Report Title:

Renewable Energy

Description:

Provides tax credit for renewable energy technologies; creates a solar water heating loan revolving fund; directs DLNR to do a renewable energy land inventory; directs DBEDT to convene a biomass task force; allows renewable energy development in exclusive enterprise zones; and establishes the geothermal resources development special fund.

HOUSE OF REPRESENTATIVES

H.B. NO.

1392

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to RENEWABLE energy.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

SECTION 1. The legislature finds that it is paradoxical that Hawaii is generously blessed with renewable energy and critically dependent on imported fossil fuel. Existing technology can capture and convert solar and wind energy into a usable source of thermal or mechanical energy, electricity, and fuel. Geothermal energy is a proven source of electricity generation. Research and development is closing the gap between potential and practical application for a number of the State's renewable energy resources, such as biomass, biofuel, wave energy, ocean thermal conversion, and hydrogen fuel cell energy.

The legislature finds that Hawaii is over ninety per cent dependent on imported oil, is physically isolated from outside sources of energy, and is vulnerable to economic disruptions in the world oil market. Cutting of Hawaii's existing fossil fuel supply would have detrimental consequences to the State's transportation, construction, agricultural, and tourism industries, as well as major employers such as the government and the military. The health, security, and welfare of the State are inextricably linked to Hawaii's renewable energy resources.

The indispensability of renewable energy is recognized in the Hawaii State Planning Act, chapter 226, Hawaii Revised Statutes, that includes the following objectives and policies for the State's facility systems—energy:

(1) Dependable, efficient, and economical statewide energy systems capable of supporting the needs of the people;

(2) Increased energy self-sufficiency where the ratio of indigenous to imported energy use is increased;

(3) Greater energy security in the face of threats to Hawaii's energy supplies and systems; and

(4) Support research and development as well as promote the use of renewable energy sources.

Accordingly, the purpose of this Act is to:

(1) Require the department of business, economic development, and tourism and the department of agriculture to convene a biomass task force to investigate, evaluate, and recommend measures to make biomass energy and biofuels viable for commercial development in Hawaii;

(2) Require the department of land and natural resource and the department of business, economic development, and tourism to conduct a renewable energy land inventory;

(3) Establish a geothermal resources development special fund, into which shall be deposited all royalties from geothermal developers to further develop the state's geothermal resources;

(4) Encourage homeowners to use solar energy by making affordable loans available for the purchase and installation of solar water heating systems for their homes;

(5) Allow renewable energy development in exclusive enterprise zones;

(6) Implement the recommendations of the energy efficiency policy task force that was established by Act 163, Session Laws of Hawaii 1998, to explore and make recommendations to the legislature on the most cost-effective means of supporting increased energy efficiency and sustainability in Hawaii; and

(7) Support increased energy efficiency and sustainability in Hawaii by establishing an income tax credit for renewable energy technologies.

PART II

SECTION 2. The department of business, economic development, and tourism and the department of agriculture shall convene a task force to:

(1) Evaluate past biomass energy and biofuel studies in Hawaii and other reports from other states and countries that may be relevant to Hawaii;

(2) Evaluate current and emerging technologies that could use biomass energy and biofuel for electrical generation and for transportation;

(3) Review current federal, state and county tax credits and other incentives in Hawaii and other incentives from other states and countries that may be relevant to Hawaii; and

(4) Recommend what additional measures the legislature can take to make biomass energy and biofuels viable for commercial development in Hawaii.

SECTION 3. (a) The task force shall be made up of representatives from the department of business, economic development, and tourism; department of agriculture; department of transportation; the University of Hawaii; each county; sugarcane and agriculture industries; and electric utilities.

(b) The task force shall be co-chaired by representatives from the department of business, economic development, and tourism and department of agriculture.

(c) The task force shall case to exist on July 1, 2004.

SECTION 4. The task force shall provide a report of its findings and recommendations to the legislature no later than thirty days prior to the convening of the regular session of 2004.

