The Economic and Fiscal Impacts of Hawaii's Solar Tax Credit

Thomas A. Loudat, Prahlad Kasturi

Abstract


This research paper assesses the economic and fiscal impacts of Hawaii’s solar tax credit-stimulated solar installations.  The method entails estimating the economic effects created by i) the purchase of a solar system as well as ii) of the alternatives foregone. Our study shows that the State receives full repayment of its solar credit investment in 9 to 15 years. For each solar credit dollar spent, the State receives $1.97 to $2.67 dollars in additional tax revenues. The fiscal results of the tax credit reported by this research have been replicated in a federal solar tax credit study published by the US Partnership for Renewable Finance USPRF (2012) that estimates an IRR of 10% for the government’s tax credit “investment” in residential solar systems. The findings of the federal study comports closely with our Hawaii’s estimate of an IRR of 9.5% for residential and 11.1% for commercial solar systems. 

Keywords: Solar Energy, Solar Tax Credit, Internal Rate of Return

JEL Classification: O4


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