To streamline the solar installation process, some state-sponsored solar rebate programs are set up so that the contractor is paid directly. He or she bills the customer system cost, less the rebate. Following installation, the contractor applies for the solar rebate and collects the funds. Such an approach lessens the burden on all parties. Sometimes, however, things don’t go as originally agreed — as a recent series of events in Hawaii demonstrates.

Hawaiian Electric Company (HECO) has failed to pay local solar installers the $1,000 rebate due for the installation of solar water heaters. The delay in payments put the squeeze on solar contractors, prompting some to make layoffs. As reported by the Honolulu Advertiser:

The state Public Utilities Commission ordered HECO to rectify the situation last week, and the electric utility responded by mailing out nearly $2.5 million in rebate checks late last week.

“We still need to understand how it got this far behind,” said Carl Caliboso, PUC chairman. “We have some information and are trying to get more detailed information as to what occurred when and why.”

The payment backlog mars HECO’s otherwise successful solar water heater rebate program, under which contractors knock $1,000 off the price of a system for homeowners and then apply to the utility for reimbursement. HECO has advertised the program as an “instant” rebate for homeowners and pays for it with a surcharge on residential customers’ electric bills. …

While some contractors say they have no problems with HECO, others are hailing the PUC action, saying the utility’s tardy payments had mounted this year and came at a time when they were struggling to make payroll because of an economic slowdown.

Hawaiian Island Solar Inc. in Kailua said it was owed $295,000 — and that $154,000 of that amount was at least 90 days past due.

“We’ve had to let people go,” said Hawaiian Island President Gary Ralston. “We’ve had to do things like take out loans and make ends meet when we should have been paid this money.”

The utility apologized for the late payments and acknowledged the hardship it caused contractors.

“We acknowledge it’s a bad situation,” HECO spokesman Peter Rosegg said on Wednesday. “We’re trying to get this situation rectified so that everyone can move forward.” …

HECO’s Rosegg said the backlog stemmed in part from the Hawai’i Energy Efficiency Program being transferred to Science Applications International Corp., a San Diego-based company also known as SAIC.

It appears the arrears are a small snag in an otherwise successful program. I mean, it’s not like HECO is issuing IOUs or anything… (Hello, California.) In the rebate’s 13-year history, more than 50,000 solar water heating systems have been installed statewide. Expressed differently, it’s estimated that one in three single-family homes is equipped with solar water heat. What’s more, starting in 2010 every newly constructed home will be required to have a rooftop solar thermal (solar hot water) panels installed.

NOTE: Read here for more info on the the rebate’s transfer from HECO to SAIC.

More about solar power in Hawaii:

As a state that generates nearly 80 percent of its electricity by burning imported fossil fuels, Hawaii is a unique poster child for demonstrating the merits of in-state renewable energy generation and energy efficiency programs. The islands state is prone to oil price volatility and, over the longer term, threatened by rising sea levels associated with climate change. Perhaps more than any other state, Hawaii has a vested interest in transitioning to lower-carbon, domestically produced energy.

On this front, the state has not sat idle. Hawaii’s Clean Energy Initiative sets as a goal to derive — by 2030 — 70 percent of its electricity from energy efficiency and renewable energy sources. To this end, HI provides a generous 35-percent tax credit for the purchase of solar panels and solar thermal systems, and a 20-percent credit for wind installations. As discussed above, the state of Hawaii has also worked with utilities to incentivize the purchase of solar water heating systems.