Michigan Solar Programs and Incentives: Complete 2025 Guide

The solar landscape in Michigan is defined by a unique blend of federal support, strong property rights protections, and a utility compensation structure that has evolved significantly from traditional net metering. For homeowners and businesses considering a solar installation in 2025, understanding the specific programs, incentives, and regulations in the Great Lakes State is essential for maximizing the financial return on investment.

This comprehensive guide details every major solar incentive, program, and policy available to Michigan residents, from the federal tax credit to the state's unique Distributed Generation (DG) program, financing options, and the newly strengthened solar rights laws.

The Foundation: Federal Solar Investment Tax Credit (ITC)

The single most significant financial incentive for going solar in Michigan, as in all U.S. states, is the Federal Solar Investment Tax Credit (ITC). This is a non-refundable tax credit that allows homeowners to deduct a substantial percentage of the total cost of their solar energy system from their federal income taxes [1].

For systems installed and placed in service between 2022 and 2032, the ITC is set at 30%. This credit applies to the entire cost of the system, including the solar panels, inverters, mounting hardware, and installation labor.

To qualify, the system must be new or being used for the first time, and it must be owned by the taxpayer (either purchased outright or financed with a solar loan). Systems installed on primary or secondary residences are eligible. Maximizing this 30% credit is the first and most critical step in making solar affordable in Michigan.

State-Specific Financial Incentives: Tax Credits and Rebates

Unlike some neighboring states, Michigan does not currently offer a statewide personal income tax credit or a broad, state-funded rebate program for residential solar installations. This places a greater emphasis on the federal ITC and local utility-specific incentives.

State Tax Credits

Michigan does not offer a state-level solar tax credit. This means the primary tax benefit for solar adoption comes exclusively from the federal government. Homeowners should not expect to claim an additional credit on their Michigan state income tax return for the cost of their solar system [2].

State and Local Rebates

While a universal state rebate is absent, Michigan residents should investigate two key areas for potential financial assistance:

1. Utility and Local Rebates

The most common form of direct rebate in Michigan comes from local utility providers. For example, the Lansing Board of Water & Light (LBWL) has historically offered a rebate to its customers. This rebate is typically structured as a fixed amount per kilowatt (kW) of installed capacity, often capped at a maximum dollar amount (e.g., $500 per kW, up to $2,000) [3]. Homeowners should contact their specific utility provider to check for any current or upcoming rebate programs, as these can change frequently.

2. MI Solar for All Program (Status Update)

The MI Solar for All (MI SFA) program, which was set to be a major initiative funded by a $156 million grant from the U.S. Environmental Protection Agency’s (EPA) Solar for All competition, is currently paused [4].

The program was designed to support solar development for thousands of households in low-income and disadvantaged communities through direct financial assistance for rooftop solar, community solar, energy storage, and enabling upgrades. The goal was to provide a benefit equivalent to an average 20% reduction on participants' electricity bills.

However, the Michigan Department of Environment, Great Lakes, and Energy (EGLE) received a termination letter from the US EPA in August 2025. As of early 2026, the program is on hold while EGLE works with the Michigan Attorney General on the next steps. While the program's future is uncertain, it remains a critical area to monitor for low-income solar assistance [4].

Utility Compensation: The Distributed Generation (DG) Program

Michigan's approach to compensating solar owners for excess electricity is governed by the Distributed Generation (DG) Program, which replaced the state's former Net Metering program. This transition, mandated by state law and overseen by the Michigan Public Service Commission (MPSC), fundamentally changed how utilities like DTE Energy and Consumers Energy compensate solar customers [5].

The Shift from Net Metering

Traditional net metering allowed solar customers to receive a full retail rate credit for every kilowatt-hour (kWh) of excess electricity they sent back to the grid. The DG Program operates differently, using a two-component rate structure:

1. Self-Consumed Power: Any electricity generated by the solar system and immediately used by the home is a direct saving, as it avoids the full retail rate the customer would have paid for that power.
2. Excess Power Sent to the Grid: This is where the DG Program differs. When a solar system produces more electricity than the home consumes, the excess is sent to the utility grid. For this excess generation, the customer receives a credit generally equal to the power supply component of the retail rate [5].

This compensation rate is often referred to as the utility's "avoided cost" or "generation rate," and it is significantly lower than the full retail rate, which includes distribution, transmission, and other fixed charges.

Compensation Structure

Under the DG Program, customers pay their normal retail rate for all electricity delivered by the utility. They receive a credit for excess generation delivered to the grid during the billing month. This credit is applied to the customer's next bill.

This structure incentivizes homeowners to size their solar systems to match their expected annual electricity needs as closely as possible, maximizing self-consumption and minimizing the amount of lower-compensated excess power sent back to the grid [6].

Eligibility and Application

The DG Program is available to customers of rate-regulated utilities, including DTE Energy and Consumers Energy. Key eligibility requirements include:

• System Size: The system must be sized no larger than required to meet the customer's expected annual electricity needs.
• Interconnection: Customers must complete an interconnection agreement with their utility and receive final approval before operating the system.

