The Corner

States Find Solar Subsidies Too Hot to Handle

Hawaii’s solar subsidies have been highly effective. Maybe too effective, actually . . .

The Aloha state gives homeowners and businesses tax credits covering 35 percent of the cost of their solar installation. Oh, and that’s on top of the 30 percent federal credit. So faster than you can say “free money,” Hawaiians started tricking out their homes.

Just one problem. The costs to the state are mounting, though Hawaii isn’t really sure how much:

The unexpected popularity of the solar incentive has opened a hole in the state budget and become a major topic in state politics.

During the 2010 tax year, Hawaii residents claimed $42.8 million in renewable energy credits, mostly for solar projects. In just six months of 2011, they claimed $54.9 million in credits, according to data provided to Stateline by the Hawaii Department of Taxation. This year, the price will soar to $173.8 million, the state estimates. That’s out of an overall state budget that hovers around $12 billion each year. . . .

To be clear, $173.8 million is what Hawaii thinks its credit will cost this year. It’s the highest and most recent of several estimates, meant to guide the governor in putting together the state’s next biennial budget. State economists admit there’s no way to be sure of the program’s cost, either for this year or in the future.

Hawaii isn’t alone, turns out. In Louisiana, which offers a 50 percent tax credit on wind or solar purchases, capped at a whopping $12,500, residents are really, really, really taking advantage of the subsidy:

Its cost has soared to 18 times the state’s original $500,000 per-year projection, a problem uncovered by a legislative committee that’s reviewing each of the state’s major tax programs. . . .

 “How do I know how many people would put a solar system on top of their house?” asks Greg Albrecht, chief economist of the Louisiana Legislative Fiscal Office. “I’m just guessing.”

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