SB2888

Part I

SECTION 1. The legislature finds that Hawaii has the nation's highest residential electricity cost per kilowatt hour at more than triple the average United State's price. However, the State also has one of the highest rates of rooftop solar adoption in the nation.

The legislature further finds that the federal residential clean energy credit for rooftop solar ends December 31, 2025, nine years ahead of schedule, which will increase out-of-pocket costs for residential rooftop solar installations. Small‑scale, consumer‑sited rooftop solar provided approximately fifteen per cent of total electricity generation in the State in 2024 and the residential solar industry supports more than two thousand five hundred jobs. Continued incentives for rooftop solar are necessary to ensure the State can reach its renewable energy mandates and continue support for the State's solar job market.

The legislature further finds that the elimination of the federal residential clean energy credit for rooftop solar effective January 1, 2026, constitutes an emergency threatening Hawaii's clean energy transition, solar industry viability, and energy affordability for residents, requiring immediate implementation of this Act.

The legislature further finds that over ninety per cent of the State's total energy consumption is from petroleum, the highest in the nation. Additionally, all of the petroleum used in the State is imported. The substantial revenues raised each year from the environmental response, energy, and food security tax on imported petroleum, also known as the barrel tax, can be directed toward growing the State's residential rooftop solar adoption as a way to reduce reliance on imported fossil fuels. Growing rooftop solar installation and investment will also provide continued economic and employment opportunities for local residents.

The legislature further finds that direct rebates for rooftop solar installation may offer more accessible energy cost relief for low‑ and moderate‑income families, who typically spend the highest proportion of their income on energy costs.

Accordingly, the purpose of this Act is to:

(1) Increase the rooftop solar tax credit to forty five per cent for tax years beginning after December 31, 2025 through December 31, 2030;

(2) Establish a direct solar rebate program for low- and moderate‑income households;

(3) Streamline rooftop solar county permitting; and

(4) Provide resources to the Hawaii state energy office workforce development program to connect job seekers with rooftop solar jobs.

Part II

SECTION 2. Section 235-12.5, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) 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 by a taxpayer during the taxable year. The tax credit may be claimed as follows:

(1) [~~For~~] Regardless of when the taxpayer files a tax return, for each solar energy system[:] installed on or before December 31, 2025: thirty-five per cent of the actual cost or the cap amount determined in subsection (b); and for each solar energy system purchased or installed on or after January 1, 2026: forty-five per cent of the actual cost or the cap amount determined in subsection (b), provided that:

(A) For taxable years beginning after December 31, 2019, and except as provided in subparagraphs (B) and (C), no tax credit may be claimed for a solar energy system that is five megawatts in total output capacity or larger and requires a power purchase agreement approved by the public utilities commission;

(B) A solar energy system that is five megawatts in total output capacity or larger, installed and placed in service pursuant to a power purchase agreement approved or pending approval by a decision and order by the public utilities commission prior to December 31, 2019, shall continue to receive a tax credit equal to thirty‑five per cent of the actual cost, or $500,000 per solar energy system that has a total output capacity of at least one thousand kilowatts per system of direct current, whichever is less; and

(C) For each solar energy system integrated with a pumped hydroelectric energy storage system, the tax credit may be claimed for thirty-five per cent of the actual cost or the cap amount determined in subsection (b), whichever is less; provided that applicable project approval filings have been made to the public utilities commission by December 31, 2021; or

(2) For each wind-powered energy system: twenty per cent of the actual cost or the cap amount determined in subsection (b), whichever is less;

provided further 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 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 administrative rule.

(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~~] $7,500 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), 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), 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

Part III

SECTION 3. Chapter 196, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§196- Direct solar rebate program. (a) The Hawaii state energy office shall establish the direct solar rebate program to provide financial assistance and improve access to residential rooftop solar systems for low- and moderate‑income households.