Solar Rights and Regulations: The Homeowners' Energy Policy Act

A major victory for solar homeowners in Michigan is the passage of the Homeowners' Energy Policy Act (Public Act 68 of 2024). This landmark legislation significantly limits the power of Homeowners Associations (HOAs) and condominium associations to restrict solar installations [7].

Prior to this law, many HOAs could effectively ban solar panels or impose aesthetic restrictions that made installation prohibitively expensive or impractical. The new law, which took effect in 2024, establishes the following protections for homeowners:

• Prohibition on Bans: HOAs can no longer prohibit the installation of solar energy systems on a homeowner's property.
• Reasonable Restrictions: While HOAs can still impose reasonable restrictions concerning the location, size, and appearance of a solar system, they cannot enforce standards that increase the installation cost by more than a certain amount or decrease the system's efficiency by more than 10% [8].
• Policy Requirement: HOAs are required to adopt a solar energy policy within one year of the law's effective date.
• No Neighbor Approval: The law explicitly states that the approval of an adjacent home or unit owner is not required to approve a member's application to install a solar energy system [7].

This act ensures that Michigan homeowners have a protected right to install solar energy systems, removing a significant barrier that existed in many planned communities.

Permitting and Local Regulations

While the state has addressed HOA restrictions, the permitting process for solar installations remains under the jurisdiction of local municipalities (cities, townships, and counties). The process typically involves:

1. Submitting a permit application to the local building department.
2. Providing detailed plans, including electrical schematics and structural specifications.
3. Undergoing a final inspection after installation to ensure compliance with local codes and the National Electrical Code (NEC).

The complexity and speed of the permitting process can vary widely across Michigan, making it an important factor to discuss with your chosen solar installer.

Tax Exemptions: Property and Sales Tax

Michigan offers a powerful property tax incentive for solar, but does not extend the same benefit to sales tax.

Property Tax Exemption

Michigan offers a significant financial advantage through the Alternative Energy Property Tax Exemption (MCL 211.7h) [9]. This exemption ensures that the added value a solar energy system brings to a home is exempt from property tax increases.

In many states, installing a solar system increases the market value of the home, which in turn leads to a higher property tax assessment. In Michigan, this exemption effectively shields the homeowner from this tax increase, preserving the financial benefits of the solar investment. This exemption applies to solar, wind, and water energy conversion devices [9].

Sales Tax Status

The purchase and installation of a residential solar system in Michigan is subject to the state's standard 6% sales tax [10]. Unlike some other states that offer a sales tax exemption for renewable energy equipment, Michigan does not provide this benefit for residential solar installations. This cost should be factored into the total system price when calculating the return on investment.

Financing Solar: The Michigan Saves Loan Program

For homeowners who prefer to finance their solar installation rather than paying cash, the Michigan Saves program is the state's leading resource for affordable, accessible financing [11].

Michigan Saves is a non-profit organization that partners with a network of local lenders, including credit unions and banks, to offer low-interest financing for energy efficiency and renewable energy improvements.

Key Features of Michigan Saves Loans:

• Eligible Projects: Loans can cover the cost of solar photovoltaic (PV) systems, as well as other energy efficiency upgrades like insulation, new windows, and HVAC systems.
• Loan Amounts: Homeowners can typically finance projects up to $40,000.
• Loan Terms: Terms can extend up to 15 years, allowing for manageable monthly payments [12].
• Accessibility: The program is designed to be accessible, with competitive interest rates and a streamlined application process through authorized Michigan Saves contractors.

Utilizing a Michigan Saves loan can allow homeowners to install a solar system with no upfront cost, with the monthly loan payment often being offset or even exceeded by the monthly savings on their electricity bill.

Community Solar and Solar Renewable Energy Credits (SRECs)

Two other potential revenue streams or program types—Community Solar and SRECs—have a limited or non-existent presence in Michigan's current market.

Community Solar Programs

Michigan does not have a statewide law enabling community solar. Community solar allows multiple customers to subscribe to a shared solar array located off-site and receive credits on their electricity bills for the power generated by their share of the array.

Currently, any community solar projects in Michigan are developed and managed through local utility initiatives, rather than a state-mandated framework [13]. However, there is significant legislative momentum and public support for expanding community solar access. Bipartisan bills (such as Senate Bills 518 and 519) were introduced in 2025 to create a formal community solar program, indicating that this landscape may change in the near future [14].

Solar Renewable Energy Credits (SRECs)

Michigan does not have a viable SREC market. SRECs are tradable certificates that represent the environmental benefits of 1 megawatt-hour (MWh) of electricity generated by a solar system. They are typically created in states with a Renewable Portfolio Standard (RPS) that includes a "solar carve-out," requiring utilities to purchase a certain amount of solar-generated electricity [15].

