What homeowners need to know about net metering in Michigan

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The Michigan State Capitol building. Image source: WILX

If you own solar panels, there’s a good chance they make more power than your home needs when the sun is shining bright. That excess power is sent to the grid, and over time gets recorded by the utility company as kilowatt-hours (kWh) of electricity. 

When that happens, the utility gives you a credit to use toward the electricity your home needs when the sun isn’t shining. If the credit for excess generation is equal to the full-retail price of the electricity you buy from the utility, that’s called net metering.

Net metering is the gold standard for solar billing in the USA, and it was one of the main reasons the number of solar installations in Michigan quintupled between 2011 and 2018. We say “was” because most Michigan utility companies no longer offer true net metering

Instead, people who go solar in Michigan now can sign up for something called the “Distributed Generation Program”. It’s not quite as good as net metering, but it still enables solar owners to save money on their electricity bills. 

Below, we’ll cover how Michigan’s Distributed Generation programs work and how much you can save with solar panels on your roof. We also cover information on how the program works at your utility company. If you’re pressed for time, here’s the short version:

Michigan net metering at a glance

  • Michigan offered net metering for all utility customers between 2008 and 2018. The state’s Public Service Commission approved a replacement for it, called the “Distributed Generation Program”.
  • Under the Distributed Generation Program, solar panel owners get credit for all excess energy their systems send to the grid during the day.
  • These credits vary by the utility, but are generally between 6 and 12 cents, and are used to offset the power supply portions of their monthly energy bills. If the credit in any month exceeds the power supply portion of the bill, it carries over to the next month.
  • The Distributed Generation Program is not as financially beneficial as net metering, but homeowners in Michigan can still save money, and reduce their usage of fossil fuel electricity by going solar.

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    A short history of net metering in Michigan

    Michigan began its net metering journey in 2008, when the legislature passed Public Act 295 and it was signed into law by Governor Jennifer Granholm. 

    That law directed the Michigan Public Service Commission (MPSC) to create a net metering program that would apply to all utilities in the state. Importantly, the law also specified that utility companies wouldn’t be required to offer net metering once the total capacity of solar installations within its territory was equal to 1% of its in-state peak load from the previous year. 

    The net metering law was hugely successful. Between 2008 and 2018, Michigan saw a huge boost in solar, increasing from less than 100 to over 5,000 individual installations. 

    Here’s a chart showing the growth in the number of net metering customers before and during the net metering program’s most active years:

    michigan net metering data

    Growth in Michigan solar from 2006 to 2018. Image source: MPSC

    Despite (or perhaps because of) the program’s success, Michigan lawmakers decided to kill the program before it was 10 years old. 

    The beginning of the Distributed Generation Program 

    In 2016, the state legislature passed Public Acts 341 and 342, which directed the MPSC to work on designing a successor to net metering and approving new rate plans from utilities. It took the MPSC two years to study the effects of net metering and design a new program, but in 2018, they approved a follow-up, called the Distributed Generation Program. 

    A report filed by the Commission in February 2018 outlined how the new program would work. The most important part of its design was its so-called “Inflow/Outflow methodology”, which detailed how the state’s utilities could differentiate between the energy they delivered to customers (inflow) and the energy they received from customers (outflow).

    Essentially, the rules established by the MPSC required the use of bidirectional smart meters that could measure all the energy delivered to and received from its Distributed Generation (DG) customers. 

    Then it allowed the utilities to provide monetary credits for all the energy sent to them by those customers. Under net metering, that energy had been counted against all the energy customers used from the grid in current and future months, but could now be credited at a dollar amount that was less than the retail price of electricity.

    Later in 2018, the first utility Distributed Generation Program rate schedules were approved by the MSPC, and utilities transitioned away from offering net metering to new solar customers. Those solar owners who already had net metering got to keep it, until 10 years after their initial date of enrollment. 

    Distributed Generation Programs at Michigan utilities

    As of this writing, only Upper Michigan Energy Resources Corporation, Cloverland Electric Coop, Alpena Power Company, Ontonagon County REA, and Xcel Energy continue to offer net metering. Those utilities serve only about 1.5% of the state’s approximately 3.5 million residential electricity customers.

    Over 90% of households in Michigan are served by one of two major utility companies: Consumers Energy and DTE Energy.

    Because each of these utilities offers a slightly different version of the Distributed Energy Program, we’ve separated them out below. The final ~8% of the state’s energy customers are served by a mixture of small co-operative and investor-owned utilities that mostly operate under similar rules, so we’ve lumped them together in another section below. 

    Consumers Energy’s Distributed Generation Program for solar homeowners

    If you’re a Consumers Energy customer who wants solar panels, there are a few things to know: 

    • Consumers Energy requires all of its solar customers to be on a Time of Use billing plan called “RSP-DG”. You’ll be billed a different amount for electricity based on the season (summer vs. winter) and the time of day (On vs. Off-peak during the summer only). You’ll also get a different credit amount for your solar electricity based on those different seasons and time periods.
    • All solar energy used in your home reduces your bill by the retail price of that electricity, but all extra solar energy your panels produce is tallied under the lower credit amount on your bill.
    • The size of your solar system cannot be larger than what’s needed to produce 100% of your average annual energy usage or 20 kW, whichever is smaller.
    • The credits you earn from solar energy go toward reducing the amount you pay for the power supply charges on your bill, however you still have to pay the distribution charge and fixed charge. Any excess credit you earn from solar energy can be carried over to your next bill.
    • Consumers Energy is over the 1% cap for solar interconnections, which means they don’t have to accept new solar customers. They still are accepting customers, however, and are now operating under a voluntary 2% cap. It remains to be seen whether that will continue into the future.

