Getting Solar Panels In Michigan: What Clients Should Know
Michigan has an ambitious goal 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 solar energy contractors throughout the state.
Solar panel installations in Michigan have grown dramatically in recent years, primarily in the residential, commercial, and utility markets. 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, solar 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. Let’s explore solar energy deployment in Michigan so contractors can take advantage of this emerging market.
What To Consider When Going Solar 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.
Energy Consumption
The average monthly electricity bill in Michigan in October 2022 was about $110 per month or $1,320 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 have greater electricity use in the summer due to air conditioning. However, homes that heat with electricity may have greater electricity consumption in the winter, especially if they are further north where the climate is colder.
Upfront Costs
The average 6 kW solar system in Michigan costs $19,860 or about $3.31 per watt, 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 can have the lowest racking and labor costs.
Payback Period
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 if the homeowner can take advantage of solar incentives. For example, in areas of the state with higher electricity costs, the solar payback period will be shorter.
The average residential electricity rate in Michigan was 17.72 cents per kilowatt hour (kWh) as of November 2022, and the average household uses 985 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 Available In Michigan
There are several solar energy incentives available nationally and locally to make solar more affordable in Michigan.
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 Incentives
Michigan has a net metering program that enables solar system owners to dramatically reduce their energy bills by installing a solar energy system and feeding surplus to the electric grid. The interconnection of solar systems on the utility grid enables 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 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.
Other Frequently Asked Questions About Solar Panels In Michigan
Let’s examine some of the FAQs that your potential solar clients may ask.
What 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. Some 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.
Does Michigan use a lot of renewable energy?
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 were added each year. There are currently numerous utility-scale solar farms in various stages of development in the state with 100 MW or more of planned capacity.
Going Solar In Michigan Is 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 a solar PV system.
As clean energy use increases, the use of fossil fuels for electricity will taper down, especially the use of coal. Although Michigan doesn’t offer state-wide rebates for solar installations, 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 here for free or contact us to solve your next permitting roadblock!