The complete list of Michigan solar incentives and tax credits for 2022, plus how to take advantage.
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Michigan was lagging behind a little in installing solar capacity, but utility-scale solar installations more than quadrupled in 2021 over the previous year, giving solar a huge boost in the state. Why this big jump in solar capacity? In large part, it’s because of Michigan Governor Gretchen Whitmer’s enthusiasm for transitioning the Great Lakes State to clean, distributed energy systems.
This is great news for residents of Michigan who want to go solar. The new initiatives help bring solar installers and manufacturers to the state, which helps decrease the cost of going solar in Michigan. Homeowners may be able to earn annual income from selling their arrays’ solar renewable energy certificates (SRECs) and can access net metering benefits. The governor also reinstated a property tax exemption!
Michigan State Solar Incentives
|Solar renewable energy certificates (SRECs)||Michigan doesn’t have a robust SREC market, but homeowners may be able to sell their SRECs in Ohio instead|
|Low-cost solar loans||Michigan Saves offers low-cost, accessible loans for solar installations, while businesses can take advantage of low-cost PACE loans for solar|
|State property tax exemption for solar||The resurrected state property tax exemption for solar would see homeowners paying just $32 extra each year on most systems|
|Net metering in Michigan||Net metering was eliminated in Michigan in 2019 in favor of a distributed generation program that offers credits for exported energy at a lower than retail rate|
SRECs in Michigan
Michigan enacted a renewable portfolio standard (RPS) in 2008, with all retail electric providers required to demonstrate certain levels of production or purchase of clean energy credits each year. The initial minimum was just 10% of production in 2015, rising to 15% in 2021. These are very low compared to some other states that now require as much as 40% of electricity production from renewables.
Michigan utilities easily met these targets, mostly using wind farms. This means that there’s currently no real market for SRECs in Michigan, but homeowners may be able to sell their solar renewable energy certificates (SRECs) in Ohio instead.
The Michigan Renewable Energy Certification System (MIRECS) collects, issues, and tracks credits, including from homeowners with residential solar arrays. Homeowners can sign up for MIRECs to record their SRECs and may want to ask their solar contractor about options to sell SRECs in the state. Most SRECs remain valid for up to three years, meaning that homeowners who install solar now may be able to sell them in Michigan if the SREC market does improve in the future.
Low-cost solar loans in Michigan
Homeowners in Michigan can access low-cost financing to install home solar through Michigan Saves, a non-profit green bank. The bank offers loans of $1,000-$100,000, depending on its lender partners. Loan terms are up to 15 years, with interest rates as low as 3.99% currently. There are no annual or early repayment fees with these home improvement loans, and homeowners can use them to install solar and carry out energy efficiency upgrades.
Michigan businesses can also access financing for energy efficiency upgrades, which includes some solar equipment, through the Property Assessed Clean Energy (PACE) Program. Loans are repayable as part of the property tax bill over 5-20 years and are low-interest and accessible.
There are no residential PACE loan programs currently available to homeowners in Michigan.
State property tax exemptions in Michigan
Michigan Governor Gretchen Whitmer reinstated the state’s property tax exemption for solar installations in 2019 by signing bills SB 1105 and SB 1106 into law. These bills exempt home solar energy systems from personal property tax and instead apply a payment in lieu of taxes (PILT) program.
Under the separate payment plan, solar developers pay no more than a maximum PILT rate fixed in the state’s law and based on the size of the solar energy system. However, the taxpayer can negotiate a lower charge with their local assessing authority.
The fixed PILT rate is $4,000 per megawatt, plus an additional $500 per megawatt-hour of storage capacity, both in alternating current (AC). For most homeowners installing an average-sized 8 kW array, the proposed property tax would be just $32 each year. Not bad for a potential 4% increase in your home’s value!
Net metering in Michigan
The Michigan Public Service Commission (PSC) eliminated full retail rate net metering in 2019, with most utilities switching to a lower rate of compensation as of 2021. The new rules also maintain a cap on how many net-metered or distributed generation customers can sign up with a utility before the utility is allowed to stop offering the program. Some utilities, such as Consumers Energy, have already met that cap but are still allowing customers to sign up for distributed generation.
DTE Energy, one of the main investor-owned utilities in Michigan, credits customers for energy outflowing to the grid from a home solar energy system. The credit is worth the cost of electricity minus transmission charges (so, less than retail rate). These credits are used to offset the cost of electricity a customer draws from the grid in any given month, with any excess exported energy credits banked and deducted from the cost of power on future bills.
DTE has also asked the PSC to approve changes to its distributed generation program that would see solar customers pay a monthly charge based on their peak usage each month. Some experts warn that this could kill residential solar in Michigan as the charges may outweigh any savings customers would make by going solar.
DTE’s Demand Charge for solar
Buried in a proposed rate schedule sent to the Michigan Public Service Commission in January 2022, DTE describes introducing a Demand Charge for residential solar customers. This charge would be based on peak energy usage and could add as much as $100 to a customer’s monthly bill if approved.
In Kansas, solar customers who paid a similar Demand Charge for several years were recently issued refunds by their utility after the Kansas Supreme Court deemed the charges discriminatory and unconstitutional.
DTE’s proposed Demand Charge has not been approved by the PSC, and may never come to pass, especially given that the PSC already rejected DTE’s request to make solar customers pay a ‘system access contribution charge’. If it does pass, though, Michiganders who sign up for solar now may be able to remain on the current tariff as a legacy agreement.
Final thoughts on state solar incentives in Michigan
There’s been a huge increase in renewable energy capacity in Michigan in the last couple of years, largely due to the major utility, DTE, adding three new wind parks and one new solar park in 2021. Together, these increased DTE’s clean energy generation by 40%, helping to satisfy demand for clean energy from its MIGreenPower customers.
Michigan’s Public Service Commission has also approved new utility-scale solar projects and community solar projects, including a 20 MW project in Ann Arbor. And on August 10, 2022, automaker Ford announced a deal with DTE Energy to power its plants using clean energy. Through the deal, DTE will install 650 megawatts of new solar energy capacity in Michigan by 2025. This is the largest ever renewable energy purchase from a U.S. utility and will help Ford on its way to being climate neutral by 2050.
While DTE goes ahead and installs huge new solar farms to satisfy Ford’s demands, the utility is also trying to make residential solar less attractive to its customers in Michigan. Savvy homeowners looking to go solar in Michigan would be wise to consult an experienced solar installer to design a system that can meet their household’s needs and help reduce peak usage (perhaps by installing back-up batteries), just in case those Demand Charges are approved by the PSC.
All in all, Michigan doesn’t provide a lot of state incentives to go solar, but the numbers still work out well for most homeowners here. The cost of electricity is much higher than average in Michigan, meaning that solar producers stand to save a good amount of money on their utility bills each month even under the new distributed generation rules. The state property tax laws also help keep costs low, and Michiganders can take advantage of the federal solar tax credit, with the potential to sell SRECs and make a little extra to pay off their solar array sooner.