Solar Incentives in Michigan
Michigan homeowners considering solar in 2026 have access to several active state-level programs. Under Michigan's Distributed Generation Program, administered by the Michigan Public Service Commission and rate-regulated electric utilities, customers are billed on an inflow/outflow basis: electricity drawn from the grid is charged at the full retail rate, while surplus generation exported to the grid is credited at approximately the power-supply component of the retail rate — a lower figure than the full retail rate. Because export credit rates vary by utility, homeowners should confirm the specific rate with their provider. Separately, MCL 211.9i, as amended by 2019 PA 118, provides a personal property tax exemption for alternative energy systems, including solar, up to 150 kW in generating capacity used to offset on-site consumption; post-2019 installations are subject to a combined true cash value threshold. Michigan's Property Assessed Clean Energy (PACE) program, established under 2010 PA 270, allows participating local governments to create financing districts where property owners may fund solar installations through voluntary special assessments repaid via property tax bills; terms and availability vary by locality.
The federal residential Clean Energy Credit under §25D — commonly referenced as the 30% federal tax credit — expired for systems placed in service after December 31, 2025, under the One Big Beautiful Budget Act (Pub. L. 119-21). Homeowners installing a new residential solar system in 2026 do not qualify for that credit. The loss of this incentive meaningfully extends estimated payback periods compared to prior years, making the value of Michigan's remaining state programs and utility export rates more significant to any financial analysis.
Michigan's residential electricity rate averaged approximately 21.20 cents per kilowatt-hour as of March 2026, up about 1.85 cents year-on-year. That rate level influences how quickly on-site solar generation offsets electricity costs, though actual payback depends on system size, financing method, applicable utility export rates, and local PACE program terms.
Figures here are verified as of June 2026 against official sources; solar incentive programs and utility rate structures change with each legislative session and rate case, and the Michigan Public Service Commission and Michigan Department of Treasury are the authoritative sources for current program details.
Federal credit update. The federal residential Clean Energy Credit (the 30% “solar tax credit” under §25D) expired for systems placed in service after December 31, 2025. New 2026 residential installs do not qualify; a 2025 install can still be claimed on a 2025 return (IRS Form 5695). What this means for 2026 →
Current solar incentives in Michigan
Distributed Generation Program (inflow/outflow billing)
Michigan replaced retail net metering with a distributed generation program billed on an inflow/outflow mechanism: electricity drawn from the utility (inflow) is billed at the full retail rate, while excess customer generation exported to the grid (outflow) is credited at approximately the power-supply component of the retail rate. Following 2023 PA 235, eligible projects may be up to 550 kW and may be sized to generate up to 110% of the customer's electricity consumption over the previous 12 months. The Michigan Public Service Commission approved each rate-regulated utility's updated DG tariff on March 13, 2025 (dockets U-21790 through U-21798, per Order U-21767); customers must interconnect with their utility before operating. About 97% of participating projects are solar.
| Amount | Inflow billed at full retail rate; outflow credited at roughly the power-supply component of the retail rate (utility tariff-specific, may net out transmission costs). System cap 550 kW and 110% of prior 12-month consumption. |
|---|---|
| Who qualifies | Customers of MPSC rate-regulated electric utilities (Consumers Energy, DTE Electric, Alpena Power, Indiana Michigan Power, Northern States Power, UMERC, UPPCO) with on-site renewable generation up to 550 kW sized to no more than 110% of annual consumption. |
| Administered by | Michigan Public Service Commission / rate-regulated electric utilities |
Source: MCL 460.1173 et seq. (2016 PA 342), as amended by 2023 PA 235; MPSC Order U-21767 and tariff dockets U-21790 to U-21798 Official source →
Alternative Energy Personal Property Tax Exemption
MCL 211.9i exempts alternative energy personal property, including alternative energy systems such as solar, from personal property tax. As amended in 2019 (2019 PA 118), the ongoing exemption applies to alternative energy systems with a generating capacity of not more than 150 kW that are used solely to offset all or part of the commercial or industrial energy use of the person on whose real property the system sits. For systems installed after the 2019 amendment, the system's true cash value combined with other eligible exempt personal property of the claimant must total less than $80,000. The original broader exemption window applied only to taxes levied after December 31, 2002 and before January 1, 2013.
| Amount | Full personal property tax exemption for qualifying systems; post-2019 installations subject to a combined true cash value limit of less than $80,000 with property exempt under MCL 211.9o. |
|---|---|
| Who qualifies | Alternative energy systems of not more than 150 kW used solely to offset commercial or industrial energy usage on the host property, regardless of system ownership; not currently available for residential installations. |
| Administered by | Local assessors / Michigan Department of Treasury, State Tax Commission |
Source: MCL 211.9i (2002 PA 549, as amended by 2019 PA 118) Official source →
Solar Energy Facility Exemption (Solar Energy Facilities Taxation Act)
Under the Solar Energy Facilities Taxation Act, 2023 PA 108, an owner of a new utility-scale solar energy generation facility may obtain a Solar Energy Facility Exemption Certificate (SEFEC) that exempts the facility from ad valorem real property taxes for a 20-year term; exempt facilities instead pay a specific Solar Energy Facilities Tax, giving host local governments a stable revenue stream. Applications are filed with and approved by the local governmental unit and must also be approved by the State Tax Commission. New exemptions may not be granted after December 31, 2031. This program is for utility-scale facilities, not residential rooftop systems.
| Amount | 20-year exemption from ad valorem real property taxes, replaced by the specific Solar Energy Facilities Tax (payment in lieu). |
|---|---|
| Who qualifies | Owners of qualified new utility-scale solar energy generation facilities in local units of government that approve a SEFEC application; State Tax Commission approval also required; no new exemptions after December 31, 2031. |
| Administered by | Local governmental units and Michigan Department of Treasury, State Tax Commission |
Source: Solar Energy Facilities Taxation Act, 2023 PA 108 Official source →
Property Assessed Clean Energy (PACE) Financing
Michigan's Property Assessed Clean Energy Act, 2010 PA 270, lets counties, townships, cities, and villages create PACE districts in which property owners finance energy projects — including acquisition and installation of renewable energy systems such as solar — through voluntary special assessments repaid with their property taxes. Each local program must adopt a report establishing contract forms, eligibility, repayment terms (not exceeding the useful life of the project), and a requirement that owners with a mortgage obtain written consent from the mortgage holder before participating. Financing may be capital raised by the local unit or owner-arranged through a commercial lender. In practice Michigan PACE operates as commercial-property financing through participating local governments.
| Amount | Set by each local PACE program; assessment term may not exceed the useful life of the financed project, with required loan-to-assessed-value ratios determined locally. |
|---|---|
| Who qualifies | Record owners of property within a PACE district created by a participating county, township, city, or village; mortgage-holder consent required; energy projects include renewable energy systems and energy efficiency improvements. |
| Administered by | Local units of government under 2010 PA 270 |
Source: Property Assessed Clean Energy Act, 2010 PA 270, MCL 460.931 to 460.949 Official source →
Compare solar incentives across all states → · Check what applies to you →
Programs verified as of June 2026 against official state and federal sources (each cited above); refreshed quarterly as legislatures and utility rate cases change the rules. How we verify this data. This page is informational only — not tax or legal advice.