Michigan Solar Incentives and Rebates Guide
Key Takeaways
- The Midwestern state of Michigan participates in net metering, which allows residents to obtain credit for any excess renewable energy that their solar panels generate.
- Federal incentives, such as the federal solar tax credit, offer Michigan residents a 30% tax credit through 2032 when they purchase solar panels.
- Local financial incentives include solar rebates for City of Lansing Board of Water and Light customers.
Known for its cold winters and thousands of lakes, Michigan may not immediately come to mind as a prime location for solar panel installation, especially when compared with sunnier states. However, Michigan has worked to make the switch to solar a viable and attractive option for its residents and businesses.
Now there are options like solar incentives and tax credits that can help ease residents’ worries about high upfront costs for the purchase and installation of solar panels. Homeowners and business owners alike can take advantage of solar loan offers with attractive interest rates that make switching to solar power easier on their wallets.
After all, spending roughly $25,000 for a solar system would make anyone hesitant about switching to solar, no matter how good the benefits are for the environment or their energy bills.
To alleviate this financial burden and make transitioning to solar more feasible, Michigan provides a wide array of state and local incentives that complement the federal tax credit. These programs are designed to reduce the overall costs of solar installations and make solar energy more accessible to everyone.
It pays to thoroughly research all available Michigan solar incentives. These state incentives, when coupled with the federal solar tax credit, can reap significant savings on the upfront investment, making installing solar panels more practical and budget-friendly.
In the following sections, we’ll dig into the specific state, local, and federal programs that can help Michiganders save money on solar equipment, like solar panels and solar batteries. Read on to learn how making the switch to one of the most cost-effective renewable energy sources can lead to major solar savings.
Michigan State Incentives
Michigan Saves — Home Energy Loan Program
Homeowners are already strapped with higher energy bills and interest rates than in previous years; any loan program for home energy improvements is a big help for those looking to install solar panels. The Michigan Saves — Home Energy Loan Program helps connect homeowners with lenders that offer attractive loan terms, which can translate into reduced costs for those looking to incorporate solar into their energy-saving strategy.
According to the Database of State Incentives for Renewables & Efficiency (DSIRE), terms are available for up to 15 years, with solar loans ranging from $1,000 to $50,000. This loan program applies to the residential sector only and includes solar water heaters, solar thermal electric technologies, and solar panels, as well as geothermal heat pumps and small wind turbines.
Michigan Saves — Business Energy Financing
For business owners, nonprofit organizations, schools, government offices, and multifamily residential properties, Michigan offers specific rates and loan terms through contracted lenders who can help make switching to solar an affordable reality.
In contrast to the home energy loan program, this business energy financing program offers loans starting at $5,000 for 6.99% APR, and publicly owned buildings are eligible for interest rates as low as 3%. The funding source for this incentive is the Michigan Public Service Commission.
Distributed Generation Program
Michigan participates in net metering, which means Michigan homeowners and businesses can receive credit for the excess solar energy that their solar panel system may produce.
For example, a residential solar power system may generate more energy than the home’s occupants use during the sunnier hours of the day. Although their solar panels keep producing power they do not need or use, solar owners are not charged for any energy usage during this time.
At night, when their solar panels no longer generate solar power, Michigan homeowners are charged at the regular rate for electric consumption The financial benefit is a credit to their account with their utility provider in exchange for the excess energy their solar panels produced during the day. The excess energy gets fed back into the power grid.
Again, net metering is not limited to homeowners. The commercial, industrial, nonprofit, residential, agricultural, and institutional sectors and schools can also take advantage of this incentive and reap the benefits of affordable renewable energy with solar power.
While some of the state’s largest utility companies, such as DTE Energy and the Upper Peninsula Power Company, offer net metering programs, the credit rates they provide are not equivalent to the retail electricity rate.
Alternative Energy Property Tax Exemption
This property tax exemption, established in 2019, is offered for renewable energy systems, including solar panel systems, with a capacity of up to 150 kilowatts. The solar panels must offset some or all of the energy used on the property to be eligible for this financial incentive, according to DSIRE.
The Solar Energy Facilities Taxation Act (Solar Energy Exemption)
Of all the Michigan solar incentives available, this property tax exemption applies to the likes of solar power plant owners, independent power producers, or perhaps a utility company, not to the residential sector.
Under this program, eligible and qualified owners of utility-size solar generation systems can obtain a Solar Energy Facility Exemption Certificate (SEFEC), which means they won’t need to pay real property taxes for 20 years. According to Michigan.gov, solar system owners must build a new solar energy facility that generates local government revenue.
Power Purchase Agreement (PPA)
Like most states, Michigan offers a PPA for eligible low-income households. A PPA is basically a solar lease. It’s another way to finance solar panels and ultimately save money on your electric bills.
Under this arrangement, a developer handles the design, permitting, financing, and installation of solar panels on a customer’s property with little to no upfront solar costs.
The customer then purchases the generated electricity from the developer at a fixed rate, typically lower than the local utility rate, thereby reducing their electricity costs. The developer benefits from electricity sales and tax incentives.
These agreements usually last for at least a decade, during which the developer is responsible for maintenance and operation. At the end of the term, the customer can choose to extend the agreement, have the system removed, or purchase the solar panels.
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Local Incentives
The Lansing Board of Water & Light — Residential Energy Efficiency Rebates Program
The Lansing Board of Water & Light — Residential Energy Efficiency Rebates program is a Michigan solar rebates program offered through the Lansing Board of Water & Light (BWL). This is one of the Michigan solar incentives that applies to both residential and multifamily residential sectors, as long as they are BWL customers.
