Michigan Solar Rebates and Incentives

How Much Can You Save on Solar in Michigan?

Key Details

• Michigan receives an average of 4018 kJ/m2 of sunlight per year, making it the 35th sunniest state in the US.
• Residents can reduce the cost of solar system installations with renewable energy incentives offered in the state.
• Renewable energy production accounts for 11% of the energy produced in Michigan
• Residents qualify for a 30% federal solar tax credit on installation costs if they have taxable income and install solar panels before 2032.

Michigan Energy Profile

Renewable energy incentives in Michigan help homeowners reduce the cost of solar system installations. As of 2023, over 168,800 homes in Michigan are powered by solar energy (0.98% of electricity users in the state).

Michigan has 200+ solar companies in operation, comprising 70+ manufacturers, 80 installers/developers, and 6)+ other types of solar energy services providers. In addition, over a billion has been spent on solar investments in the state.

The Wolverine State also has 18 solar energy system installations with a combined output of 671 MW, this figure is projected to rise to 1,003 MW over the next five years (this will rank Michigan 13th in the United States).

The cost of solar energy installation in Michigan fell by 53% between 2011 and 2021. Michigan residents can save on solar panels by accessing the U.S. federal solar tax credit or other Michigan tax credits for solar panels.

Washington renewable energy rebates and incentives.

Note: Michigan ranks 25th in terms of solar energy growth among the U.S. states, this is seven places below the 18th position it occupied in 2022.

Cost of Electricity in Michigan

It costs between $16,022 and $21,678 to install solar panels in Michigan, while the average cost of solar panels is $3.77 per watt. The cost of solar panels varies with the wattage.

The table below shows the prices of solar panels in Michigan based on wattage and cost reduction due to the federal tax credit (FTC).

Federal Solar Tax Credit in Michigan

Federal Solar Tax Credit (Residential Energy Credit) is a government initiative to encourage homeowners to switch to clean energy sources. Residential Energy Credit in Michigan matches the costs of installing renewable energy systems up to a certain amount.

The U.S. Energy Policy Act of 2005 provided a 10% cost coverage for renewable energy system installations in homes. Over the years, the percentage of the cost of installation covered by the government has been on the increase. Installing renewable energy systems is expensive.

The renewable energy tax credit is designed to help increase renewable energy use by reducing the amount U.S. citizens pay to install renewable energy systems on their properties. For instance, if you install a solar system on your property in Michigan before 2032, you can recover 30% of the cost if you are eligible. For a homeowner whose solar system installation cost is $30,000, the solar tax credit will cover $9,000 of the expenses ($30,000 x 0,3)

Eligibility

The federal tax credit covers labor costs, equipment, and permit. To be eligible for the federal solar tax credit in Michigan:

• You must own a solar panel system
• You must pay taxes
• You must have the solar system installed on your primary, or secondary residence in the state
• Your claim must be on the original installation of the solar system.

How do I claim the Federal Solar Tax Credit in Michigan?

To file for the federal solar tax credit, Michigan residents must fill out the following IRS tax forms:

• Form 5695 Instruction (Residential Energy Efficient Property Credit Limit Worksheet)
• Form 5695 (Residential Energy Credit form)
• Schedule 3 Form (Form 1040)
• Form 1040 (standard federal income tax form)

The following steps should be taken when filing for federal solar tax credit in Michigan.

Step 1 - File tax returns by tallying income, claim dependents, and charity donations. You can do this by filling out the Standard Federal Income Tax Form (Form 1040)

Step 2 - Fill out and attach form 5695. To calculate your solar tax credit:

• Input the total cost of the system installation in line 1 of the form
• Multiply the gross cost by 30% (0.3) and write the figure on line 13. For instance, if the cost of your 6 kW solar panel system is $25,000, you are eligible for a $7,500 solar tax credit.
• Use the Residential Energy Efficiency Property Credit Limit Worksheet to calculate tax liability for line 14. The calculated figure for line 14 should be greater than the one for line 13 for you to use your federal solar tax credit for the entire year. Else, you will not be able to use the entire tax credit within one year and will have to carry it over to the next year
• Enter the smaller of the two figures you got in lines 13 and 14 into line 15, if the figure for line 13 is less than that of line 14, the tax credit becomes available to be used in one year

Step 3 - Input the tax credit calculated in step 2 into line 5 of the schedule 3 form. (Form 1040) Fill out the entire form and sum up the figures. Enter the final figure on line 20 (this can be accessed on the second page) of Form 1040.

Net Energy Metering in Michigan

Net energy metering (NEM) is a system for connecting surplus green energy to public utility grids. The Michigan state net energy metering program allows energy consumers to reduce their energy bills by producing electricity through renewable energy sources.

It credits energy consumers in the state for excess electricity they feed into the grid. NEM helps on-site energy producers to benefit from the excess energy they produce. The excess energy fed into the grid is recorded by the utility company and the bill credit is applied to future energy bills

To illustrate how Net Energy Metering works, consider the electricity bills of two Michigan energy consumers living in the same location, one has a 6 kW solar panel system installed on the property and the other does not.

Customer 1 (without net energy metering)

Customer 2 with a 6 kWh solar energy system connected to the net metering system. Some of the energy produced gets used during peak-period hours thereby reducing grid consumption and reducing cost. In addition, excess energy produced during off-peak periods is fed into the grid to earn solar credit that will be deducted from future bills.

The above table shows that customer 2 was able to save over $70 monthly using net energy metering.

To participate in the Michigan net metering program, it is important to note:

• You must be on a Time of Use billing plan
• Your solar energy system reduces your monthly electricity bill. However, the utility company will pay you a lower rate for your excess electricity than they charge you for their grid power supply
• Your solar system energy output must not be greater than 100% of your average annual power consumption or greater than 20 kW
• You will pay distribution charges
• Excess power added to the grid will be calculated as credit points and the payment is deducted from your future electricity bills

How to Enroll for Net Energy metering in Michigan

To be eligible for enrollment for net metering in Michigan you must

• Have a renewable energy generator of not more than 150 kW, or a methane digester of not more than 550 kW
• Your generating capacity must meet the electricity need of your home or business

You can enroll for net metering with any of the utility interconnection companies in Michigan through this link. Essentially, the following steps should be followed to register for the Michigan Distributed Generation Program.

Step 1

Determine which of the following three available categories your electric generator belongs to.

• Category 1 is for energy generators that produce 20 kWH of electricity or less and comply with UL 1741 scope 1.1A. In addition, such generators must pass IEEE 1547.1 testing standards for equipment certification
• Category 2 for generators that have installed capacities ranging between 20 kW and 150 kW.
• Category 3 for methane digesters with electricity output between 150 kW and 550 kW

Step 2

Fill out the interconnection form (similar to the one shown here) with the required information. For additional information, call your preferred utility company through the phone numbers provided in the link above or send a mail to the indicated address. Note that there is an interconnection fee payment (this is not more than $100).

Before applying, ensure that the energy generator meets the required specifications. Also, test-run it as a safety check before connecting it to the grid

Step 3

Go through the Generator Interconnection Operating Agreement (GIOA) and ensure that the provided information is accurate or not in need of an adjustment before signing. You can monitor how the enrollment process progresses by following the steps outlined by a net metering interconnection flow chart.

Michigan Property Tax Exemption

As of 2023, Michigan provides local property tax exemption for residential owners with solar installations. Michigan House Bills 1105/documents/2019-2020/billcurrentversion/Senate/PDF/2020-SCVBS-1105-0B736.pdf) and 1106 were signed into law by Governor Gretchen Whitmer in 2019, and they exempt homes with solar system installations from personal property taxes. However, the state government applied a different payment plan for residential owners with solar installations through the Payment In Lieu of Taxes/mileg.aspx?page=GetObject&objectname=mcl-125-1415a) (PILT) program.

Michigan property tax exemption helps eliminate or lower real estate tax bills for eligible property owners.

Michigan Property-Assessed Clean Energy (PACE) Financing

Michigan provides property-assessed clean energy (PACE) financing to Michigan real estate owners who want to make energy-efficiency upgrades on residential or commercial properties.

The U.S. Department of Energy oversees the PACE loan financing program across the states. Michigan’s Property-assessed clean energy loans are for energy efficiency improvements such as energy-efficient roofing and installation of solar panels.

PACE loans use the properties as collateral, do not require upfront payments, and payback is an assessment added to the owner's property taxes. The loan repayment is spread over several years (typically between 10 and 20 years).

The Michigan Property-assessed clean Energy Act Amendment (House Bill No. 5878) empowers local governments to encourage the use of renewable energy. The Act also authorizes the local governments to make provisions for financing such projects through property assessment and commercial lending. Loan beneficiaries are issued bonds, notes, and other forms of evidence to show indebtedness to the program.

