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Solar panel installation is currently on the rise — and rightfully so. With climate change affecting our world right now, it is imperative that everyone exert some effort in trying to save our planet — and making use of solar energy is one of the best ways to achieve that goal.
This is especially true for the state of Michigan because the state has its own share of natural wonders — which primarily consist of 11,000 inland lakes — and, of course, people there want to protect and preserve them.
Luckily, the government of Michigan has done its best to use solar energy in upholding its objective of protecting nature. In fact, the state has actually been able to maintain its place as a leader in solar energy — which is an impressive feat considering that it is a cold and snowy state by nature.
So, if you live in Michigan and you’re interested in investing in a solar panel installation for your home, you’re in luck. But before you make a decision, it is important that you know some facts about solar installation costs in Michigan first.
How Much Do Solar Panel Installations Cost in Michigan?
Broadly speaking, the average cost of a solar panel installation in Michigan ranges from $13,472 to $18,228. On a cost per watt ($/W) basis, the cost can range between $2.69 and $3.65. According to Energy Sage, as of September 2020, the average solar panel cost in Michigan is $3.17/W.
However, with that said, you should take note that the estimated costs mentioned above don’t include the 26% Federal Investment Tax Credit (ITC) or other local incentives. The moment ITC and the other incentives are accounted for, the net price that you’ll have to pay for solar can actually fall by thousands of dollars.
To give you an even better look at the ballpark of solar panel installation costs in Michigan, here is a table of the estimated average solar panel cost by system size in Michigan.
Estimated Average Solar Panel Cost by System Size in Michigan
|System Size||System Cost||System Cost (After ITC)|
How Long Does It Take to Earn Back Your Initial Investment in a Solar Panel Installation?
Essentially speaking, a solar payback period is the amount of time that it takes for property owners who install solar panels to recover their initial investment through electricity savings. In the U.S. at large, the typical solar payback period is just above 8 years. But in Michigan specifically, the solar payback period is 10.31 years.
There are various factors that can affect the solar payback period. The two important factors are the combined costs and the annual benefits of going solar. But to be more specific, the factors are:
- The gross cost of the solar panel system. The gross cost of a solar panel installation depends on the size of the system that you choose and the equipment that makes up that system.
- The value of up-front financial incentives. Tax breaks and rebates can drastically reduce the cost of installing solar. As was mentioned earlier, the Federal Investment Tax Credit (ITC) allows you to deduct 26% of the cost of your system from your taxes. Aside from that, there are also additional state and local financial incentives available in your area.
- Average monthly electricity use. The amount of electricity that you consume every month indicates both the size of the system you need and the amount of electricity that you can offset monthly with solar. This means that the higher your electricity bills are, the shorter your estimated payback period will be since you can reduce or eliminate the bill as soon as your panels are operational.
- Estimated electricity generation. Even though solar installers will try to convince you to choose a system that matches your electricity consumption, practical constraints like the size of your roof and seasonal weather variation may still impact the amount of electricity that you can produce on-site.
- Additional financial incentives. Sometimes, there are utility programs that give you a per kilowatt-hour credit for the electricity that your solar panels generate. Depending on the size of your solar energy system, this can actually represent a significant monetary benefit.
How does the math work?
In order to calculate your payback period, here are the steps that you have to follow:
- Determine the combined costs. To do this, you have to subtract the value of upfront incentives and rebates from the gross cost of your solar panel system.
- Determine annual benefits. Sum up your annual financial benefits, including avoided electricity costs and any additional incentives.
- Divide your combined costs by your annual financial benefits. The result will be your solar payback period. Every month of savings after that point in time will be considered a financial gain.
Financing Options for Solar Panel Installations in Michigan
Fortunately, there are many solar financial options available right now that ensure solar shoppers can afford installations. These financial options are as follows:
Paying Cash for Solar
An outright cash purchase used to be the only way to get solar, and it’s still the option that provides the “biggest” financial returns. The word “biggest” is in quotation marks because it’s technically true but based on percent return for the money, a loan is still a better option.
With this method, you’ll have to shell out a huge amount of money (usually around $20,000) upfront. But by the end of year 1, incentives and energy savings will erase a huge chunk of it. And as the electric company raises rates, you save more and more.
Using a Loan
Unlike the previous method, this one does not require you to have $20,000 sitting around to pay for solar. So long as you have equity in your home, you can still own solar panels and receive all the benefits. Additionally, even if you do have that amount of cash, getting a loan to pay for solar is the best option when it comes to percentage return on investment.
The reason for this is that in Michigan, using a loan to pay for solar is like investing in a business that will succeed and earns you a tax break as well. As a result, your tax savings will be huge in the first year, and you’ll see a tidy profit over the 25-year life of your system.
Buying the Electricity, Not the Panels, with a Power Purchase Agreement (PPA)
Power Purchase Agreements (PPAs) are a great way to go solar if you don’t have stacks of cash or equity in your home. With a PPA, it’s possible to get solar panels for $0-down and see considerable savings over 20 years.
As of right now, getting a PPA on a 5 kW solar energy system will save you only about $10 each month. This might not sound like a great deal, but as the utility company raises rates, you will soon start to see big savings.
*Important note: Srinergy offers PPA only for commercial solar projects.
Price of installing solar panels
Over the last couple of years, Michigan has been able to uphold its place as a leader in solar energy despite the fact that it’s a cold and snowy state. This is primarily because Michigan is home to more than 11,000 inland lakes, and in order to maintain the state’s natural beauty, the government has to turn to excellent solar innovation so as to help achieve that goal. In other words, if you’re a resident in Michigan who is interested in going solar, then the whole process might be a bit easier for you.
That said, you should still know about the solar installation costs in Michigan before you make a decision. As of September 2020, the average solar panel cost in Michigan is $3.17/W. In other words, an average solar installation in the state can range from $13,472 to $18,228, with the average gross price coming in at $15,850. And when you account for the ITC and other state and local solar incentives, these prices can be reduced by thousands of dollars.
Other things you need to know about solar installation costs in Michigan are that the solar payback period — the time it takes for you to “break-even” on your solar energy investment — in the state is estimated to be around 10.31 years and that there are three primary ways in which you can pay for solar installation. These three primary methods are 1) using cash to pay for solar, 2) using a loan, and 3) using Power Purchase Agreements (PPAs).
Solar energy has become more and more accessible as time goes on. For that reason, if you’re interested in going solar, you should consult solar companies in Michigan to ask for more in-depth information.