Electric Bill Before Solar
Electric Bill After Solar
Est. Solar Payment
First, take a look at a typical electric bill before considering solar power. That's a nasty outlay of cash. Imagine what you could do with all that immediate savings above every month.
As a result of what state legistlatures in leasing states have accomplished, you could instead save a bunch of cash. Imagine getting this bill in the mail instead. Whew!
Now, while you have a drastically cut back power bill, you also have a solar lease payment. Essentially, you're renting out your rooftop to a company who then pimps it out with solar panels. Then, you pay a lease payment to them for the power it produces. In each case, this payment added to your existing power bill will be lower than your previous bill, netting you instant savings with nothing down out of pocket! How awesome is that?!
Leasing vs. Buying If you decide not to go with the leasing option, we've calculated the amount of time it would take for your home solar panel system to pay for itself if you put up the cost of the install out of pocket or financed it yourself. This calculation (see the bottom of the page under "5kw Solar System Purchase Payback Time") takes into account all the rest of the incentives below, and assumes you meet all the criteria to take advantage of them (e.g. - having a tax appetite, south facing roof with limited shade, etc.)
10% by 2015 and 1100 MW
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner.
RPS solar carve out
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
Michigan Electricity Prices
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
Michigan Solar Power Rebates
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
Michigan Solar Power Tax Credits
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Property Tax Exemption
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Many argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing. Leasing still has a positive impact on the ability to sell your home though, in our opinion).
For many average-sized solar power systems on a house, that can mean $20,000 to your home value. (Edit April, 2014: Some companies, like Solar Mosaic, are starting to offer traditional style equity-based home loans for such a thing). An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was also sourced from the Database of State Incentives for Renewables and Energy Efficiency. The stronger the tax exemption, the higher the grade.
Sales Tax Exemption
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
Solar Power Performance Payments
Consumers Energy Only Residential, July - August 2013: $0.243/kWhN Residential, October - November 2013: TBD
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
If you don’t know what an SREC is, or how they work, check out this great SREC video
Time it Takes for 5kW of Solar Power to Pay for Itself
Michigan Net Metering
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
Michigan Interconnection Rules
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Home Solar Power: Leasing Vs. Purchasing
To lease, or not to lease? Willsolar Shakespanels would be proud we're discussing this. Here's the basic deal. If you choose to lease your panels, you benefit from no out of pocket costs and an immediately reduced total electricity payment. Because of this, many regard this option as a no-brainer, since there isn't any downside to think of. The only hiccup you'll start to experience is when you consider the long term financial benefit of owning the solar panel system yourself.
In many situations, if you can afford the outlay or can easily secure financing, the cost of the install becomes an investment with a return outpacing even the strongest performing mutual funds. In addition, there's significantly less principal risk, since the energy credits you will be producing are tied to the sun coming up in the morning instead of our financial markets!
Additionally, if you go the leasing route, you must forfeit all the credits and performance payments you would receive by owning the system yourself to the solar leasing company (after all, that's how they can afford to give you such a no-brainer proposition in the first place).
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Welcome to the Michigan solar power information page – Details Section
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People think that just because it’s cold and snows in Michigan during the winter that you can’t go solar. Wrong. Over the course of the year, a city like Detroit gets an average of 4.2 hours of sun a day. That’s plenty for solar. Plus, solar panels are more efficient (produce more energy) when it’s cold, and less energy when it’s hot. So while you might not love the cold and the snow for other reasons, keeping you from saving money (and the planet) with solar power shouldn’t be one of them!
Michigan’s Renewable Portfolio Standard
A Renewables Portfolio Standard (“RPS”) is a law or other piece of regulation that mandates that a certain percentage of at state’s energy production comes from renewable resources by specified target dates. A strong RPS is important because it forces utility companies to promote conversion to renewable energy. That generally means free money for you in the form of solar power rebates and performance payments when you switch to solar.
Michigan’s RPS sets a minimum renewable generation level of 10% by 2015. The state’s two largest investor-owned utilities have additional obligations: Detroit Edison must produce 300 MW of new reneables by 2013 and 600 MW by 2015; Consumers Energy must produce 200 MW and 500 MW of new renewables by the same dates.
Any RPS is better than none, but those overall figures are a bit low to truly encourage strong solar policy. To truly affect solar policy, an RPS needs to set high minimum levels and threaten utilities with penalties if they don’t meet those levels.
Michigan Solar Power Performance Payments
The additional requirement in the RPS does seem to have stirred at least one of the two big utilities into encouraging solar power. Consumers Energy has reopened its Experimental Advanced Renewable Program (“EARP”). EARP is a buy-back tariff where Consumers purchases all of the solar energy you produce. That means you’re not using that energy to power your home, and certainly not getting net metering (we’ll get to that later). You will, however, getting a pretty good purchase price – between $0.20 and $.259 per kilowatt-hour (usually in the higher end of the range for residential customers).
No other performance payments are available in Michigan.
Michigan Solar Power Rebates
Now the effects of the law RPS can start to be seen. Just a few years ago Michigan had a real strong statewide solar power rebate program. But that program has gone the way of the dodo, and with the RPS goals still at a low 10%, utilities lack the incentives they need to keep offering you incentives for solar power.
