Your 2019 guide to getting solar panels for your home 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 2019 **
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 full 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!
Seriously, in a state that is involved in so much solar innovation, and struggling so much financially, it’d be a shame for the Michigan legislature not to help homeowners start the transition to the future of energy production.
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.
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.
|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!
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.
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:
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 electrciity 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!
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. Read more about Renewable Portfolio Standards.
RPS solar carve out
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.
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
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.
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 Net Metering
Solar panel installations are typically hooked up to a house's main panel, first supplying any necessary power to the house, and second sending excess power onto the electrical grid. The panels produce lots of energy while the sun shines, feeding electricity to the grid, and the house draws power from the grid when the sun isn't shining.
Net Metering is a solar billing arrangement that requires your utility to credit you full retail prices for any solar energy your solar panel installation sends to the grid. Unfortunately for Michiganders, your governor and public utilities commissioners seem too stupid to grasp this simple concept. Let us explain what we mean by that:
The solar installation connection we describe above is known as "behind the meter" (BTM), because that's where the solar panel connection takes place. It allows the electric meter to essentially "spin forward" to record any electricity the house consumes and "spin backward" when the solar panels are sending extra energy to the grid.
As of 2018, Michigan has declared that BTM solar installations are no longer required, and while most utilties in the state currently still allow net metering, that could be changing very soon.
Inflow/Outflow, and why it's stupid
In April of 2018, the state of Michigan's Public Service Commission issued an order that sets up a new method of solar installation connection they call "Inflow/Outflow," under which the panels installed on a home would be hooked up to a meter that records every kilowatt-hour they generate, paying the system owner the "avoided cost rate" for the energy (i.e. the wholesale rate the utility pays to power plants). Any energy consumed by the homeowner would, of course, be charged at the full retail rate.
Under this rule, solar installation owners essentially get to use none of the energy their systems generate, meaning they can't reduce their usage of the utility company's pricey fossil fuel energy. That's inefficient and stupid. And the avoided cost rate is laughable, considering that the benefits of rooftop solar power are worth far more than the wholesale cost of energy from traditional power plants.
Given these truths about Michigan's current solar billing arrangements, we have no choice but to give the state an F for net metering. Screw you, Michigan PSC. Do better.
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
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.
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.
Solar Incentives in Michigan
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 30% of your 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:
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.
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
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.
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.
Solar Power Performance Payments
Solar power performance payments are just that; payments for every kWh of electricity your system sells back to the grid. Consumers energy used to have an application process for homeowners who want to sell their power back to the grid above retail prices. Unfortunately, they have closed the program to new suppliers.
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.
We've got a great article if you like to read more about what SRECs are and how to earn them.
Property Tax Exemption
When you install a solar panel system on your home, it’s resale value goes up considerably. The best states for solar recognize this, and reward solar homeowners by exempting the extra value from property taxes. Michigan used to offer this kind of exemption, but since 2013, it’s gone baby, gone.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Some argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing). Other studies seem to indicate a home price premium about equal to the cost of installing the system, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. 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 sourced from the Database of State Incentives for Renewables and Energy Efficiency. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
Sales Tax Exemption
Michigan also offers no sales tax exemption on solar panel purchase and installation, meaning you’ll pay a 6% premium.
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).
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 13-year payback timeframe and virtually no state solar incentives leaves Michigan with a “D.” 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 the above average electricity prices, we thought we’d offer you the benefit of the doubt.
Another reason we gave Michigan a “D” 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.