PART III

SECTION 5. The department of land and natural resources, with the assistance of the department of business, economic development, and tourism, shall conduct a study to:

(1) Determine the size and location of federal, state, and county lands and waters suitable for renewable energy development (i.e., geothermal, wind, solar, biomass, hydroelectric, and ocean);

(2) Review and evaluate current federal, state, and county land use policies, rules, and regulations relating to renewable energy development;

(3) Review and evaluate current federal, state, and county environmental policies, rules, and regulations relating to renewable energy use; and

(4) Recommend what actions and measures the legislature can take pertaining to land use and environmental policies, rules, and regulations to make renewable energy development viable in Hawaii.

SECTION 6. The department of land and natural resources, with the assistance of the department of business, economic development, and tourism, shall provide a report of its findings and recommendations to the legislature no later than thirty days prior to the convening of the regular session of 2004.

PART IV

SECTION 7. Hawaii remains heavily dependent on petroleum fuel as its main source of energy. While oil accounts for forty per cent of the energy needs of the United States, it accounts for ninety per cent of Hawaii's energy needs.

As a result, the need to reduce our vulnerability to disruptions in oil supplies is an urgent one. One way to reduce this dependency on petroleum is by encouraging the use of indigenous resources as our sources of energy. There are few resources more unique to Hawaii than the geothermal energy offered by its volcanoes.

Geothermal energy represents a substantial and long-term source of renewable alternate energy that could be used to generate electric energy to meet the State's needs and concurrently help to reduce the Hawaii's dependence on imported fossil fuels.

The purpose of this part is to establish a geothermal resources development special fund, into which shall be deposited all royalties received by the State from developers of geothermal resources, to fund further development of the state's geothermal resources.

SECTION 8. Chapter 182, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§182- Geothermal resources development special fund. (a) There is created in the treasury of the State a special fund to be known as the geothermal resources development special fund. The proceeds in the fund shall be used to expand the development of geothermal sources of energy.

(b) Moneys appropriated to the fund and royalties received

by the State from developers of geothermal resources shall be

deposited into the geothermal resources development special

fund. All interest earned or accrued on moneys deposited in the

fund shall become part of the fund. Moneys in the fund shall be

expended upon warrants drawn by the comptroller."

PART V

SECTION 9. Chapter 201G, Hawaii Revised Statutes, is amended by adding to part III a new subpart to read as follows:

" . Solar Water Heating Loan Program

§201G- Purpose. The legislature finds that Hawaii is a leader in the use of renewable energy; however, there is a need to increase the use of renewable energy to reduce Hawaii’s use of fossil fuel and to protect Hawaii’s special environment. The legislature further finds that given Hawaii’s prevailing sunny climate, solar energy is a logical renewable resource and public policy and programs should promote and aid consumers in the use of solar energy.

It is the purpose of this subpart to encourage homeowners to use solar energy by making affordable loans available to homeowners for the purchase and installation of solar water heating systems for their homes, particularly, for homes developed under the jurisdiction of the corporation.

§201G- Solar water heating loan program. (a) The corporation may make direct solar water heating loans to eligible homeowners as determined by the corporation. In administering the solar water heating loan program, the corporation shall establish the terms and conditions, maturities, interest rates, collateral, and other requirements for the loans; provided that:

    1. The amount of the loan shall not exceed the cost of purchasing and installing the solar water heating system, less any applicable rebate and less the Hawaii energy conservation tax credit established under section 235-12, that is provided as a result of the purchase and installation of the solar system, as calculated at the time of installation;
    2. The interest rate on the loans may range from zero per cent to a maximum rate that shall be less than market rate; and
    3. Notwithstanding standard underwriting criteria and practice, the corporation may allow a loan repayment schedule based on the electrical usage savings expected to be realized by the eligible homeowner.

(b) The corporation shall establish the qualifications of the eligible homeowner, and may consider the household income of the eligible homeowner and give priority to low and moderate income homeowners.

(c) The corporation shall establish requirements for the solar water heating systems eligible for financing by the solar water heating loan.

(d) All solar water heating loans made shall comply with applicable state and federal laws.

