Anders Alexander has worked in solar since 2013, from selling residential systems and directing installer sales teams to managing solar analysis software at EagleView and partnering on clean energy financing. He serves on the boards of the Washington Solar Energy Industries Association and Solar Washington.
Hawaii is one of the few states where a no-money-down solar offer is genuinely available, and it is also the state where accepting one costs you the most. A Hawaii system generates a 35% state tax credit capped at $5,000 on top of the federal credit, and both of them belong to whoever owns the equipment. Sign a lease and you have handed over the largest state solar credit in the country before your first bill arrives.
Two Credits, and Both Follow Ownership
A free solar offer is a lease or a power purchase agreement, and under either one a company owns the panels on your roof. Hawaii authorizes both, which puts it outside the 17 states that have no third-party providers at all. The offers here are real. What they cost you is the question.
Curious how $0-down offers work outside Hawaii? See our nationwide free solar overview.
Value stream | If you own the system | If a company owns it |
|---|---|---|
Hawaii state credit | Yours, 35% of cost up to $5,000 per system | The owner’s, not yours |
Federal credit | Nothing. Section 25D is $0 from January 1, 2026 | The company may claim Section 48E if its project qualifies under current federal deadlines (in service by December 31, 2027, or construction started by July 4, 2026), and passes back what it chooses |
Bill savings | Yours, at your island’s retail rate (statewide average 41.53¢) | Yours, minus the monthly payment |
That first row is worth pausing on because no other state has a row like it. Hawaii’s Renewable Energy Technologies Income Tax Credit, at section 235-12.5 of the Hawaii Revised Statutes, is the most valuable state solar credit in the country, and with Section 25D gone it is the only percentage-based money a Hawaii homeowner can personally claim. A lease removes it.
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Compare owning against leasing on your island
The One Case Where a Lease Genuinely Wins
There is a real exception worth knowing. Act 24 rewrote the state credit for taxable years beginning after December 31, 2026, and one of its changes is an income test: the credit is disallowed in full above $175,000 of adjusted gross income filing alone, or $350,000 filing jointly. It is a cliff, not a taper.
A household above those thresholds installing in 2027 or later gets nothing from the state credit however it pays. For them, third-party ownership stops costing anything, because a company is not subject to a personal income test. That is a narrow but genuine case where a lease is the better instrument rather than the worse one.
The same act adds a certificate requirement from the Hawaii State Energy Office and a statewide annual limit of $40,000,000 for 2027 through 2030, falling to $0 on January 1, 2031. A first-come statewide pot is another reason a household might rationally prefer a company’s balance sheet to its own claim.
For 2026 itself, Executive Order 26-02 preserved the old rules. So a system placed in service this year faces no income test at all, which makes ownership the stronger case for almost everybody installing right now.
Why Hawaii Offers Are Priced Against 41.53 Cents
Hawaii’s statewide average residential rate is 41.53¢ per kilowatt-hour, the highest in the United States by a wide margin, and that shapes every offer you will see. A power purchase agreement here can quote a price per kilowatt-hour that looks dramatically cheaper than your utility rate and still be expensive relative to what the system actually costs to run.
The comparison that matters is not the offered rate against the 41.53¢ statewide average, and your island’s own tariff, not the average, is the rate to check any offer against. It is the offered rate against what the same system would cost you to own over the same period, with the state credit counted on the ownership side. A contract at 22¢ looks like a 47% saving against the utility and can still be worse than buying.
The other Hawaii-specific factor is that export credits vary by island and by hour under Smart DER Export, from 6.6¢ daytime on Maui to 40.8¢ at peak on Lanai. A third-party contract priced on a statewide assumption is priced on something that does not exist. Ask which island tariff the offer was modeled against.
You Likely Will Not Qualify If
- You expected to claim the Hawaii state credit on a leased system. The credit follows ownership, so it goes to the company.
- You are counting on the 30% federal credit yourself. Section 25D is $0 for purchased systems from January 1, 2026, and Section 48E belongs to the business that owns the system, if its project qualifies under current federal deadlines.
- Your credit history does not clear the provider’s threshold. Third-party ownership is a twenty-year financing decision by the company and turns on credit rather than on your roof.
- You are on Kauai. Kauai Island Utility Cooperative sits outside the Hawaiian Electric framework, so the export assumptions behind most offers do not describe your bill.