(b) Households with annual incomes at or below one hundred forty per cent of the area median income shall be eligible for a rebate under the program for installation of a residential rooftop solar system as follows:

(1) A household with an annual income at or below eighty per cent of the area median income shall receive a rebate of $5,000 per system; and

(2) A household with an annual income between eighty‑one per cent and one hundred forty per cent of the area median income shall receive a rebate of $3,000 per system.

(c) Households that install battery energy storage systems in combination with residential rooftop solar systems under this program shall receive an additional rebate of:

(1) $2,000 for systems with at least ten kilowatt-hours of storage capacity; or

(2) $3,500 for systems with at least twenty kilowatt-hours of storage capacity.

(d) Battery energy storage system rebates described in subsection (c) may be combined with rebates described in subsection (b) but shall not exceed a total combined rebate of $8,000.

(e) Rebates described in subsection (b) may be combined with tax credits described in section 235-12.5 and any other available incentives.

(f) Landlords or other housing providers may be eligible for a rebate under the program; provided that:

(1) Each tenant household, at the time of application, meets the area median income limits described in subsection (b); and

(2) Energy cost savings are passed through to tenants either through direct energy bill credits or an annual reduction in rent equal to the amount of the rebate divided by the number of tenant households.

(g) In furtherance of the program, the Hawaii state energy office shall:

(1) Establish a streamlined application process to provide approval or denial decisions within thirty days of receiving a complete application;

(2) Provide rebates as direct payments to applicants within sixty days of installation and inspection;

(3) Coordinate with and provide information on approved licensed contractors to approved applicants to ensure quality installation;

(4) Prioritize applications from households with a high energy cost burden;

(5) Provide multilingual information and assistance to applicants;

(6) Accept applications from homeowners and renters; provided that renters shall provide evidence of landlord agreement;

(7) Establish partnerships with community-based organizations, particularly those serving Native Hawaiian, Pacific Islander, and low-income communities, to conduct outreach and provide application assistance;

(8) Create an online portal showing:

(A) Current program funding availability;

(B) Estimated wait times for applications;

(D) Typical system costs and energy savings by island and household size;

(9) Reserve at least thirty per cent of annual program funds for households at or below eighty per cent of area median income; and

(10) Implement a waitlist system if applications exceed funding, with priority given to:

(A) Households with the highest energy cost burden;

(B) Hawaiian home lands residents;

(D) Households in areas with frequent power outages.

(h) The Hawaii state energy office shall provide an annual report on the program to the legislature no later than twenty days prior to the convening of each regular session, which shall include the following information:

(1) Number and demographic data of households served;

(2) Total solar capacity installed under the program;

(3) Estimated energy cost savings for approved households;

(4) Job creation impacts;

(5) Progress toward renewable energy goals; and

(6) Program improvement recommendations."

SECTION 4. Section 46-19.4, Hawaii Revised Statutes, is amended to read as follows:

"[[]§46-19.4 Priority permitting process for renewable energy projects[.]]; electronic application on system; residential solar. (a) All agencies shall provide priority handling and processing for all county permits required for renewable energy projects.

(b) All agencies shall establish an electronic application system for all county permits required for residential solar installations. Access to the system shall be available to applicants twenty-four hours per day, seven days per week.

(c) All agencies shall approve or deny all county permits required for residential solar installations within ten business days of receiving a complete application; provided that failure to approve or deny a permit within ten business shall result in automatic approval of the permit; provided further that the permit applications shall meet all statutory safety and building code requirements.

(d) All agencies shall develop a standard permit application checklist for residential solar installations.

(e) All agencies shall develop pre-approved designs for typical residential solar installations.

(f) Each county shall designate a solar permitting ombudsman to assist applicants and resolve disputes relating to permitting delays or denials.

(g) Each county shall provide a quarterly report to the legislature on the following:

(1) Average permit processing times;

(2) Percentage of permits approved or denied within the required timeframe;

(3) Common reasons for delays or denials; and

(4) Improvement initiatives.

