Michigan aims to produce 60% of its electricity from renewable sources and phase out coal power plants by 2030. Although Michigan has been a leader in wind power production, solar energy capacity has been largely undeveloped until recently. As Michigan rapidly boosts its renewable energy generation, numerous opportunities exist for contractors to install solar panels. In recent years, solar panels in Michigan have grown dramatically, primarily in the residential, commercial, and utility markets.
There are 1,444 megawatts of installed solar energy capacity in the Great Lake State, enough to power over 255,000 homes. There are more than 4,000 employed in the Michigan solar energy industry, according to the Solar Energy Industries Association. However, the state lacks legislation supporting community solar, so this market has not developed at the same pace. There are now numerous solar energy providers in Michigan, including some with national coverage and others serving certain regions of the state.
Unfortunately, Michigan solar panel installation companies must overcome the misconception that the state lacks solar resources. In fact, Michigan solar projects can have a high return on investment, and residential solar typically has a payback period between 9 and 12 years. Educating potential customers that solar is worth it in Michigan is important. Let’s explore the Michigan solar energy sector so contractors can take advantage of this emerging market.
What To Consider When Installing Solar Panels In Michigan
There are numerous factors to consider when installing solar panel systems in the Great Lakes State.
Roof Orientation
Ideally, your potential customers will have a large south-facing roof with minimal shading and obstructions. It is also possible to install solar panels facing east or west, but it will decrease the total solar energy production somewhat. At GreenLancer, we don’t recommend orienting solar panels facing north.
Michigan Home Energy Consumption
According to EnergySage, the average monthly electricity bill in Michigan is about $168 or $2,000 annually. Thus, the average household can see significant savings on their electric bills with a solar PV array. Properly sizing the solar system is essential to maximize electricity bill savings.
The average Michigan home needs a 6 kW solar system to produce the majority of its electricity. Viewing a year of utility bills helps understand historical electricity consumption throughout all the seasons. Remember that summer and winter energy use may vary due to heating and cooling and other seasonal factors.
Many Michigan homes use more electricity in the summer due to air conditioning. However, homes that heat with electricity may use more electricity in the winter, especially if they are further north, where the climate is colder.
Solar Panel System Costs in Michigan
The average 6 kW solar system in Michigan costs $19,440 or about $3.24 per watt before incentives, according to EnergySage. Yet, the cost of the solar panel system varies by size, solar equipment, and type of installation.
For example, pole-mounted solar systems often have a higher upfront cost due to additional labor, permitting, and equipment costs. Conversely, rooftop solar systems are usually the most economical because they typically have the lowest racking and labor costs.
Payback Period of a Michigan Solar Panel System
The average payback period for a solar power system in Michigan is usually between 9 and 12 years. Properties with greater solar energy potential will have more productive PV systems.
However, the payback system varies by the cost of the equipment, labor, and grid electricity and whether the homeowner can take advantage of solar incentives. For example, in areas of Michigan with higher electricity costs, the solar payback period will be shorter.
The average residential electricity rate in Michigan was 19.06 cents per kilowatt hour (kWh) as of October 2023, and the average household uses 953 kWh of power each month. But these stats vary throughout the state and by household. Also, if future electricity costs increase rapidly, this will decrease the payback period.
National, State, And Local Incentives Michigan Solar Incentives
There are several solar incentives in Michigan that make solar power more affordable.
National Incentives
The U.S. government offers a federal tax credit for 30% of the total solar system cost, known as the investment tax credit (ITC), and Michigan residents are eligible. The ITC takes into account the total cost of the system, including equipment, labor, and additional expenses such as solar batteries.
For residential solar, the home must be a primary residence or vacation property, and the homeowner must own the solar system (not lease it). Also, the homeowner must have a sufficient tax liability with the IRS to take advantage of the federal solar tax credit. Likewise, businesses can take advantage of the tax credit and write-offs.
To calculate the value of the tax credit, multiply the cost of the solar array by 30%. For example, if the solar panel system costs $15,000, then the tax credit = 15,000 x .3 = $4,500. This credit will be put towards any tax liability residents hold at tax time. If the full 30% credit is more than the tax liability, it can be rolled over into the next tax year.
State- And Local-Level Michigan Solar Incentives
Although utility companies no longer need to offer net metering for Michigan solar panel systems, there is a Distributed Generation program that compensates solar homeowners for surplus solar energy to the electric grid. Solar systems are interconnected on the utility grid, enabling utility companies to supply the grid with energy from solar panel installations.
Many Michiganders also have Commercial Property Assess Clean Energy (C-PACE) financing programs available for commercial, industrial, and multifamily properties that make clean energy or energy efficiency improvements. This low-cost, long-term financing mechanism offers a fixed interest rate that is paid through property tax payments.
In addition, Michigan offers an alternative energy property tax exemption for systems under 150 kW and must offset some or all of the electricity used on the property. This solar property tax exemption ensures that taxes don’t increase due to installing an onsite renewable energy system.