- You were quoted against a statewide Hawaii export rate. There is not one. Credits differ by island and by hour, and an offer modeled on an average is modeled on nothing.
How to Compare an Offer Here
Hawaii is the state where the arithmetic most rewards doing it properly, because the amounts are the largest. Get a purchase quote and a third-party quote for the same system on the same roof. On the ownership side, count the state credit at 35% up to $5,000 and the bill savings at your island’s actual tariff. On the third-party side, count the total of every payment across the full term with the escalator applied: the annual raise written into most of these contracts, typically 2 to 3% a year, compounding across a 20 to 25 year term.
Then ask the one question that decides it for most households: are you installing in 2026, or in 2027 and later, and does your income clear the new thresholds. That answer moves the state credit from your column to theirs and flips the conclusion. Our Hawaii incentives guide covers the credit and the island tariffs, and the Hawaii installer list covers who does the work.
Hawaii Solar FAQs
Yes, in the sense that no-money-down leases and power purchase agreements are both authorized here, which puts Hawaii outside the 17 states with no third-party providers. The panels remain the company’s property. The catch specific to Hawaii is that the state’s 35% tax credit, capped at $5,000 per system, follows ownership, so a lease hands it to the company.
The company that owns the system. Hawaii’s Renewable Energy Technologies Income Tax Credit under section 235-12.5 is worth 35% of cost up to $5,000 for single-family residential property, and with Section 25D at $0 it is the only percentage-based money a Hawaii homeowner can personally claim. Signing a lease removes it from your column.
Yes, in one specific case. Act 24 adds an income test for taxable years beginning after December 31, 2026, disallowing the state credit entirely above $175,000 of adjusted gross income filing alone or $350,000 jointly. A household above those thresholds installing in 2027 or later loses the credit however it pays, so third-party ownership stops costing them anything. For 2026 installs, Executive Order 26-02 preserved the old rules and ownership is stronger for almost everyone.
Get both quotes for the same system on the same roof. On the ownership side count the state credit at 35% up to $5,000 plus bill savings at your island’s actual tariff. On the third-party side count every payment across the full term with the escalator applied. Do not compare the offered rate against the 41.53¢ statewide average, because an offer at 22¢ can look like a 47% saving and still be worse than buying.
No, and this is a common flaw in quotes. Export credits under Smart DER Export vary by island and by hour, from 6.6¢ daytime on Maui to 40.8¢ at peak on Lanai. A contract priced on a statewide assumption is priced on something that does not exist. Ask which island tariff the offer was modeled against, and note that Kauai sits outside the Hawaiian Electric framework entirely.
The credit is worth up to $5,000 and it follows ownership. Enter your ZIP code to compare both routes.
Check which island tariff applies
References & Research Sources
The credit terms, export figures and rates above come from the records below. Contract terms described are general to third-party ownership and are not a substitute for reading your own agreement. Sources accessed between June 10 and August 21, 2026.
- pv magazine USA. States without residential solar third-party ownership may become holes in the market after 2025. Analysis drawing on DSIRE data: the 23-state and 17-state counts, with Hawaii outside those groups. Dated July 22, 2025. Accessed August 17, 2026.
- Hawaii State Legislature. Senate Bill 3125, enrolled text, enacted as Act 24. The 35% credit rate and $5,000 single-family cap under HRS 235-12.5, the $175,000 and $350,000 adjusted gross income limits, the Hawaii State Energy Office certification requirement, the $40,000,000 annual statewide totals for 2027 through 2030, the $0 figure from January 1, 2031, and the application to taxable years beginning after December 31, 2026. Accessed August 17, 2026.
- Office of the Governor, State of Hawaii. Executive Order 26-02 announcement. Dated June 12, 2026: the preservation of the existing credit rules for 2026. Accessed August 17, 2026.
- Hawaiian Electric. Smart DER Export rate sheet. The per-island time-of-day export credits printed on this page and the exclusion of Kauai Island Utility Cooperative. Accessed August 21, 2026.
- US Energy Information Administration. Electric Power Monthly, Table 5.6.A: Average Price of Electricity to Ultimate Customers. The Hawaii statewide average residential rate of 41.53¢ per kWh used on this page as labeled context. Accessed August 17, 2026.
- Internal Revenue Service. One, Big, Beautiful Bill provisions. The Public Law 119-21 termination of Section 25D and the availability of Section 48E to business owners of residential systems under current deadlines. Accessed August 17, 2026.
