2024 Michigan Commercial Solar Incentives & Rebates

Curious if commercial solar in Michigan makes sense for your business? Solar is less prevalent in Michigan than in most of the country as the state only generates 1.31% of its electricity from solar according to a Q4 2023 SEIA report. Furthermore, the state’s overly cloudy weather and winter make Michigans question the viability of a solar investment. And, of course, there is the cost to worry about.

The good news is that Michigan enjoys up to 170 days and an equivalent of 4,018 kJ/m² of sunlight per year. There are also a few commercial solar incentives Michigan businesses can explore to reduce the cost of setting up their solar system. We have covered all the Michigan commercial solar incentives you can explore and the viability of solar investment in Michigan.

You can speak to our vetted experts to help you determine the best incentives for you and if solar is worth it for your business.

Modified Accelerated Cost-Recovery Systems (MACRS)

MACRS classifies commercial solar systems as five-year property in Michigan, enabling businesses to recover investments through accelerated depreciation deductions. This program schedule accelerates tax benefits, improving return on solar investments. Furthermore, the Tax Cuts and Jobs Act of 2017 expanded bonus depreciation to 100% for qualified solar property, bolstering the financial incentives for solar investments in the Great Lake State. Consequently, businesses can leverage MACRS to realize substantial tax savings while advancing their sustainability goals through solar energy adoption.

Business Investment Tax Credit (ITC)

Business Investment Tax Credit (ITC) Michigan

Businesses across the country can enjoy a federal tax benefit that pays 30% of their solar cost. 

The Investment Tax Credit (ITC) offers businesses a tax credit for a portion of the cost of solar system installation during the tax year. Solar systems placed in service from 2022 onward in Michigan are eligible for this 30% ITC if they begin construction before 2033. Eligible expenses for the ITC include solar PV panels, inverters, racking, installation costs, and certain indirect costs.

Renewable Electricity Production Tax Credit (PTC)

The Production Tax Credit (PTC) is also a commercial solar incentive Michigan businesses are eligible for. It provides a per-kilowatt-hour tax credit for electricity generated by solar systems during the first 10 years of operation. Solar projects in Michigan that begin construction before 2033 can opt for a 2.75 ¢/kWh PTC if they meet labor requirements or are under 1 MW in size. While the PTC offers a more attractive cash flow over time, it requires ongoing electricity production to claim the tax credit. Eligible expenses for the PTC are primarily related to the costs associated with generating electricity, making it beneficial for large-scale PV projects in sunny areas. Need a proposal to see the numbers? We are a US based commercial solar company serving businesses across the country.

Net Metering (Distributed Generation) in Michigan Explained

Net-metering in Michigan

Michigan started phasing out net metering in 2016, transitioning to distributed generation. Under net metering, homeowners could sell excess energy back to utility companies at retail prices, receiving credits for their contribution to the grid. However, with distributed generation, compensation is based on the wholesale value of the electricity generated, resulting in lower earnings for solar users. 

Under this mechanism, customers are billed separately for electricity consumed from the grid (inflow) and electricity generated by their distributed generation projects (outflow). While Public Act 235 in 2023 expanded the eligibility criteria for distributed generation projects, allowing for larger installations of up to 550 kW and permitting generation capacity up to 110% of a customer’s annual electricity consumption, it also mandated the shift away from legacy net metering programs.

Comparatively, Michigan’s transition to distributed generation offers a more structured and regulated approach to compensating solar energy producers, aligning with the state’s evolving energy landscape. However, the shift does mean reduced earnings for commercial solar users in Michigan compared to the previous net metering system, placing Michigan somewhat behind other states that may offer more favorable compensation schemes for distributed generation.

How to enroll in distributed generation (net metering ) in Michigan

Your utility company should help you set up net metering during installation. To enroll, here is everything you need to do as per your utility.

1. Understand Eligibility: Ensure your renewable generation project meets the criteria for participation in the Distributed Generation program. Eligible projects must be grid-connected, renewable generation installations with a maximum capacity of 550 kW.
2. Evaluate Project Size: Determine the appropriate size for your distributed generation project. Projects may generate electricity up to 110% of your annual electricity consumption.
3. Interconnection Process: Before operating your distributed generation project, you must properly interconnect it with the utility grid. Familiarize yourself with the electric utility interconnection standards established by the Michigan Public Service Commission (MPSC).
4. Review Tariffs: Review the Distributed Generation tariffs provided by your utility company. These tariffs outline the billing mechanisms, compensation rates, and other relevant details for participating in the program.
5. File Application: Submit an application to enroll in the Distributed Generation program with your utility provider. Ensure that all necessary documentation and information are provided accurately to expedite the enrollment process.
6. Comply with Regulations: Adhere to the regulations and requirements set forth by the MPSC and your utility provider throughout the enrollment and operation of your distributed generation project.
7. Monitor Performance: Regularly monitor the performance of your distributed generation system to ensure optimal efficiency and compliance with program requirements.
8. Stay Informed: Stay informed about any updates or changes to the Distributed Generation program, including regulatory developments and tariff revisions, to ensure ongoing compliance and participation.

Additional Local Commercial Solar Incentives Michigan: Incentives, Rebates, & Grants

Michigan offers several loan financing options for solar projects such as the PACE programs and the Michigan Saves Business Financing program. However, there are very few local commercial solar incentives Michigan offers. In 2024, you can enjoy a property tax on solar equipment and the Renewable Energy Renaissance Zones program.

Renewable Energy Renaissance Zones

In Michigan, Renewable Energy Renaissance Zones (RERZ) are special areas where facilities get big tax breaks. If a facility is in one of these zones, it doesn’t have to pay certain taxes. This tax break can last for up to 15 years, but in the last three years, the tax breaks are reduced by 25% each year.

To get an area designated as a RERZ, the local community needs to apply to the Michigan Strategic Fund Board (MSF) with support from the city, village, or township where the business is located. The MSF approves based on factors like economic impact, job creation, and project feasibility. To qualify, businesses must have a solar system.  Interested businesses can reach out to the Michigan Economic Development Corporation (MEDC) to learn more and discuss potential projects.

Michigan Alternative-Energy Personal Property Tax Exemption

The Michigan property tax for renewable energy was reinstated in 2019 after being discontinued in 2012. Today, Michigan businesses do not pay property tax for the added value of a solar system on their property. This tax exemption is certified by NextEnergy and only properties in the NextEnergy zones may benefit from this tax break.