People think that just because it’s cold and snows in Michigan during the winter that you can’t go solar. Wrong. Over the course of the year, a city like Detroit gets an average of 4.2 hours of sun a day. That’s plenty for solar. Plus, solar panels are more efficient (produce more energy) when it’s cold, and less energy when it’s hot. So while you might not love the cold and the snow for other reasons, keeping you from saving money (and the planet) with solar power shouldn’t be one of them!
Michigan’s Renewable Portfolio Standard
A Renewables Portfolio Standard (“RPS”) is a law or other piece of regulation that mandates that a certain percentage of at state’s energy production comes from renewable resources by specified target dates. A strong RPS is important because it forces utility companies to promote conversion to renewable energy. That generally means free money for you in the form of solar power rebates and performance payments when you switch to solar.
Michigan’s RPS sets a minimum renewable generation level of 10% by 2015. The state’s two largest investor-owned utilities have additional obligations: Detroit Edison must produce 300 MW of new reneables by 2013 and 600 MW by 2015; Consumers Energy must produce 200 MW and 500 MW of new renewables by the same dates.
Any RPS is better than none, but those overall figures are a bit low to truly encourage strong solar policy. To truly affect solar policy, an RPS needs to set high minimum levels and threaten utilities with penalties if they don’t meet those levels.
Solar Performance Payments in Michigan
The additional requirement in the RPS does seem to have stirred at least one of the two big utilities into encouraging solar power. Consumers Energy has reopened its Experimental Advanced Renewable Program (“EARP”). EARP is a buy-back tariff where Consumers purchases all of the solar energy you produce. That means you’re not using that energy to power your home, and certainly not getting net metering (we’ll get to that later). You will, however, getting a pretty good purchase price – between $0.20 and $.259 per kilowatt-hour (usually in the higher end of the range for residential customers).
No other performance payments are available in Michigan.
Michigan Solar Utility Rebates
Now the effects of the law RPS can start to be seen. Just a few years ago Michigan had a real strong statewide solar power rebate program. But that program has gone the way of the dodo, and with the RPS goals still at a low 10%, utilities lack the incentives they need to keep offering you incentives for solar power.
Solar Tax Credits in Michigan
Michigan also lacks any solar tax credits. Tax credits are a golden opportunity for legislators in every state to encourage solar power. Tax credits minimize both the work and the “out-of-pocket” cost to the state, so it literally costs legislators almost nothing to potentially save you thousands on a solar power system! Michigan lawmakers should take advantage of that win-win with a strong personal tax credit on the purchase of a residential system like the one you’re considering.
Solar Tax Exemptions in Michigan
Thankfully Michigan does have an exemption for the property taxes that would otherwise be associated with the increase in home value you get when you install a solar power system. That’s a pretty sweet little law right there – it saves you money year after year, for the entire life of your solar system.
Given how much the property tax exemption saves you, we can overlook the lack of an equivalent sales tax exemption. But that sales tax exemption would still be nice. Nice to the tune of the 6% it would save you on the up-front cost, that is.
Utility Prices in Michigan
Michigan pays an average of 13.68 cents/kwh of electricity. That’s about two cents above the national average of 11.43. Yes, we know those 2 cents add up. Yes, we know you hate that monthly electric bill. But that’s only until you’ve made the switch to solar power! That 2 cents per kwh does indeed add up. Right now it adds up to higher bills, but once you’ve made the switch to solar, it adds up to higher savings!
Not to mention, electricity costs are only going to rise. Currently far too much of our energy comes from nonrenewable, dirty fossil duels. As the long-term costs associated with fossil fuels start to really kick in, standard electricity prices are going to skyrocket. When that happens, you’re going to look like a regular Einstein for having made the early switch to producing your own power.
Michigan Net Metering and Interconnection
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume. If you run an electricity surplus, you get credit for it.
Michigan has a very strong net metering law that lets you carry over all Net Excess Generation (“NEG”) (i.e. your surplus) at the full retail electricity rate. NEG credits are applied to your next month’s bill, and if you continue to run a surplus, the credits can be carried over indefinitely to apply toward future charges.
For small systems like yours, net metering application fees may not exceed $25, and total charges along with interconnection studies may not exceed $100 total.
Speaking of interconnection, the law supporting your residential solar power system getting hooked up to the grid are strong here as well. Like we just said, the application and review fews are capped at just $75 for interconnection. Even better, utilities are prohibited from requiring you to carry additional liability insurance, a sometimes burdensome additional cost we’ve seen imposed in too many other places.
5kW Example Return on Investment in Michigan
What do all the numbers add up to for you? Let’s take a look:
Installing a typical 5kW solar system should start at about $25,000. Don’t worry; even without state incentives that’s going to drop a lot:
- Since the federal government calculates the 30% federal solar tax credit after state solar power rebates, no check from the state means a bigger check from the feds. Subtract $7,500 (30% of $25,000 for a new price of $17,500.
- Then subtract your annual electricity savings of $747, for a final price after year one of $16,753. A discount of more than eight grand already – not bad at all, even without state solar incentives!
- Taking a conservative estimate of the future rise of electricity prices, your solar power system should pay for itself in about 15 years. After that you start turning a profit to the tune of nearly $20,000 the next 10 years that your system should be churning out clean solar power.
- Oh yeah! Least we forget, all that clean solar power is good for the earth as well. How good? The equivalent of planting 97 trees every years!
These numbers are estimates. Your home is unique and how much power you generate and how much money you save depends on that uniqueness. The best way to find out how much cash switching to solar can save you is to get one of our free quotes, and an expert installer in your area can draw up a home-specific estimate for you. Your quote is 100% free (yes, that’s right, 100% free) and you can get as many of them as that smart shopper in you desires!
Michigan Solar Consensus
Michigan isn’t all bad on the solar power front, but overall the picture isn’t too bright, at least for now. A 15 year payback timeframe and virtually no state solar incentives leaves Michigan with a “C.” We had to seriously consider dropping you down even further, but given a strong recent history, the still strong net metering and interconnection laws, and te above average electricity prices, we thought we’d offer you the benefit of the doubt.
Another reason we gave Michigan a “C” is because there is more room for improvement here than in most other states that are currently weak in solar policy:
First, just a few years ago the passage of the RPS spurred a very strong statewide incentive program that made solar policy here some of the best in the nation. So that suggests a willingness on the park of lawmakers in Lansing to help promote more clean and efficient solar power.
Second, there is room for simple but rapid improvement. While the current RPS minimum renewable energy level of 10% is quite low, it’s implementation timeframe (by 2015) is a much-nearer date than most other Renewable Portfolio Standards. Because most of the higher-minimum RPS’s have phase-in periods, 10% is not too far behind where many of the stronger overall Standards will be in 2015. That means if the Michigan legislature were to raise RPS standards now, we’d barely miss a beat in maintaining a strong level of renewable energy requirements. And just as we’ve seen in every state that’s adopted strong RPS goals, strong incentives for residential solar power follow quickly thereafter.