Frequently Asked Questions About Solar Panels In Michigan
Let’s examine some of the FAQs that your potential solar clients may ask.
What solar financing options are available in Michigan?
There are various ways to finance residential and commercial solar systems in Michigan. For example, Michigan Saves is a non-profit green bank that offers solar loans for residential homes and commercial properties, and C-PACE financing is available for commercial and multi-family solar PV systems.
Some homeowners use home equity loans, which may be tax deductible. Also, certain Michigan contractors offer solar leases or Power Purchase Agreements (PPAs), and some customers may opt to make a cash purchase. Sometimes solar contractors partner with solar financing companies to offer this service to customers.
Are solar panels worth it in Michigan?
Solar systems are an excellent way to drastically decrease electricity bills and boost the resale value of homes. Most solar systems in Michigan pay for themselves with utility bill savings in 9 to 12 years, but the lifespan of solar systems is usually between 25 and 30 years. That means that home and business owners can enjoy many years of low-cost solar power.
A quality solar installation is critical to ensuring years of savings. A solar company that provides a long labor and service warranty for solar installations helps protect the clean energy investment of its customers.
How long do solar panels in Michigan last?
Solar panels typically last for around 25-30 years, with a gradual decline in efficiency over time due to degradation. The average degradation rate is about 2.5% in the first year, followed by 0.5% per year afterward. This means that after 25 years, solar panels in Michigan may still retain about 85.5% of their original efficiency.
PV modules are known to be a reliable technology and rarely have issues with solar panel defects. However, proper PV module maintenance can extend their lifespan and prevent performance issues.
Does Michigan use a lot of renewable energy and solar power?
Currently, 11% of Michigan’s electricity comes from renewable sources, with the majority from wind power. Coal power plants provide the largest share of electricity at 32%. However, the state plans to phase out the use of coal power plants by 2030, so it is critical to promote energy efficiency and clean energy capacity.
Installed solar energy capacity has increased significantly in recent years, especially in 2021 and 2022, when more than 400 MW of new capacity was added each year. Numerous utility-scale solar farms in various stages of development in the state have 100 MW or more of planned capacity.
Are there specific regulations for installing solar panels in Michigan?
Regulations govern residential and commercial solar installations in Michigan. These may include building permits, interconnection agreements with utilities, and compliance with local zoning ordinances. Understanding these regulations is crucial for a smooth solar permitting process. GreenLancer specializes in solar permit design and engineering services.
Can I install solar panels myself in Michigan?
Although it's technically possible for handy homeowners to install DIY solar panels in Michigan, it's important to be aware of permitting and interconnection requirements. The state has specific regulations and permitting requirements for electrical work, including solar panel installations in Michigan. Also, connecting solar panels to the grid requires following interconnection standards set by local utility companies, presenting further challenges for self-installation.
DIY solar installers in Michigan need to navigate these regulations, which can be a complex and time-consuming process. GreenLancer offers numerous solar design and engineering services, including PV interconnection and permit-ready solar plan sets, which help streamline these processes. Create a free account to begin shopping for permit-ready solar plan sets, interconnection drawings, and engineering reviews.
Is there net metering for solar panels in Michigan?
In Michigan, most utility companies no longer offer net metering for solar panels. Instead, homeowners can enroll in the Distributed Generation program, which allows them to provide excess energy back to the utility. The Distributed Generation program sets specific interconnection and net metering standards, enabling customers to generate up to 110% of their annual electricity consumption. This program replaces traditional net metering and allows homeowners to receive credit for the excess electricity they generate, but at a much lower wholesale or avoided cost rate.
Advocates for solar energy in Michigan often criticize this change to net metering laws because homeowners are no longer compensated at the retail rate for surplus solar power. Many believe this isn't fair compensation for solar power.
Do I need to remove snow from solar panels in Michigan?
In Michigan, removing snow from solar panels isn't necessary and it can actually be risky and unsafe. Solar panels are typically angled, which allows snow to slide off once the sun comes out. Attempting to remove snow with tools like a rake can scratch or damage the panels, reducing their efficiency and lifespan. Plus, getting up in a roof that may be icy can be very dangerous. So, it's generally best to let the snow naturally melt or slide off of solar panels in Michigan.
Solar Panels in Michigan Are Worth It For Many Residents
The solar energy industry in Michigan is rapidly growing in Flint, Detroit, Grand Rapids, and beyond. As electricity prices increase, so will the savings from Michigan solar panels.
As clean energy use increases, the use of fossil fuels for electricity will taper down, especially the consumption of coal. Although Michigan doesn’t offer state-wide solar rebates, there are numerous other solar incentives available, including net metering and the federal solar tax credit.
The GreenLancer platform has a number of vetted drafting and certified engineering partners who specialize in all AHJs throughout Michigan and the rest of the United States. Sign up for free, or contact us using the form below to solve your next solar permitting or engineering roadblock!