Michigan Solar Power Tax Credits
Michigan also lacks any solar tax credits. Tax credits are a golden opportunity for legislators in every state to encourage solar power. Tax credits minimize both the work and the “out-of-pocket” cost to the state, so it literally costs legislators almost nothing to potentially save you thousands on a solar power system! Michigan lawmakers should take advantage of that win-win with a strong personal tax credit on the purchase of a residential system like the one you’re considering.
Thankfully Michigan does have an exemption for the property taxes that would otherwise be associated with the increase in home value you get when you install a solar power system. That’s a pretty sweet little law right there – it saves you money year after year, for the entire life of your solar system.
Given how much the property tax exemption saves you, we can overlook the lack of an equivalent sales tax exemption. But that sales tax exemption would still be nice. Nice to the tune of the 6% it would save you on the up-front cost, that is.
Michigan pays an average of 13.68 cents/kwh of electricity. That’s about two cents above the national average of 11.43. Yes, we know those 2 cents add up. Yes, we know you hate that monthly electric bill. But that’s only until you’ve made the switch to solar power! That 2 cents per kwh does indeed add up. Right now it adds up to higher bills, but once you’ve made the switch to solar, it adds up to higher savings!
Not to mention, electricity costs are only going to rise. Currently far too much of our energy comes from nonrenewable, dirty fossil duels. As the long-term costs associated with fossil fuels start to really kick in, standard electricity prices are going to skyrocket. When that happens, you’re going to look like a regular Einstein for having made the early switch to producing your own power.
Net Metering and Interconnection
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume. If you run an electricity surplus, you get credit for it.
Michigan has a very strong net metering law that lets you carry over all Net Excess Generation (“NEG”) (i.e. your surplus) at the full retail electricity rate. NEG credits are applied to your next month’s bill, and if you continue to run a surplus, the credits can be carried over indefinitely to apply toward future charges.
For small systems like yours, net metering application fees may not exceed $25, and total charges along with interconnection studies may not exceed $100 total.
Speaking of interconnection, the law supporting your residential solar power system getting hooked up to the grid are strong here as well. Like we just said, the application and review fews are capped at just $75 for interconnection. Even better, utilities are prohibited from requiring you to carry additional liability insurance, a sometimes burdensome additional cost we’ve seen imposed in too many other places.
Example 5kW (5000 Watt DC STC) Solar System Return on Investment in Michigan
What do all the numbers add up to for you? Let’s take a look:
Installing a typical 5kW solar system should start at about $25,000. Don’t worry; even without state incentives that’s going to drop a lot:
- Since the federal government calculates the 30% federal solar tax credit after state solar power rebates, no check from the state means a bigger check from the feds. Subtract $7,500 (30% of $25,000 for a new price of $17,500.
- Then subtract your annual electricity savings of $747, for a final price after year one of $16,753. A discount of more than eight grand already – not bad at all, even without state solar incentives!
- Taking a conservative estimate of the future rise of electricity prices, your solar power system should pay for itself in about 15 years. After that you start turning a profit to the tune of nearly $20,000 the next 10 years that your system should be churning out clean solar power.
- Oh yeah! Least we forget, all that clean solar power is good for the earth as well. How good? The equivalent of planting 97 trees every years!
These numbers are estimates. Your home is unique and how much power you generate and how much money you save depends on that uniqueness. The best way to find out how much cash switching to solar can save you is to get one of our free quotes, and an expert installer in your area can draw up a home-specific estimate for you. Your quote is 100% free (yes, that’s right, 100% free) and you can get as many of them as that smart shopper in you desires!
The consensus on Michigan solar power rebates and incentives
Michigan isn’t all bad on the solar power front, but overall the picture isn’t too bright, at least for now. A 15 year payback timeframe and virtually no state solar incentives leaves Michigan with a “C.” We had to seriously consider dropping you down even further, but given a strong recent history, the still strong net metering and interconnection laws, and te above average electricity prices, we thought we’d offer you the benefit of the doubt.
Another reason we gave Michigan a “C” is because there is more room for improvement here than in most other states that are currently weak in solar policy:
First, just a few years ago the passage of the RPS spurred a very strong statewide incentive program that made solar policy here some of the best in the nation. So that suggests a willingness on the park of lawmakers in Lansing to help promote more clean and efficient solar power.
Second, there is room for simple but rapid improvement. While the current RPS minimum renewable energy level of 10% is quite low, it’s implementation timeframe (by 2015) is a much-nearer date than most other Renewable Portfolio Standards. Because most of the higher-minimum RPS’s have phase-in periods, 10% is not too far behind where many of the stronger overall Standards will be in 2015. That means if the Michigan legislature were to raise RPS standards now, we’d barely miss a beat in maintaining a strong level of renewable energy requirements. And just as we’ve seen in every state that’s adopted strong RPS goals, strong incentives for residential solar power follow quickly thereafter.
Our older archived Michigan Solar Power costs and savings breakdown images for reference: