The Federal Solar Tax Credit Is Gone. Here's the Hawaii Playbook.

For a decade, the federal Investment Tax Credit (ITC) was the single biggest lever in residential solar economics. A 30% federal credit on top of Hawaii's 35% state credit made solar one of the most tax-advantaged purchases available to any US homeowner.

That ended December 31, 2025. The ITC is gone for residential installations — permanently, under current law. What's left is Hawaii's own Residential Energy Tax Credit (RETITC), which is real, but structured very differently. If you're evaluating solar in 2026, the math has changed, and so has the installer playbook.

1. Permit Volume: What the Data Shows

Every solar installation in Honolulu generates a building permit. That gives us a real-time read on market activity. Here's the monthly permit volume over the past two-plus years — the clearest signal we have on how demand is shifting around the ITC expiration.

The pattern to watch: solar markets historically see a surge in permit filings in the months before a tax credit deadline, as homeowners rush to capture the credit. If that surge appears in our data, you'll see it in the October–December 2025 bars. Post-deadline, volume typically dips before stabilizing at a new baseline.

2. What $/W Looks Like Going Into 2026

Installers know that losing the federal credit makes their product ~23% more expensive in after-tax terms for the average homeowner. The competitive response is usually some combination of: price compression, financing repackaging, and value-added bundling (batteries, monitoring).

Annual Permit Volume & $/W

3. The Hawaii RETITC: Still 35%, But the Math Changed

Here's what most homeowners don't know: Hawaii's own Residential Energy Tax Credit was designed independently of the federal ITC. It still pays out at 35% — but it's capped, and the cap structure is what drives installer strategy in 2026.

4. The 5 kW Block Strategy

This is the most important structural change in how Hawaii solar is being sold in 2026, and most homeowners have never heard of it.

The RETITC cap is per 5 kW block, not per installation. Under Hawaii law, a single homeowner can claim the credit on multiple 5 kW blocks — if those blocks are filed as separate permits. That changes the economics dramatically for larger systems.

In practice, this means a homeowner installing a 10 kW system who structures it as two 5 kW permits can double their state credit from $5,000 to nearly $10,000. Some installers are proactively recommending this structure, particularly for homes that previously would have qualified for the full $9,000–$12,000 federal ITC (which no longer exists).

5. What Installers Are Doing to Adapt

The installer market is responding across a few dimensions:

6. The Corporate Pass-Through: How Prepaid Leases Bring Back the 30% Credit

The federal ITC didn't disappear — it moved. Corporations still get the 30% credit (§ 48E, active through 2027). What some installers are now doing is structuring deals where a financing company or their own business entity owns the system, claims the ITC, and passes those savings to the homeowner through a lower-cost lease or PPA. The homeowner effectively gets 30% ITC-level savings without having to claim it themselves.

This is the single biggest post-ITC development in residential solar financing, and it's how the majority of US residential solar was financed even before the ITC expired. Third-party ownership (leases, PPAs, and their prepaid variants) made up roughly 60% of the US residential solar market historically. In 2026, that model becomes the primary path for homeowners who want ITC-level economics without buying outright.

The Three Main Structures

Buying vs. Prepaid Lease vs. PPA — Full Comparison

Real Prepaid Lease Proposals We've Reviewed

Rather than work from estimates, here's what three Hawaii installers actually quoted for the same neighborhood — proposals submitted to Bright Neighbors for a home in Mililani. All three are prepaid 25-year leases with ownership transfer after year 6 and no monthly payments. No escalators on any of them.

Who’s Offering These in Hawaii Right Now

The three proposals reviewed above came from three active Hawaii installers. Here’s what each company is offering:

Solartech Industries — Submitted a 6.16 kW prepaid lease at $21,957 ($3.56/W). That price is effectively equivalent to what you’d pay purchasing the system outright at current market rates, meaning Solartech is passing nearly all of the corporate ITC benefit back to the homeowner. Ownership transfers after year 6. No escalators. No monthly payments.

Alternate Energy — Submitted a 6.16 kW prepaid lease at $24,313 ($3.95/W). Same structure as Solartech: 25-year prepaid, ownership after year 6, no escalators. For the exact same system size, they charge 10.7% more. Whether the difference in service, equipment, or warranty justifies that premium is worth asking them directly.

RevoluSun LLC — Submitted a 4.4 kW prepaid lease at $20,682.80 ($4.70/W). Smaller system size means a higher per-watt cost — smaller systems cost more per watt to deploy. If you’re deciding between RevoluSun and the other two, make sure you’re comparing system sizes side-by-side, not just the bottom-line price. A 4.4 kW system costs less in total, but per watt it’s the most expensive of the three.

7. Should You Wait for SB 2888?

Hawaii's SB 2888, introduced in the 2026 legislative session, proposes bumping the RETITC from 35% to 45% — still at the $5,000 per 5 kW block cap. If it passes, the maximum credit on a 10 kW split-permit system would jump from ~$9,800 to $12,500.

8. The Bottom Line for Hawaii Homeowners

Solar in Hawaii still makes financial sense post-ITC — Hawaii has among the highest electricity rates in the US ($0.40+/kWh), and the RETITC + block-splitting strategy recovers a meaningful portion of what the federal credit provided. But the math is different, and you need to understand it before signing.