Welcome to the Ultimate Guide to Solar Panels in Michigan
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Michigan home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2020 **
Despite the best efforts of Governor Gretchen Whitmer, who in 2019 signed into law a bill reinstating a property tax exemption for solar, the net metering rules for solar here were weakened significantly by DTE. Read on to learn what those impacts mean for your investment in home solar panels in Michigan.
Questions? Our network of solar experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page. You can get discounted on-grid pricing as low as $3,500/kW! This is paired with the Michigan solar incentives you see below.
What you'll find on this page:
The Solar Strategy section is focused on the 3 ways of paying for solar in Michigan, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in Michigan. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in Michigan.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
Generate an accurate online solar estimate for your home
|Your Michigan Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Michigan|
|Solar Loans in Michigan|
|Solar PPAs in Michigan|
|Solar Purchase Payback Time in Michigan|
|Michigan Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Michigan
Figuring out the best way to go solar in Michigan can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
How to pay for solar panels in Michigan
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan or Power-Purchase Agreement (PPA). As you can see, the purchase option leads to the highest dollar-amount returns over time, but look a little closer. Taking a solar loan or Home Equity LLine of Credit (the orange bars) and paying for the system over time means you'll actually put down less of your own money, while reaping a big financial benefit in year 1.
That's because you'll be paying over time for the system, but you still get a 30% federal tax credit based on the entire cost. You'll start out ahead, so your payments over 15 years will have less impact on you than plunking down a big pile of money up front. All you need is equity or great credit.
The option with the smallest savings is for a solar PPA, which means you put $0 down on a rooftop solar system and pay monthly while you accumulate electricity bill savings over time. Leases and PPAs are an excellent option if you don't have any equity or cash to put down, and they still save you money.
Read more below about each of three very good options for solar in Michigan!
How much can solar panels on roof save you?
Option 1: Paying cash for solar
An outright purchase used to be the only way to get solar, and it's still the option that provides the "biggest" financial returns. The reason we put "biggest" in quotes here is because it's technically true, but based on percent return for the money, a loan is a better option.
If you have equity in your home or good enough credit to qualify for a solar loan with an interest rate of 4% or less, that's the option to go with. It's like being able to start a business that is sure to succeed, just by having a roof. Read about loans below.
If you've got cash and you prefer to pay up front, you'll have to plunk down $20,000. But by the end of year 1, incentives and energy savings will erase a bunch of it. Over 25 years, your system will have produced about $12,000 in income, after your costs are paid back. The reason this works is that solar offsets your electricity bill—enough to save you about $820 in year 1, and it just goes up from there. As the electric company raises rates, you save more and more, and more...
Net Present Value: -$621
Net Present Value (NPV) measures how good of an investment something is, compared to the best alternative. We use a 6% return to evaluate all solar investments, and Michigan's -$621 NPV on a 5-kW solar system means you'd be that much better off investing your money in stocks over 25 years than in Michigan solar. But check out what happens to NPV if you buy the same system with a loan that you can pay back over time.
Here’s how the numbers pencil out when you pay up front for a 5-kW rooftop solar system:
- Installing a typical 5kW solar system should start at about $20,000. That's cheaper than solar has ever been, but it still might seem like a big investment. Don’t worry, because after tax breaks and energy savings, your first-year costs will be considerably less than that.
- The Feds calculate their incentive based on actual out of pocket costs, so take 30% of $20,000, for a tax credit of $6,000.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be $819. That reduces your cost after the first year to only $13,181.
- Your system will pay for itself with electric bill savings in 15 years, and after it does, you'll see a total net profit of $12,135 for the next 10 years. The internal rate of return for this investment is a solid 5.5%. Banks can't promise that kind of return, but you might be better off in the stock market.
- And don't forget... your home's value just increased by close to $20,000, too (your expected annual electricity savings over 20 years).
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil fuels. It's like planting 91 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Michigan. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 2: Using a loan to pay for solar
You don't need $20,000 sitting around to pay for solar. As long as you have equity in your home, you can still own solar panels and reap all the benefits. Heck, even if you do have the cash, getting a loan to pay for solar is by far the best option when it comes to percentage return on investment.
That’s because, in Michigan, using a loan to pay for solar is like investing in a business that's sure to succeed, and also earns you a tax break. Your tax savings will be huge in the first year. You'll come out thousands ahead this year, and you'll still see a tidy profit over the 25-year life of your system.
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can qualify for a solar loan or home-equity line of credit (HELOC) for $20,000, with a fixed rate of 4% or lower and a 15-year repayment period. Don't be put off if you're offered a higher rate. It just means a tiny bit less of the thousands of dollars you'll make with solar.
- You love making money without much risk.
Net Present Value: $1,005
Net Present Value (NPV) measures how good of an investment something is, compared to the best alternative. We use a 6% return to evaluate all solar investments, and michigan's $1,005 NPV on a solar loan means you'd be that much better off investing your money in solar over 25 years than in, say, stocks. Interstingly, Michigan is ne of those places where the NPV of a Power-Purchase Agreement is greater than that for ownership, but if you feel like you need to own your panels, you can rest easy with a Michigan solar loan knowing you're doing right for your pocketbook at the same time as you're doing right by the planet!
Here’s how the numbers pencil out for a Michigan solar purchase with a loan:
- Installing a typical 5-kW solar system should start at about $20,000. That's how big your loan will need to be to cover it.
