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Business // Thinking Smart
David S. Chang

Thinking Of Going Solar? Read This

Everywhere you go these days, you hear an advertisement about solar. By some estimates, there are more than 250 solar companies in Hawaii, with dozens more opening up per year! The average energy price on Oahu is about 35 cents per kilowatt/hour, and it’s much higher on the Neighbor Islands, with Kauai at almost 42 cents! In comparison, the average price on the Mainland is about 12 cents, less than a third of what we pay. The average household in Hawaii pays a monthly electricity bill of about $300. Here are some reasons for our high prices:

* The high price of oil and shipping. Hawaii is the most fossil fuel dependent state in the nation.

More than 90 percent of Hawaii’s energy comes from imported oil.

* Hawaii has six separate electrical systems (for our separate islands) and with a small population base, there are no economies of scale, making it more expensive to operate with higher costs per Hawaii resident.

* Unlike Hawaii, states on the Mainland can buy surplus energy from each other and have large projects producing cheap energy.

In order to relieve our dependence on oil, in 2008 then-Gov. Linda Lingle created The Hawaii Clean Energy Initiative. Its goal is to achieve 70 percent clean energy by 2030, with 30 percent from efficiency measures and 40 percent from locally generated renewable sources.

Because of the abundance of sun in Hawaii and generous tax credits, photovoltaic (PV) systems and solar water heaters are currently the top sources of renewable energy.

If you have not taken the leap to installing PV, here are some common methods for going solar:

* Cash Purchase: The average PV system size for a Hawaii home is 5kw to 8kw and costs between $25,000 and $50,000. Purchasing the system will give you all the energy savings, in addition to the tax incentives and other deductions. The home value generally goes up with the system, and you are free of any ongoing payment. Some cons, however, are the large up-front costs, your insurance could go up to cover the system, and you may have to pay to fix any problems in the future. You also can take out a home equity loan or refinance to pay for the system, but there could be extra fees in addition to using your home as collateral.

* Lease: In a lease you pay a monthly fee for the PV system without owning it. A lease is typically 15-20 years. The payment is generally more manageable, and if anything goes wrong, the leasing company will take care of it. You will not have the upfront costs of a cash purchase, but the overall savings potential is less and you will have to pay monthly regardless of the amount of solar energy produced.

* Power Purchase Agreement: In a PPA, a financing company owns and maintains the system, and you purchase solar electricity at a set price from them for a set length of time. The difference from a lease is that you only pay for the energy produced by your system. As a result, your payment can vary month to month. Some PPAs have a performance guarantee and allow you to pay more upfront for a lower electricity rate. There may be an escalator where the rate goes up every year.

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