(h) For purposes of this section, "agencies" means any executive department, independent commission, board, bureau, office, or other establishment of a county, or any quasi-public institution that is supported in whole or in part by county funds."

Part IV

SECTION 5. (a) Pursuant to section 269-142, Hawaii Revised Statutes, the public utilities commission shall, within one hundred eighty days of the effective date of this Act, adopt rules requiring electric utilities in the State to:

(1) Process solar interconnection applications within fifteen business days of receiving a complete application;

(2) Compensate applicants $100 per week for each week of delay beyond the fifteen-business-day requirement, payable as a credit on the applicant's first bill after system interconnection;

(3) Employ additional interconnection personnel if application processing delays exceed thirty business days on more than ten per cent of applications per quarter;

(4) Provide online application and status tracking;

(5) Use standardized solar interconnection agreements;

(6) Minimize on-site inspection requirements when safe to do so; and

(7) Provide a quarterly report on interconnection processing data to the public utilities commission no later than ninety days after the end of each quarter.

(b) The public utilities commission shall impose administrative penalties on electric utilities that fail to meet the interconnection processing timelines established in this Act as follows:

(1) A warning for the first violation; and

(2) For any application delayed beyond the fifteen business day requirement thereafter, a fine of $500 per day per application.

SECTION 6. (a) The Hawaii state energy office shall enhance its workforce development program focusing on jobs in the residential solar installation sector by:

(1) Providing assistance and information on employment in the rooftop solar industry to job seekers, prioritizing those who are:

(A) Displaced workers from fossil fuel industries;

(B) Young adults residing in areas of high unemployment;

(D) Veterans transitioning to civilian careers;

(E) Native Hawaiians; and

(F) Any other underserved populations;

(2) Connecting job seekers to apprenticeships in the rooftop solar industry;

(3) Providing certification for solar installers and electricians;

(4) Expanding partnerships with community colleges, trade schools, and other groups to share information and identify workforce needs;

(5) Partnering with the Hawaii Solar Energy Association and solar contractors to ensure training curricula meet current industry needs and standards;

(6) Providing stipends or scholarships to offset training costs for eligible participants from low-income households;

(7) Requiring apprenticeship programs that receive State support to:

(A) Pay apprentices at least seventy-five per cent of the journeyman wage; and

(B) Achieve a permanent job placement rate of at least sixty per cent within six months of program completion; and

(8) Track and report annually on:

(A) The number of participants trained;

(B) Job replacement rates and wages;

(D) Retention rates after one year of employment.

(b) The Hawaii state energy office shall provide support to counties to implement the requirements described in section 4, including:

(1) Model ordinances for solar permitting;

(2) Training for county permitting staff;

(3) Coordination and knowledge sharing between counties;

(4) Resources for installers and households.

SECTION 7. The department of business, economic development, and tourism; Hawaii state energy office; and the public utilities commission may adopt interim rules using expedited rulemaking procedures under section 201M-7, Hawaii Revised Statutes, to implement this Act; provided that:

(1) Interim rules shall take effect no later than one hundred twenty days after the effective date of this Act; and

(2) Permanent rules shall be adopted within one year after the effective of this Act.

Part V

SECTION 8. There is appropriated out of the energy security special fund the sum of $10,000,000 or so much thereof as may be necessary for fiscal year 2026-2027 for the establishment of the direct solar rebate program.

The sum appropriated shall be expended by the Hawaii state energy office for the purposes of this Act.

SECTION 9. There is appropriated out of the energy security special fund the sum of $2,000,000 or so much thereof as may be necessary for fiscal year 2026-2027 for the enhancement of Hawaii state energy office's solar workforce development initiatives.

The sum appropriated shall be expended by the Hawaii state energy office for the purposes of this Act.

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect on July 1, 2026; provided that part II shall repeal on January 1, 2031; provided further that section 235-12.5, Hawaii Revised Statutes, shall be reenacted in the form in which it read the day before the effective date of this Act.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2888
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII