A state loan program helping Hawaii households finance rooftop solar systems has been greatly expanded after an initial flop and slow recovery.

The Legislature this year appropriated a $100 million infusion to an agency nicknamed Hawaii’s Green Bank to continue lending money to households with low and moderate incomes for installing rooftop solar systems while also expanding the program to finance energy storage systems.

The program, called Green Energy Market Securitization, or GEMS, and operated by the Hawaii Green Infrastructure Authority, began operating in 2015 with $150 million limited to solar systems without battery storage, and has $12 million remaining to lend despite initially being branded as a failure.

“This additional $100 million is very timely,” said Gwen Yamamoto-Lau, executive director of the authority.

Yamamoto-Lau said the new funding should allow for the installation of at least 2,000 residential rooftop solar systems with storage based on an average system cost of about $50,000. However, more could result because some customers use program loans in combination with commercial financing that they could not obtain without support from the program.

GEMS serves households that lack sufficient income or credit quality to qualify for commercial loans financing rooftop solar systems.

Loans from the program carry a fixed 5.5% interest rate and 20-year term, which is not as good as what households with more income and better credit can obtain in the commercial market. Still, GEMS is structured so that a borrower’s monthly cost for the loan and electricity is less than their monthly electrical bill without solar power.

“We’re not here to compete with the banks and credit unions,” Yamamoto-­Lau said. “We’re trying to put our vulnerable families in a better place.”

The new funding should be available July 1, given expected approval from Gov. Josh Green, and Yamamoto-­Lau said people can apply now for loans. How long the $100 million lasts is hard to predict, but it is expected to be used more quickly compared with the original version of GEMS.

State lawmakers created GEMS in 2013 and approved a $150 million bond sale to fund it. Those bonds were sold in 2014, applications started to be accepted in 2015 and officials expected all the money would be lent by the end of 2016.

Yet as of mid-2016 only 11 system installations had been funded at a cost of $370,000 — less than 1% of available funding.

Meanwhile, Hawaii electrical utility ratepayers were footing the bill to repay the bonds through a special charge on their monthly bill as part of the way lawmakers set up GEMS.

This “green infrastructure fee” was initially $1.29 a month for a typical residential customer using 600 kilowatt-hours of electricity a month, and through mid-2016 had cost ratepayers about $21.5 million despite scant GEMS use.

A big reason for the program’s early trouble was a Public Utilities Commission decision to terminate an incentive in late 2015 for installing rooftop solar systems called net metering, under which system owners received a credit equal to the retail rate for any excess energy their systems sent into the grid.

Other factors included competition from solar company system leasing programs, and reduced general demand given that annual Hawaii rooftop solar installations peaked a year before GEMS was created.

Because of the trouble with GEMS, consideration was given to unwinding the program. Instead, tweaks were made to help salvage GEMS, including a broadening of allowable uses for program funds to include state projects, energy-­efficient lighting upgrades and electric vehicle charging stations.

Another big change that invigorated program use came in 2019 when an arrangement was created so that loan repayment would be part of a system owner’s monthly utility bill.

Yamamoto-Lau called this on-bill financing feature a “game-changer” for GEMS.

With GEMS funding nearing depletion, lawmakers this year proposed replenishing the bank but not from another bond sale. This time, money from the state’s general fund was sought.

Dean Nishina, acting executive director of the Division of Consumer Advocacy at the state Department of Commerce and Consumer Affairs, submitted testimony to the Legislature in favor of more GEMS funding and praised the shift away from bond financing.

“The department especially appreciates that the solar energy system revolving loan fund will be funded by the general fund and not through fees assessed on utility customers through their monthly bills,” he said in written testimony. “Other programs that seek funding through utility rates do not adequately consider that utility rates are regressive and will increase utility bills for all customers, especially low- to moderate-income households whose energy burden will only increase. Additional fees to pay for the loan fund through utility rates would further increase the energy bills that many customers have struggled to pay, especially during the pandemic and over the last year when significant bill increases occurred.”

In the 51-member House of Representatives, Speaker Scott Saiki and 40 colleagues introduced House Bill 949 to appropriate $200 million from the state’s general fund for solar and energy storage systems under the GEMS lending program in the fiscal year beginning July 1.

Separately, the House draft of the state budget bill, HB 300, proposed a $300 million appropriation for GEMS. The Senate appeared less enthusiastic about the program, and amended the appropriation to $34.5 million in its draft of HB 300.

Ultimately, HB 949 stalled in the Senate, but a final House-Senate compromise draft of the budget bill passed with $100 million for GEMS.