Written by Sarah Hancock | September 19th, 2019Sarah Hancock is passionate about green living and sustainability. She frequently writes about renewable energy and manages the Solar blog at BestCompany.com.
Michigan Solar Overview
To date, Michigan legislators haven't done the greatest job of implementing solar-friendly policies, and as a result, there sadly aren't many solar incentives to be had in the Great Lakes State at this time. However, regardless of the lack of favorable solar policies and incentives, it is still possible to save money with solar in Michigan thanks to the state's relatively high electricity prices.
Here’s an at-a-glance description of the current benefits and drawbacks of switching to solar in Michigan:
Benefits of going solar in Michigan:
- 30% federal solar tax credit
- Higher-than-average electricity prices
- Multiple financing options available
- Straightforward interconnection rules
- Good for the environment
Drawbacks of going solar in Michigan:
- No state tax credits
- No solar rebates
- No property tax exemptions
- No sales tax exemptions
- No performance payments
- Restricted net metering laws
- Relatively low RPS
We break down and explain each of these items in the article below.
Cost of Solar in Michigan
Prices of solar in Michigan have fallen 47 percent over the last five years, and as of 2019, the average price per watt for a solar energy system purchased outright in the Great Lakes State is approximately $3.18. For an average-sized 8 kilowatt system, this comes out to be about $25,500 before the federal solar tax credit is applied. After the tax credit is applied, the cost drops to approximately $17,850.
In terms of price per kilowatt-hour of energy used, those with solar panels in Michigan will pay only about $0.09 per kilowatt-hour. This is low compared to the average price of electricity from the utility, which is currently about $0.15 per kilowatt-hour. Utility prices are expected to go up over the next several years, which means that Michiganders who switch to solar now will see their savings increase over time.
Considering this, as well as inflation and financial benefits from available incentives, the average home or business owner in Michigan who purchases a solar energy system could expect to recoup their solar investment in about 15 years. After that, they will essentially be able to use the energy production from their solar panels to power their house or office building for free or for a very low rate.
In fact, over the life of the solar energy system, the average Michigan resident could reasonably expect to save upwards of $10,000.
Michigan Solar Financing Options
Michiganders have several options available to them in terms of paying for a solar energy system, including outright purchases, loans, leases, and power purchase agreements.
In Michigan, purchasing a solar panel system outright will provide you with the biggest savings in the long run, but it does require that you pay for your system in full upfront. However, since you’ll be the owner of the system, you’ll get to take advantage of the 30 percent federal tax credit, which will help you to recoup a good portion of those costs in the first year. In addition, you’ll own the solar equipment and the energy it produces. In about 15 years after it pays itself off, all the electricity produced by the system will be pure profit.
Although this option is not feasible for everyone, you may want to consider it if you can swing it. Some solar companies will even offer a discount if the system is paid for in full upfront.
Getting a loan to finance your solar system in Michigan is a great way to get started with solar if you are interested in solar ownership but don’t have the cash to pay for the system upfront.
Many solar companies partner with banks or companies that specialize in providing loans for solar projects. These loan companies typically offer contracts ranging from 5 to 20 years and interest rates between 1.99 and 4.99 percent, depending on your credit score and the length of the loan. Common benefits that come along with getting a solar loan include the ability to take advantage of federal tax credits and available local incentives, as well as the option to pay off the loan early with no prepayment penalties.
With a loan, it will take about five years longer for the system to pay itself off than it would with an outright purchase. However, after about 20 years, you’ll be the exclusive owner of the solar energy system and the energy it produces, essentially allowing you to power your home or business for free for the remainder of the system’s life.
Leasing a solar panel system for your home basically means that you will be renting the system from a solar company or a third-party financier for the duration of a contract, which is generally 20 years, at a locked-in monthly rate. Leases typically do not require the homeowner to put any money down upfront, but because the solar company owns the system, the customer does not get to take advantage of tax credits, net metering, or long-term financial benefits.
Since electricity prices in Michigan are higher than the national average, home and business owners can take advantage of decent savings by leasing solar panels because the lease payment will be lower than their electricity bill without solar. As electricity prices go up over time, so will solar savings. Plus, let’s not forget the positive impact on the environment.
Power Purchase Agreements
PPAs are similar to leases in that the homeowner typically does not have to put any money down and a third party owns the system. However, instead of renting the system at a locked-in rate, the homeowner buys the electricity produced by the system at a set rate.