To be eligible for loan financing, PACE administrators must:

1. Verify the ownership of the property and confirm that:

• The title is within the county, district, or municipality where the program has legal jurisdiction.
• The applicant is the title owner and the property is not a subject of litigation. In addition to this, the property must be devoid of other encumbrances such as mortgages, easements, and subordination agreements.

**2. **Carry out property valuation, tax assessment, and evaluate property-based debts to avoid placing PACE obligations on a distressed property.

3. Review an applicant’s income and debt obligation.

PACE interest rates are between 5% and 10% of the funded amount. Payback for loans can be spread over twenty years.

Michigan Saves Home Energy Loan Program

The Michigan Saves Home Energy Loan Program is an affordable loan program that offers unsecured personal loans for energy improvement to state citizens. Loans range from $1,000 to $50,000 and can be used in combination with federal tax credits and Michigan renewable energy rebates. To participate in the Michigan Saves Home Energy Loan Program the following steps should be followed.

• Contact a Michigan Saves Home Energy Loan contractor for information on qualifying home energy improvement
• Apply for financing using your authorized contractor’s six digits ID number (you will get this from your contractor). Also, you can apply by calling (877) 867-8522 between 8.30 a.m. and 11.00 p.m. between Mondays through Thursdays, 8.30 a.m. and 9.00 p.m. on Fridays, and 9.00 a.m. and 5.30 p.m. on Saturdays.
• Find your lender to work on the loan, and inform your contractor immediately after you get the loan approval.

Some lenders in Michigan can structure loan payback over 20 years. However, the interest on loans must not exceed 7% of the loaned amount. Michigan Saves Home Energy Loan Program has helped residents finance home improvements that reduce energy bills and lessen environmental pollution resulting from using non-renewable sources in electricity generation.

Lansing Board of Water & Light (LBWL) Residential Energy Efficiency Rebates

The Lansing Board of Water & Light (LBWL) Residential Energy Efficiency Rebates program is an initiative that offers partial refunds to homeowners and renters in Lansing County for money spent on energy-efficiency projects on properties. To benefit from LBWL rebates, you must be an LBWL customer. LBWL rebates are available as financial incentives to homeowners for new and old construction projects that make energy-saving improvements. The LBWL residential energy efficiency rebate program includes:

• Appliance recycling
• Indoor agriculture program
• Solar installations
• Plug-in electric vehicles
• Energy star lighting
• Energy star appliances
• Heating and cooling
• GreenWise Renewable Power
• New construction and renovation

The size of LBWL rebates varies depending on the equipment efficiency and standard. In addition, it also depends on annual electricity savings. By encouraging energy-efficient appliances, the Lansing Board of Water and Light has helped Michigan homeowners and renters reduce their energy bills.

In addition, it has helped to improve the quality of life due to reduced environmental pollution. The table below gives the rate schedule of some equipment in the LBWL Residential Energy Efficiency Rebates program.

State Sales Tax Exemptions in Michigan

As of 2023, Michigan provides sales tax exemption. In Michigan, sales tax exemptions are available in the following categories

• Food and meals
• Manufacturing and Machinery
• Medical goods and services
• Newspapers and magazines
• Occasional sales
• Optimal maintenance contracts
• Services
• Software, and digital products.

Michigan's sales tax exemption rate for 2023 is 6.00%. This ratio is higher than 71.2% of states in the U.S. To claim Michigan sales tax exemption, you must provide any of the following to the vendor/seller

• Completed Michigan Sales and Use Tax Certificate of Exemption (form 3372)
• Multistate Tax Commission Uniform Sales and Use Tax Certificate
• Streamlined Sales and Use Tax Agreement Certificate (you can also present this information in another format)

Michigan Energy Profile

In Michigan, renewable energy accounts for 11% of energy production. The major source of renewable energy in Michigan is wind. In 2021, Michigan’s 32 wind farms produced over 60% of renewable energy output and 7% of the total electricity production for the year.

This ranked it 15th among the top states for wind energy production in the U.S. In addition to wind energy, Michigan has 50 hydroelectric dams that generated 1% of the state’s electricity in 2021.

Solar energy contributed less than 1% of electricity output for the period. However, efforts are being made to increase renewable energy production in the state. Michigan’s over 450-megawatt solar energy output is projected to increase by another 670-megawatt before the end of 2024 with the commissioning of Assembly Solar (the state’s largest solar farm).

In Michigan, the primary energy source is coal (it accounted for 32% of electricity production in 2021). However, the state’s Renewable Energy Standard (RES) requires electricity utility providers to source 15% of electricity supplied to consumers from renewable sources.