- The electricity you'll save in the first year of operation would have cost $819, but your annual loan payments will be $1,775, meaning you'll spend $956 on solar this year, but...
- You'll also see a huge tax break. The Feds give you 30% of the cost of your system back as a tax credit, which in this case is $6,000. You'll be paying over time but getting the benefits up front!
- That tax break means you'll come out $5,044 ahead after year 1. Your loan payments will be about $80/month more than your energy bill savings, but that difference will get small as the utility company raises rates every year.
- By the time you've paid off your loan in 2031, you'll see yearly savings of about $1,100. After 25 years, your total profit will be about $5,506!
- On top of the green that will stay in your pocket, your system will mean green for the environment, too. 91 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in Michigan. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
PPAs are a great way to go solar if you haven't got stacks of cash or oodles of equity in your home. With a PPA, it's possible to get solar panels for $0-down and see substantial savings over 20 years!
For now, getting a PPA on a 5-kW solar system will save you only about $10 per month, which might not sound like a great deal, but as the utility company raises rates, you start to see big savings. Our 20-year PPA estimate shows a total savings of $4,119.
Net Present Value: $2,153
Net Present Value (NPV) measures how good of an investment something is, compared to the best alternative. We use a 6% return to evaluate all solar investments, and Michigan's $2,153 NPV on a solar PPA means you'd be that much better off investing your money in solar over 25 years than in, say, stocks. That number is pretty huge for a $0-down investment, so you can rest easy with a PPA in Michigan knowing you're doing right for your pocketbook at the same time as you're doing right by the planet!
Here's more about how a PPA works:
Keep in mind, the numbers above are based on an average home in Michigan. If you're ready for a custom quote for a solar PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Calculate solar panel cost and savings for your specific home
Michigan Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in Michigan:
Michigan's Renewable Portfolio Standard
10% by 2015 and 1100 MW
A Renewables Portfolio Standard (“RPS”) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels. Michigan has had an RPS law since 2008, and it was updated in 2016 to mandate 15% of all electricity must come from renewables by 2021. The word "updated" makes it sound like Michigan lawmakers have been working to improve the law, but really, there's a reason the image above says "nation's 25th best." 15% by 2021 is honestly a paltry goal, and many states have higher goals, sooner, like Colorado and Maryland, both of which have nearly double the percentage goal by one year sooner.
An RPS is critical to strong renewable energy policy. Utility companies aren't really all that gung-ho about you producing your own power. After all, it costs them money when you use less of their electricity. They also don’t naturally want to give you big payments for energy you're feeding back into the grid. The main reason the utilities aid the transition to lower electric bills and offering incentives to put solar on roofs is because the state forces them to.
Where does that leave Michigan homeowners who want to go solar? Unfortunately, with very few statewide incentives. Still, solar is cheaper than ever, and it's 100% economically viable in Michigan, saving homeowners thousands over the long-term. Read on to discover how solar saves you money and the planet at the same time!
Michigan's Solar carve-out and SRECs
One way a new Michigan RPS could be improved is with a specific requirement that a percentage of the state’s energy come from solar panels, or a mandate for environmentally necessary increases in distributed generation. If that was the case, you’d see even stronger incentives for residential solar power.
Michigan Electricity Prices
Michigan homeowners pay an average of 16 cents/kWh for electricity. That’s more than 2 cents above the national average. Yes, we know those pennies add up. Yes, we know you hate that monthly electric bill. But that’s only until you’ve made the switch to solar power! Right now, that penny per kWh adds up to higher bills, but once you’ve made the switch to solar, it adds up to higher savings!
Electricity costs are only going to rise. Currently far too much of our energy comes from nonrenewable, dirty fossil fuels. 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.
Michigan Net Metering
In 2019, the Michigan Public Service Commission eliminated full retail net metering in the state. The MPSC opted instead for a credit for solar customers at the “power supply component” of the retail rate minus transmission charges. That basically means you are not credited at full retail for the power you send back to the grid. So, instead of typical sized home solar installs to take 9 years to pay for themselves, they now take 13. Michigan can and has done better than this, but it’s now going to be difficult for solar installers in the state to expand.
Michigan Interconnection Rules
Speaking of interconnection, the law supporting your residential solar power system getting hooked up to the grid is strong here as well. Like we just said, the application and review fees 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.
Michigan Solar Incentives
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 26% of your total system costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how Michigan measures up:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
Michigan Solar Power Rebates
Now the effects of the expiration of the RPS law 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 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.
Property Tax Exemption
Michigan's solar property tax exemption has been on a bit of a roller coaster in the past decade. The state had one for many years, but it went away in 2013 under former Governor Rick Snyder. Then in 2019, Gov. Gretchen Whitmer signed a bill to reinstate the property tax exemption for solar.
That means any value your solar panels add to your property cannot be considered in assessing your home for property taxes. That's a win!
Sales Tax Exemption
Michigan also offers no sales tax exemption on solar panel purchase and installation, meaning you’ll pay a 6% premium.
Low-income Solar Programs
Grade: FLearn more about low-income solar programs available in the U.S.
The consensus on Michigan solar power rebates and incentives
Michigan has a chance to be a great state for home solar power, but without net metering, it just can’t be. Maybe the lawmakers in Lansing will come to their senses soon and get net metering back as the law of the land, but until then, we’d recommend extreme caution before proceeding with an investment in home solar in Michigan.