What Are the Solar Incentives in Michigan?

Because of the fact that everyone is now aware of climate change, we are all trying our best to help save our planet. All of us try to reduce, reuse, and recycle our trash, and we also try to look for products that are cruelty-free and sustainable. During recent years, another method to help our environment has started to rise up, and now, that method is thriving. This method is installing a solar panel system into your property.

Solar Installation in Michigan: Costs and Payback Period 

As of right now, the government of Michigan has been using solar energy in order to uphold the state’s objective of protecting nature. In fact, Michigan has actually been able to secure its place as a leader in solar energy even though the state is known for its cold and snowy nature. 

When buying solar panels in Michigan, the first thing you need to know is the price range of the solar installation cost. For this question, the answer is that the average cost of a solar panel installation in Michigan sits between $13,472 to $18,228. If you want to see the price on a cost per watt basis ($/W), then the cost can range from $2.69 to $3.65. As of September 2020, the average solar panel cost in Michigan is reported to be $3.17/W. 

Another thing that you should take note of is the state’s solar payback period. Basically, a solar payback period is a calculation that estimates how long it will take for those who install solar into their properties to “break-even” on their solar energy investment. In the U.S., the common solar payback period is just above 8 years. But in Michigan, specifically, the solar payback period is around 10.32 years. 

Solar Incentives in Michigan 

Since the solar industry is currently thriving in Michigan, getting a solar installation there seems rather appealing. And it becomes even more appealing when you consider the various solar incentives offered by the state. The following are the most popular incentives that you can get if you install a solar panel system into your property. 

The Federal Investment Tax Credit 

Out of all the solar incentives available in the U.S. right now, the Federal Investment Tax Credit (ITC) is one of the most reliable. The ITC was originally established by the Energy Policy Act of 2005, and it was supposed to expire at the end of 2007. However, extensions of the expiry date kept happening, and when the expiry date was set up at the end of 2016, experts believed that an additional five-year extension would bring the solar industry to its fullest potential. For that reason, this particular tax credit is now available to homeowners in some form through 2021. 

For this incentive, the ITC allows the person who invested in a solar panel system to deduct a percentage of the cost of solar installation from their federal taxes. This percentage decreases as the years go by. From 2016 to 2019, people could deduct 30% of the total solar installation costs from their federal taxes. But in 2020, this percentage lowered down to 26%, and by 2021, it will become 22%. From 2022 onwards, owners of new solar panel systems can deduct 10% of the cost from their taxes. 

The ITC applies to both residential and commercial systems, and there is also no cap to its value.

How Do You Qualify for the Federal Investment Tax Credit?

All you have to keep in mind is that so long as you own the solar energy system that has been installed in your home, you are eligible for this tax credit. You are also eligible even if the solar panel system is not on your primary residence. So long as you own that property and have lived in it for part of the year, you can claim the solar tax credit. 

Additionally, even if you don’t have enough tax liability to claim the entire credit in one year, you can still choose to roll over the remaining credits into future years so long as the tax credit is still in effect. 

The only drawback to this process is that you have to pay for the solar installation with a direct purchase or a loan. You won’t be eligible if your method of payment is through a third-party lease or Power Purchase Agreement (PPA). This is because if you sign a lease agreement, the third-party owner gets the solar tax credit associated with the system, not you. 

This drawback is also true for the vast majority of state and local incentives for solar. But there are some special cases where a lease will grant you the financial benefits associated with the sale of solar renewable energy certificates (SRECs). 

How Do You Claim the Solar Tax Credit?

Simply put, you claim the solar tax credit when you file your yearly federal tax return. If you have an accountant, you simply inform them that you have currently installed a solar panel system into your property. And if you file your own taxes, you should follow these three broad steps. 

  1. Determine if you are eligible. For this, you have to make sure that you have enough tax appetite to use the ITC against your total taxes. 
  2. Complete IRS Form 5695. This form validates your qualification for renewable energy credits. You can obtain this form online. 
  3. Add your renewable energy credit information to your typical Form 1040

What Is an SREC?

As mentioned earlier, there are some cases where a lease will provide you with the financial benefits that are connected with the sale of SRECs. Solar Renewable Energy Certificates (SRECs) are a solar incentive that allows homeowners to sell certificates for energy to their utility. 

The way this incentive works is that a homeowner earns one SREC for every 1000 kilowatt-hours (kWh) produced by their solar panel system. The worth of one SREC varies from one state to the other. 

Michigan doesn’t actually have a viable SREC market as of right now. That said, solar owners in Michigan are eligible to participate in the Ohio SREC market. In Ohio, one SREC is worth $7.50, as of January 2020.

Michigan Saves Home Energy Loan Program

Another great solar incentive program in Michigan is the Michigan Saves Home Energy Loan Program. Michigan Saves is a nonprofit organization that is dedicated to making energy improvements easy and affordable. The company operates as a green bank to offer financing programs that help Michigan residents take control of their energy costs through efficiency and renewable projects. 

The Michigan Saves Home Energy Loan Program, in particular, offers homeowners the chance to upgrade their home’s energy efficiency with loans up to $30,000 and with APR’s offered as low as 4.99%, depending on credit score. The loan’s timeline ranges from 12 months to 10 years with a maximum APR set at 6.99%. This makes the program a viable way to buy your solar energy system by making easy and affordable payments.


  With over 11,000 lakes within the state, Michigan has been widely known as the Great Lake State. And because Michigan is the home to so much natural beauty, it is no wonder that the state’s government is trying to preserve the environment. One of the methods they’re implementing right now to achieve that goal is to encourage Michigan residents to go solar. 

So far, it looks as though Michigan is doing well with its goal to implement solar energy. The cost of solar panels is dropping, and with the help of the federal investment tax credit, people can now pay less for a solar panel system installation. Aside from the ITC, people can also get solar incentives from green banks like Michigan Saves and from solar renewable energy certificates (SRECs) that they can sell in the Ohio SREC market. 

Basically, now is the perfect time to go solar in Michigan. The state is offering so many opportunities for its residents, allowing them to save money and save the environment at the same time. With amazing solar incentives available, it won’t be a surprise if Michigan continues to be a beacon of light for solar energy in the United States in the next few years.