Due to Michigan’s relatively high electricity prices, Michiganders can absolutely save money with a PPA, and those savings should increase each year as the cost of electricity goes up.
Michigan Solar Incentives
Currently, Michigan doesn’t offer much in terms of solar incentives. However, Michiganders can still take advantage of the federal solar tax credit, which is worth 30 percent of the total cost of the solar energy system.
There are two tax credits you need to be aware of when switching to solar. The first is the 30 percent federal tax credit that anyone in the United States who owns their solar panel system can qualify for. Because these credits are given on a 1-to-1 basis according to your tax liability, you will want to have an idea about what your federal tax liability is to know how many years it will take for you to take full advantage of this tax credit.
The second is the state tax credit. Michigan does not currently offer a state solar tax credit, but state residents can still cash in on the federal tax credit.
Some states offer tax exemptions on the sales and property tax of the solar panel system to prevent solar buyers from having to pay sales tax on their systems and ensure they are not subject to higher property taxes as a result of the addition of solar panels.
Unfortunately, Michigan does not offer either of these tax exemptions at this time.
Some utility companies will offer rebates to homeowners that own a solar panel system. These rebates are similar to those that you’d receive on an electronic or appliance purchase and result in money back in your pocket after the solar installation.
However, there are no solar rebates currently available in Michigan.
Performance payments reward solar owners for the electricity their panels produce on an ongoing basis. Utility companies will typically either offer a per-kWh bonus or pay you a fixed amount for credits earned.
As of 2019, Michigan does not offer performance payments of any kind.
Michigan Solar Policy Information
Michigan has a decent interconnection policy in place, but the state’s net metering law and Renewable Portfolio Standard have room for improvement.
Net metering refers to utility companies crediting solar owners for the excess power that they feed back into the grid from their solar energy system. During the day while solar panels are generating power, the meter typically runs backwards and sends surplus energy to the grid, as many homes aren’t consuming as much energy as their system is producing. At night, when the system is no longer producing energy, most homes pull energy back from the grid to cover their electricity needs. Through net metering, solar owners are able to generate credits to help offset any bills they receive from their utility company for tapping into the grid.
Michigan used to have a more traditional statewide net metering policy that allowed solar customers to receive credits for the extra energy their solar system produced and roll those credits over from month to month. Some utility companies in the Great Lakes State still offer this type of arrangement.
However, in 2018, Michigan’s Public Service Commission enacted a new net metering policy called “Inflow/Outflow” that gives utilities more options. Under this new policy, utility companies have the ability to pay solar customers for all the electricity their system produces at the wholesale rate while any energy consumed by the solar owner is charged at the full retail rate. Essentially, this means that the energy solar customers are producing is worth less than the power they are utilizing, which isn’t an incredibly beneficial arrangement for solar customers.
Top solar companies in Michigan are well-versed in local net metering policies, so we recommend consulting with your preferred solar provider for more specific information about the net metering policy that you will be subject to based on your utility.
Renewable Portfolio Standard
Utility companies are required by their state legislature to make sure that a certain percentage of their energy production comes from renewable energy sources, such as solar, by a specific date. If the utility companies in the state do not comply with Renewable Portfolio Standard law, they will be heavily fined. Therefore, states that have a large RPS requirement usually have great incentives up for grabs from the utility companies in that state.
Michigan’s current RPS requires that at least 15 percent of electricity production in the state must come from renewable energy by 2021. While it’s a good thing that the state at least has an RPS, this goal is not incredibly aggressive, especially compared to some other states in the country, which likely explains the lack of solar incentives available in Michigan.
Interconnection standards have to do with the requirements involved when it comes to connecting a solar system to the grid. It’s important to know if your state has any additional requirements that must be met in order to get your home solar system plugged into the grid.
In Michigan, solar customers are not required to have additional liability insurance in order to connect to the grid, which is great. Additionally, interconnection application and review fees are capped at $75, which means that is the most you’ll have to pay to plug into the electric grid.
Michigan Solar Statistics
To date, Michigan has installed over 150 megawatts of solar, enough to power more than 25,000 homes in the state with solar energy. Over 800 additional megawatts of solar are expected to be installed in the Great Lakes State over the next five years. Currently, there are over 230 solar companies and more than 4,200 solar jobs in Michigan.
Interested in a solar quote? Check out the top-rated solar companies in Michigan and read reviews from verified solar customers.