Rebates include solar installation and extend to both homeowners and renters. According to DSIRE, purchased products must meet all regulations outlined on the program’s site, where you can also find the application for the solar rebate.
BWL customers can see up to $2,000 in a solar rebate when they install solar panels. The site also offers useful tips on how to select a contractor from among the many solar companies and solar installers.
Lean and Green Michigan PACE
Lean and Green Michigan’s Property Assessed Clean Energy (PACE) program is a financing opportunity that can help owners of commercial, industrial, multifamily housing, agricultural, and nonprofit properties like houses of worship reduce energy costs and install a solar system with no upfront costs. Residential homeowners are not eligible to participate.
Property owners interested in PACE financing would first perform energy audits on their properties; the Lean and Green program can help them find solar companies that will complete the audit.
PACE financing can include long-term repayment plans for those looking to make the switch.
Of all the Michigan solar incentives, this program is another way to save money on top of the federal solar tax credit.
Community Shared Solar
Technically, community solar does not fall under the category of Michigan solar incentives, but it is a great way for people who cannot install a solar system on their roof to access the benefits of a solar array—namely, low-cost renewable power.
While there are no nationwide incentives for community-shared solar, local power companies have partnered with solar customers and their communities to help offset electricity costs.
There are several reasons that prospective Michigan solar customers would be unable to install their own solar system. Perhaps they don’t own the property in which they live, or they do own their home but their roof is not suitable or is under too much shade. These reasons are completely valid, but they do not preclude people from accessing the benefits of solar panels in Michigan. That’s where community solar comes in.
Community solar is a solar project or purchasing program, within a geographic area, in which the benefits of a solar project flow to multiple customers. These customers can be individuals, businesses, nonprofits, and others. Usually, the solar system panels are offsite, so subscribers cannot see them.
To participate and receive solar energy, customers subscribe to their local community solar project. Multiple local projects under Michigan’s Community Shared Solar program have resulted in increased energy equity for low and moderate-income community members.
Visit the MI Solar Communities website to find out whether there is a community solar project in your area (these projects are set up and managed by a local utility company) and find contact information if you have questions.
The more community solar projects there are, the more people who have the ability to access affordable clean power.
Federal Incentives for Solar Panels
Federal Solar Tax Credits
In addition to the multiple state and local incentives, Michigan residents and businesses can take advantage of a federal tax credit that can help reduce the cost of solar equipment.
The federal government’s tax credit program was established to help all U.S. residents save on solar-associated costs. For homeowners, the federal solar tax credit, also known as the Investment Tax Credit (ITC), offers a 30% tax credit to individuals installing solar panels through the end of 2032.
Michigan residents who install their solar energy system after 2032 can receive up to a 26% tax credit. And for any solar panel installation in 2034, there is up to 22% in savings. With no financial limit, this federal program offers significant savings for large installation projects.
Federal Solar Investment Tax Credit
| Through 2032 | 30% |
|---|---|
| 2033 | 26% |
| 2034 | 22% |
Businesses, nonprofits, local and tribal governments, and other such entities can take advantage of a federal tax credit to purchase solar panels in Michigan as well. In fact, they have more than one federal tax credit to choose from.
One federal tax credit is the ITC, which lowers the federal income tax liability for a percentage of the cost of a solar system. The other federal tax credit is the production tax credit (PTC), which is a per kilowatt-hour (kWh) tax credit for solar-generated electricity for the first decade of a system’s operation. It lowers the federal income tax liability and is adjusted every year for inflation.
The government offers these solar incentives because it is serious about transitioning the nation to clean energy as quickly as possible.
The Payback Period on Solar Panels in Michigan
Incentives may make switching to solar possible, but when will you start seeing a return on your investment?
How and when you will begin to see savings depends on many factors, including how much you pay upfront (for the solar panel system as well as to your solar installers), the size of your solar array, and, of course, what incentives you are eligible for. After calculating your expenses minus the incentives that reduce energy costs, you can be closer to determining your solar payback period.
A payback period for an investment can be defined as the time it takes for the savings generated by an investment to match its cost. Various state, local, and federal incentives help to decrease the time so you have a shorter payback period and start seeing your savings more quickly.
Factors such as the cost of the solar system (potentially including a solar battery so you can store excess energy and use it whenever it is needed), the cost of the solar installer, and the average local electricity rates affect your payback period.
| Typical 6kW solar system installation cost | $17,700 |
|---|---|
| 30% Federal Tax Credit | $5,310 |
| Total Cost After Incentives Not including local incentives, which vary | $12,390 |
| Assumed Electricity Produced by a 6kW Solar System in Indiana | 8,126 kWh |
| Annual Electricity Cost Reduced or Offset Assuming 100% utilization by the home | $1,563 |
| Sample Payback Period | 8 years |
Sources: https://www.nrel.gov/docs/fy22osti/83586.pdf, https://globalsolaratlas.info/map (Detroit); https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a
Conclusion
For many Michigan residents, switching to solar may be possible only with financial incentives. While free solar panels are not on the menu in Michigan, these helpful financial incentives at the local, state, and federal levels allow all Michiganders to reduce their carbon footprint and their annual energy expenses.
FAQs
How long does it take for solar panels to pay for themselves in Michigan?
Solar power panels can take an average of 10 years to pay back for themselves, depending on the size of the system, local electricity rates, and eligible incentives.
Do solar panels work in Michigan winters?
Light snowfalls can easily brush off solar panels, allowing light to reach through and generate power. Heavy snow must slide away to expose part of the solar panel to sunlight.
Is it worth it to get solar panels in Michigan?
Although it can be costly initially to purchase and install solar panels in Michigan, the year-after-year lowering of electricity bills that result from your investment, combined with local, state, and federal incentives, can provide substantial savings.