    Let’s look at an example of how a Consumers Energy bill works for a solar customer versus a non-solar customer during a late-summer month. 

    Say these customers live in identical houses in Grand Rapids, and pay about $125 per month for electricity. Each house needs about 650 kWh in September, and one of them has a 6 kW solar system on their roof. 

    Customer 1 pays a bill of about $126, which breaks down as follows:

    Item Per-unit cost Total cost
    520 kWh at Summer Off-Peak $0.1001/kWh $52.05
    130 kWh at Summer On-Peak $0.1493/kWh $19.41
    650 kWh for Power Supply Cost Factor $0.0071/kWh $4.62
    650 kWh for Distribution Charge $0.0591/kWh $38.42
    650 kWh for Energy Efficiency Program Surcharge $0.0035/kWh $2.28
    650 kWh for Power Plant Securitization Charge $0.0012/kWh $0.78
    System Access Charge $8.00 $8.00
    Low-Income Energy Assistance Fund Surcharge $0.87 $0.87
      Total bill $126.43

    Customer 2 has a 6 kW solar system, which generates 675 kWh of electricity during the month. 

    • Some of the energy gets used in the home; 275 kWh during Off-Peak times, and 90 kWh during On-Peak times. This reduces the homeowner’s usage from the grid down to 245 kWh Off-Peak and 40 kWh On-Peak.
    • Some of the solar electricity gets sent to the grid; 250 kWh during Off-Peak times and 60 kWh during On-Peak times.

    Here’s how their bill breaks down:

    Item Per-unit cost Total cost
    245 kWh at Summer Off-Peak $0.1001/kWh $24.52
    40 kWh at Summer On-Peak $0.1493/kWh $5.97
    285 kWh for Power Supply Cost Factor $0.0071/kWh $2.02
    250 kWh Off-Peak Outflow Credit -$.0789 -$19.72
    60 kWh On-Peak Outflow Credit -$0.1178 -$7.07
    650 kWh for Distribution Charge $0.0591/kWh $38.42
    650 kWh for Energy Efficiency Program Surcharge $0.0035/kWh $2.28
    650 kWh for Power Plant Securitization Charge $0.0012/kWh $0.78
    System Access Charge $8.00 $8.00
    Low-Income Energy Assistance Fund Surcharge $0.87 $0.87
      Total bill $56.07

    Looking at both bills, you can see the person with the solar installation saved a little over $70 this month by using their solar panels. 

    If their solar system had produced more electricity, they could have completely wiped out the power supply portion of the bill (the top three rows in each of the tables above) and had extra credit to carry over to the next month.

    See what local solar companies are charging for installations

    DTE Energy’s Distributed Generation Program for solar homeowners

    DTE Energy does things a bit more simply than Consumers Energy. Here’s what you should know about DTE’s Distributed Generation program:

    • Solar-owning customers can take service under a rate plan called D1-DG, which has only one price for electricity throughout the year. It’s about $0.164/kWh.
    • All solar energy used in your home reduces your bill by the retail price of that electricity, but all solar energy your panels produce above is tallied under the lower credit amount on your bill.
    • DTE credits that excess solar energy at $0.0775/kWh. Your monthly credit cannot exceed the Power Supply charges on your bill.
    • The size of your solar system cannot be larger than what's needed to produce 100% of your average annual usage, or 20 kW, whichever is smaller.

    Let’s look at a very simple example of how solar saves you money with DTE. Say your power bill for any given month is $125 before solar, for about 720 kWh of usage. Here’s how that breaks down:

    • $69.50 for power supply charges
    • $47.50 for delivery charges
    • $7.50 for the monthly service charge
    • $0.87 for low income programs
    • Final bill: $43.25

    If you have a 6 kW solar system on your roof, it’ll produce about 675 kWh in an average month. You’ll use about 365 of those kWh, bringing your grid usage down from 720 kWh to 355 kWh. You’ll also send about 295 kWh to the grid. 

    The bill for 355 kWh of usage is about $66.10, then you’ll get a credit for about $22.85 for the energy you send to the grid. Your final bill will be about $43.25, meaning you save a little over $80 in an average month with solar.

    In months when your solar production is very high compared to your usage, you may be able to wipe out the power supply charges on your bill and earn a credit toward future months. 

    Other utilities and co-ops

    The rest of the co-ops and other utilities in Michigan, for the most part, operate using similar rules. These programs operate very similarly to DTE’s, except the rates are a little different.

    Almost all of them offer the following:

    • A $0.056/kWh credit for solar energy sent from your home to the grid
    • 10-year agreement
    • 20 kW maximum system size

    The very best thing you can do if you’re feeling unsure about how much money you can save with solar panels is to get multiple quotes and compare them. Don’t believe anyone who tells you that you can wipe out your whole power bill with solar, and double-check all the numbers installers show you. 

    Final word on Michigan net metering

    It’s a shame that Michigan no longer offers net metering.

    The credits available under each utility’s Distributed Generation Program are still enough to save solar owners a moderate amount of money on their electricity bills, but not so good as to make solar energy a no-brainer like it is in other states. 

    We hope Michigan will get it together in the near future when it comes to renewable energy, either by reinstating net metering, offering some new solar incentives, or doing something else to help homeowners get solar panels installed and save money. 

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     - Author of Solar Reviews

    Ben Zientara

    Solar Policy Analyst and Researcher

    Ben is a writer, researcher, and data analysis expert who has worked for clients in the sustainability, public administration, and clean energy sectors.

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