(e) The corporation may take all necessary action to collect any delinquent amount in the event of a default in the payment of any installment of principal or interest on any loan made from the solar water heating loan revolving fund and to otherwise secure the loans in a manner which affords reasonable protection of the State’s resources. The corporation may purchase services required for the purposes of this subpart from any state or national bank authorized to accept or hold deposits in the State.

(f) The corporation may purchase services from the electric utilities to have the loan repayment amounts billed and paid through the electric utility.

§201G- Solar water heating loan revolving fund. (a) There is created a solar water heating loan revolving fund to be administered by the corporation, which shall be used to carry out the purposes of this subpart.

(b) Any funds appropriated for the purpose of the solar water heating loan revolving fund and all moneys received or collected by the corporation for the purpose of the revolving fund shall be used for loans under this subpart; provided that interest earned on funds appropriated for the solar water heating loan revolving fund may be used by the corporation for the administration of the solar water heating loan program established under this subpart.

§201G- Additional powers. The powers conferred upon the corporation by this subpart shall be in addition and supplemental to the powers conferred upon it by any other law, and nothing herein shall be construed as limiting any powers, rights, privileges, or immunities so conferred upon it."

SECTION 10. There is appropriated out of the general revenues of the State of Hawaii the sum of $1,000,000 or so much thereof as may be necessary for fiscal year 2003-2004 to be paid into the solar water heating loan revolving fund created in this part.

The sum appropriated shall be expended by the housing and community development corporation of Hawaii for the purposes of this part.

PART VI

SECTION 11. The legislature finds that renewable energy development in Hawaii is primarily driven by efforts to reduce the state's oil dependency, stabilize against oil disruptions, improve energy security, and protect the environment.

Renewable energy development poses significant challenges to electric utilities because implementation issues, such as high cost and technical immaturity, integration of intermittent resources with the existing electric system, limited site and resource availability, and controversial environmental and social issues, can conflict with the ability to maintain reliable and cost-effective electric energy generation and delivery.

The legislature finds that the State should do more to support efforts to develop renewable energy in Hawaii. The legislature recognizes the challenges of renewable energy development in Hawaii.

Accordingly, the purpose of this part is to allow into any enterprise zone qualified businesses that produce electricity from renewable energy for sale primarily to public utilities for resale to the public.

SECTION 12. Section 209E-2, Hawaii Revised Statutes, is amended by amending the definition of "qualified business" to read as follows:

"Qualified business" means any corporation, partnership, or sole proprietorship authorized to do business in the State that is qualified under section 209E-9, subject to the state corporate or individual income tax under chapter 235, and [[]is[]]:

(1) Engaged in manufacturing, the wholesale sale of tangible personal property as defined in section 237-4, or a service business as defined in this chapter;

(2) Engaged in producing agricultural products where the business is a producer as defined in section 237-5;

(3) Engaged in research, development, sale, or production of all types of genetically-engineered medical, agricultural, or maritime biotechnology products; or

(4) Engaged in producing electric power from [wind] renewable energy, as defined in section 269-91, for sale primarily to a public utility company for resale to the public."

PART VII

SECTION 13. The purpose of this part is to implement the recommendations of the energy efficiency policy task force that was established by Act 163, Session Laws of Hawaii 1998, to explore and make recommendations to the legislature on the most cost-effective means of supporting increased energy efficiency and sustainability in Hawaii.

This part implements certain recommendations of the task force, including:

(1) Restricting tax credits to renewable energy technologies and recommending appropriate credit levels and dollar caps;

(2) Reducing the cost of any qualifying system by the dollar amount of any new federal tax credit before applying the state tax credit;

(3) Requiring the department of taxation to collect detailed data on tax credits to support future analyses and to prepare appropriate administrative rules; and

(4) Requiring the state energy resources coordinator to review and evaluate energy efficiency policies every seven years.

