electricity is .29 per kWh, approximately 37 percent of residential homeowners have installed residential solar panels. Because Hawaii has the highest electricity costs in the nation this has had significant social impact on energy fairness. For while it reduced the cost 99% for home owners the electricity burden remained high for renters.
Typically those who own assets that enable to qualify for tax credits for renewable energy pay 1-2% of their income for electricity while renters and low income householders who don’t qualify for bank credit because they lack assets pay 5-6 % as much as 15% of their income or more. In Hawaii generally those with the lowest annual income pay 20% more for electricity than the wealthy.
If Hawaii state subsidies in the form of tax credits have been partially responsible for this problem why not use state subsidies to fix it. Tax credits can be implemented quickly and are far more certain than the other considerations considered to make access to affordable energy more fair.
There are for example, alternatives such as community based renewable solar energy (CBRE ) in which groups of people without access are encouraged as a group to invest in a solar farm. But theses generally only save participants 10% per month on their electric bill. Not enough to make a difference for the very poor. They take a long time because of permitting and other issues to implement. Their main goal is to provide more fossil free renewable energy but, as has been stated, that is a different goal than energy equity. Energy equity should be immediate and separated from energy efficiency efforts or the efforts to make Hawaii fossil fuel free by 2045.
Why not instead mandate that those people absolutely unable to pay their electricity for reasons for health or unemployment receive a $2,000 annual energy tax credit. This amount is the average annual bill ($177 per month) of those who earn 100-140% of the Area Median Income (AMI) in Hawaii. This will increase energy equity – free renters and low income households of the crippling cost of energy, and provide them with access to air conditioning. Generally it would be a more fair and decent thing to do. Whats more it can be done swiftly and without the need for permits for CBRE or energy efficiency which take considerable amounts of time and effort. Those efforts should still be ongoing but should be made separate from trying to relieve low income residents of Hawaii from their energy burden. State tax credits have lifted the electricity burden from the wealthy. Its time to make it accessible to everyone.
One might ask why help the poor and those with low income? Maybe, because the benefits of government should be for everyone. Energy equity should also be a goal of Hawaii’s state energy policy.