Because Michigan's RPS does not include a solar carve-out, there is no in-state demand for SRECs. While Michigan solar owners are technically eligible to participate in voluntary or out-of-state SREC markets, the value is highly variable and often minimal compared to states with mandatory SREC programs [16]. Homeowners should not rely on SREC revenue as a primary financial incentive in Michigan.

Application Processes and Eligibility Requirements

Navigating the solar process involves several key applications and eligibility checks.

1. Federal ITC Eligibility

• Requirement: Own the system (purchase or loan).
• Process: Claim the credit when filing federal income taxes using IRS Form 5695 (Residential Energy Credits).

2. Distributed Generation (DG) Program

• Requirement: System size must not exceed expected annual usage.
• Process: Submit an interconnection application and agreement to your utility (DTE Energy, Consumers Energy, etc.) for approval before installation begins.

3. Michigan Saves Loan

• Requirement: Work with an authorized Michigan Saves contractor.
• Process: The contractor assists with the loan application through a participating lender. Eligibility is based on creditworthiness and the project scope.

4. Property Tax Exemption

• Requirement: The system must be a qualified alternative energy conversion device.
• Process: The exemption is typically handled by the local assessor, but homeowners may need to file a specific form, such as the Alternative Energy Property Tax Exemption application, with their local government to ensure the exemption is applied correctly [9].

Tips for Maximizing Your Michigan Solar Investment

To ensure the highest possible return on your solar investment in Michigan, follow these strategic tips:

1. Maximize the Federal ITC: Ensure your system is installed and placed in service by the end of 2032 to lock in the 30% tax credit. Keep meticulous records of all system costs.
2. Optimize System Sizing: Due to the DG Program's compensation structure, it is crucial to size your system to offset 100% of your annual electricity consumption, but not significantly more. Oversizing will result in excess power being compensated at the lower avoided cost rate, reducing your overall return.
3. Utilize Michigan Saves: If you require financing, leverage the low-interest, long-term loans offered through the Michigan Saves program to minimize your borrowing costs.
4. Check for Local Rebates: Always check with your specific municipal utility (e.g., LBWL) or electric cooperative for any local rebates or incentives that can reduce your upfront costs.
5. Know Your Solar Rights: If you live in an HOA or condominium, be prepared to cite the Homeowners' Energy Policy Act (Public Act 68 of 2024) to ensure your right to install solar is protected and not unduly restricted.
6. Focus on Energy Efficiency First: Before installing solar, invest in energy efficiency upgrades (insulation, LED lighting, efficient appliances). This reduces your overall energy demand, allowing you to install a smaller, less expensive solar system to meet your needs.

Key Contacts for Michigan Solar Programs

For questions regarding utility regulations, interconnection, or financing, the following state agencies and major utilities are the primary points of contact.

Conclusion

Michigan presents a solid, if nuanced, market for solar adoption in 2025. The combination of the powerful 30% Federal ITC, the valuable property tax exemption, and the availability of low-cost financing through Michigan Saves creates a strong financial case for installation. While the Distributed Generation Program requires careful system sizing to maximize returns, the recent strengthening of solar rights against HOA restrictions has removed a significant non-financial barrier. By understanding these specific state policies and leveraging the available resources, Michigan residents can confidently transition to clean, self-generated solar power.

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References

[1] U.S. Department of Energy. Federal Solar Tax Credit. [2] EnergySage. Michigan Solar Incentives, Tax Credits & Rebates 2026. [3] EnergySage. Lansing Board of Water & Light Rebate. [4] Michigan Department of Environment, Great Lakes, and Energy (EGLE). MI Solar for All. [5] Michigan Public Service Commission (MPSC). Distributed Generation Program & Net Metering (PDF). [6] Solar Reviews. Solar Net Metering In Michigan: What Homeowners Need To Know. [7] Michigan Legislature. Homeowners' Energy Policy Act (Public Act 68 of 2024). [8] Kreis Enderle. New Michigan Law Limits Ability of HOAs To Prohibit or Interfere with Installation of Energy-Saving Systems. [9] Michigan Legislature. MCL - Section 211.7h (Alternative Energy Property Tax Exemption). [10] Michigan Solar Solutions. Michigan Solar Tax Incentives for Homeowners. [11] Michigan Saves. Trusted Financing for Clean Energy. [12] Christian Financial Credit Union. Save on Energy Costs with Easy Financing Through Michigan Saves. [13] Michigan Department of Environment, Great Lakes, and Energy (EGLE). MI Solar Communities. [14] Community Solar Access. Bipartisan Bills Introduced to Expand Community Solar Access in Michigan. [15] SRECTrade. Michigan - SREC Markets. [16] Solar United Neighbors. Solar Renewable Energy Credits (SRECs). [17] Michigan Public Service Commission (MPSC). Contact Us. [18] DTE Energy. Rooftop Solar and Private Generation. [19] Consumers Energy. Distributed Generation.