For years, Hawaii’s Renewable Energy Technologies Income Tax Credit (RETITC) has been one of the most effective incentives helping Hawaii homeowners and businesses invest in solar energy and battery storage. The credit has played a major role in making Hawaii a national leader in rooftop solar adoption while helping families lower electricity costs and improve energy resilience.

However, significant changes arrived in May 2026 when Governor Josh Green signed Senate Bill 3125, now known as Act 24, into law.

The legislation introduces major changes to Hawaii’s renewable energy tax credit program, creating uncertainty for homeowners, businesses, nonprofits, and the renewable energy industry statewide.

What Changed Under Act 24?

Historically, eligible renewable energy systems could qualify for a Hawaii state tax credit equal to 35% of qualified project costs, subject to existing program limits.

Act 24 dramatically changes how the credit is administered by introducing a statewide annual aggregate cap of $40 million on all Renewable Energy Technologies Income Tax Credit claims beginning in tax year 2026.

The legislation also establishes a gradual sunset of the program, with the credit scheduled to expire entirely after 2030.

While the tax credit itself still exists, the new cap fundamentally changes the availability of the incentive because all eligible projects across the state must now compete for a limited pool of annual funding.

Why Has Act 24 Generated So Much Concern?

The renewable energy industry’s concerns extend beyond the reduction in available credits.

One of the most controversial aspects of Act 24 was its original retroactive application to January 1, 2026. This meant that homeowners and organizations that had already signed contracts, secured financing, initiated permitting, or otherwise committed resources toward solar projects early in the year suddenly faced uncertainty about whether they would receive the tax benefits they reasonably expected.

For many projects, tax incentives were a critical component of financing and return-on-investment calculations. The unexpected changes created challenges for customers and project developers who had already made significant commitments.

Industry organizations, including the Hawaii Solar Energy Association (HSEA), warned that more than $400 million in active renewable energy projects—including residential, commercial, and nonprofit installations—could be impacted by the legislative changes.

How Much Has Credit Availability Been Reduced?

Although the state tax credit remains in place, the practical effect of the $40 million annual cap is substantial.

Industry stakeholders estimate the cap may represent a 60% to 70% reduction in available funding compared to historic levels of tax credit utilization.

In practical terms, this means there is now a finite amount of annual tax credit funding available statewide. Once the cap is reached, additional projects may have to wait for future allocation periods or be subject to other limitations established by the state.

This shift creates a level of uncertainty that did not previously exist under the RETITC program.

Executive Order 26-02: A Partial Solution

In response to concerns surrounding the retroactive nature of Act 24, Governor Green issued Executive Order 26-02 on June 8, 2026.

The Executive Order directs state agencies to provide guidance clarifying that certain renewable energy systems placed into service during 2026 may not be subject to the new $40 million cap if project development activities began before May 21, 2026. This includes projects where customers can demonstrate they reasonably relied upon the previous tax credit structure while investing resources into financing, planning, design, permitting, or installation activities before the law was enacted.

The order is intended to provide relief for many homeowners and organizations that had already committed to renewable energy projects before the legislation was signed.

Additional implementation guidance is expected from the Hawaii Department of Taxation and the Hawaii State Energy Office regarding documentation requirements and eligibility determinations.

Why 2026 May Still Be an Important Opportunity

Based on current guidance, many projects that were already in progress before May 21, 2026 may be excluded from counting toward the new annual cap.

If that interpretation remains in place, it could result in fewer projects competing for the cap during 2026 than in future years.

Beginning in 2027, the annual cap is expected to apply more broadly across a full year of eligible projects.

While no outcome can be guaranteed, homeowners considering solar may find that completing a qualifying project in 2026 is potentially more advantageous than delaying until future years.

What Should Homeowners Do Now?

If you’re considering solar or battery storage, now is a good time to review where your project stands.

Ask yourself:

  • Have you already signed a contract?
  • Have you paid a deposit?
  • Have you secured financing?
  • Has design work begun?
  • Have permits been submitted or approved?

If the answer is yes to any of these questions and the activities occurred before May 21, 2026, your project may qualify for treatment outside of the new cap framework, subject to future state guidance.

Homeowners should retain all project-related documentation, including:

  • Signed contracts
  • Deposit receipts
  • Financing documents
  • Design and engineering records
  • Permit applications
  • Installation records
  • Communications related to project development

These documents may become important in demonstrating eligibility under future guidance issued by state agencies.

Looking Ahead

The renewable energy industry continues to advocate for additional legislative or administrative solutions that provide greater certainty for projects that were already underway when Act 24 became law. Industry groups and lawmakers have discussed the possibility of additional “safe harbor” protections designed to protect customers who committed to projects under the previous rules.

As these discussions continue, Sunspear Energy remains committed to helping homeowners navigate the changing landscape and make informed decisions about their energy future.

Our team will continue monitoring developments from the Hawaii Department of Taxation, Hawaii State Energy Office, and state lawmakers and will provide updates as new information becomes available.

Important Disclaimer

Sunspear Energy is not a CPA, tax attorney, or tax advisor. We cannot guarantee eligibility for any tax credit, specific credit amounts, or tax savings. Tax credit eligibility is determined by applicable government agencies and each taxpayer’s individual circumstances. We encourage all customers to consult with their CPA or qualified tax professional regarding their specific tax situation.