SECTION 14. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-    Renewable energy technologies; income tax credit. (a) Each individual or corporate resident 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 by a taxpayer after June 30, 2003. The tax credit may be claimed as follows:

(1) For solar thermal:

(A) Residential systems: thirty-five per cent of the actual cost or $1,750, whichever is less;

(B) Multi-family systems: thirty-five per cent of the actual cost or $350 per family unit, whichever is less; or

(C) Commercial systems: thirty-five per cent of the actual cost or $500,000, whichever is less;

(2) For wind powered:

(A) Residential systems: twenty per cent of the actual cost or $1,500, whichever is less;

(B) Multi-family systems: twenty per cent of the actual cost or $200 per family unit, whichever is less; or

(C) Commercial systems: twenty per cent of the actual cost or $500,000, whichever is less; and

(3) For photovoltaic:

(A) Residential systems: thirty-five per cent of the actual cost or $5,000, whichever is less;

(B) Multi-family systems: thirty-five per cent of the actual cost or $350 per family unit, whichever is less; or

(C) Commercial systems: thirty-five per cent or $500,000, whichever is less;

provided that multiple owners or a multi-family owner of a single system shall be entitled to a single tax credit; provided further that the tax credit shall be apportioned between the owners or families in proportion to their contribution to the cost of the system.

(b) For the purposes of this section:

"Actual cost" means costs related to the renewable energy technology systems under subsection (a), including its accessories and installation, and shall not include the cost of consumer incentive premiums unrelated to the operation of the system or offered with the sale of the system.

"Renewable energy technology system" means a system that captures and converts a renewable source of energy, such as wind or, heat or light of the sun into:

(1) A usable source of thermal or mechanical energy;

(2) Electricity; or

(3) Fuel.

(c) The dollar amount of any new federal energy tax credit similar to the credit provided in this section that is established after June 30, 2003, and any utility rebate, shall be deducted from the cost of the qualifying system and its installation before applying the state tax.

(d) The tax credit shall be claimed against net income tax liability for the year in which the renewable energy technology system was purchased and placed in use in Hawaii. Tax credits that exceed the taxpayer's income tax liability may be used as credit against the taxpayer's income tax liability in subsequent years until exhausted.

(e) The director of taxation shall prepare such forms as may be necessary to claim a tax credit under this section. The director may also require the taxpayer to furnish reasonable information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(f) The department of taxation shall report to the legislature annually, no later than twenty days prior to the convening of every regular session on the following:

(1) The number of energy technology systems that have qualified for a tax credit during the past year by technology type (solar thermal, photovoltaic, and wind), by installation type (residential, multi-family residential, and commercial), and by taxpayer type (corporate and individual); and

(2) The total cost of the tax credit to the State during the past year by technology type, by installation type, and by credit type, with descriptive statistics including mean, median, minimum, and maximum values and the standard deviation.

(g) All claims for a tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claim. Failure to properly file the credit shall constitute a waiver of the right to claim the credit.

(h) This section shall apply to taxable years beginning after December 31, 2002."

SECTION 15. Energy efficiency policy review and evaluation. (a) The state energy resources coordinator shall ensure that review and evaluation comparable to those accomplished by the energy efficiency policy task force, pursuit to Act 163, Session Laws of Hawaii 1998, are undertaken, and that findings and recommendations of the review and evaluation are reported to the legislature no later than twenty days prior to the convening of the regular session of 2011 and every seven years thereafter.

(b) The review and evaluation shall include:

(1) The efficacy of section 235-     to determine whether the tax credits should be continued or enhanced based on impact and cost-benefit analysis or other public policy considerations;

(2) Whether the energy technology systems eligible for tax credits under section 235-     should be expanded, reduced, or remain the same; and

(3) Any other issue regarding energy technology systems identified during the seven-year review.

(c) The energy resources coordinator, in undertaking the review and evaluation, shall consult with representatives from:

(1) The department of business, economic development, and tourism;

(2) The solar, wind, and photovoltaic industries;

(3) The utilities industries;

(4) The building industry; and

(5) Any other professional or public sector group the energy resources coordinator deems appropriate.

PART VIII

SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 17. This Act shall take effect upon its approval; provided that part V of this Act shall take effect on July 1, 2003, and shall be repealed on June 30, 2006.

INTRODUCED BY:

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