Solar in Michigan: the 2026 numbers
A household here spending $200 a month on electricity needs roughly a 8.5 kW array, which generates about 10,957 kWh in its first year. Bought outright, it returns its cost in year 16 and is worth $1,050 over 25 years — after discounting, after upkeep, and with no federal credit.
Our answer for Michigan: ppa
Of the four options, a ppa has the highest net present value at $1,441 , turning cash-positive in year 1 . Solar stops making sense in Michigan above roughly $3.12/W installed — if a quote comes in above that, the answer flips.
What Michigan gives you to work with
| Sunlight (specific yield) | 1289 kWh per installed kW per year — NREL PVWatts v8, Detroit |
| Average residential rate | $0.220/kWh — EIA, May 2026 |
| Export credit | 55% of retail — The distributed generation tariff pays an outflow credit equal to the power supply portion of retail, not the whole bill. |
| Federal credit on a purchase | None — §25D expired after December 31, 2025 |
| State incentives | Checked, and there is no cash incentive — reviewed 2026-08-15 |
The four options, run side by side
A household spending $200 a month on electricity, with the array sized to cover its usage, at the default $3.00/W installed cost. This is the same case the calculator below opens on. Net present value discounts future dollars at 5%, so these are not the inflated “lifetime savings” totals a sales quote shows.
| Option | Net present value | Payback | Cost per kWh |
|---|---|---|---|
| Cash purchase You pay for it. No fee, no interest, no escalator. | $1,050 | Year 16 | $0.202 |
| Solar loan Includes the 20% dealer fee that a low-APR solar loan hides in the financed price. | -$8,901 | Never | $0.270 |
| Lease You rent the system. The owner keeps the §48E credit. | -$4,740 | Never | $0.241 |
| PPA You buy the output per kWh, not the hardware. | $1,441 | Year 1 | $0.200 |
A cash purchase delivers electricity at $0.202/kWh against a retail rate of $0.220 — it undercuts the utility, which is the whole case in Michigan.
Best option: PPA — $1,441 net present value over 25 years, paying back in year 1.
| Option | Owns it | 30% credit | Upfront | 25-yr NPV | Payback | Cost/kWh |
|---|---|---|---|---|---|---|
| Cash purchase | You | None | $25,500 | $1,050 | Year 16 | $0.202 |
| Solar loan | You | None | $0 | -$8,901 | Never | $0.270 |
| Lease | Provider | Indirect (§48E) | $0 | -$4,740 | Never | $0.241 |
| PPA | Provider | Indirect (§48E) | $0 | $1,441 | Year 1 | $0.200 |
What this calculation assumes, and where it can be wrong
Federal credit. The 30% federal residential credit (IRC §25D) expired for systems placed in service after December 31, 2025. A 2026 cash or loan purchase receives no federal credit. Leases and PPAs remain eligible indirectly: the third-party owner claims the commercial credit (IRC §48E) and reflects part of it in the price offered, provided the system is placed in service by December 31, 2027.
Estimated §48E value in a lease or PPA quote: about $3,825 for this system, assuming the provider passes through half the credit. That share is our estimate, not a published figure.
Export credit. The distributed generation tariff pays an outflow credit equal to the power supply portion of retail, not the whole bill.
State incentives. Michigan has no state solar tax credit or rebate. Legacy net metering closed and new systems go onto the distributed generation tariff, where the outflow credit equals the power supply portion of the retail rate rather than the whole bill — you still pay distribution on every kWh you take back. Michigan combines a high retail price with an export rule that captures only about half of it, so the gap between using your own power and selling it is the number that matters.
- Cash purchase: No federal tax credit is applied: IRC §25D expired for systems placed in service after 2025-12-31.
- Solar loan: Financed amount includes a 20% dealer fee, which is why a $0-down loan quote costs more than the same system bought outright.
- Solar loan: No federal tax credit is applied: IRC §25D expired for systems placed in service after 2025-12-31.
- Lease: Pricing assumes the system owner claims the §48E credit and reflects part of it in your quote. The system must be placed in service by 2027-12-31 to qualify.
- PPA: Pricing assumes the system owner claims the §48E credit and reflects part of it in your quote. The system must be placed in service by 2027-12-31 to qualify.
Sunlight data: 1289 kWh per installed kW per year (verified — NREL PVWatts v8). Retail rate: $0.220/kWh.
Why Michigan lands where it does
Across the 50 states we model, Michigan ranks #34 on the value of a cash purchase, at $1,050 — behind Iowa at $1,801 and ahead ofOregon at -$413 . The ordering is not the one people expect, and the reason is worth stating plainly: sunshine matters less than the price of the electricity you stop buying.
Michigan gets 1289 kWh per installed kW per year and pays $0.220 per kWh. That is modest sun and expensive power — and expensive power wins. A Michigan panel produces less than an Arizona one but each kWh it makes is worth roughly twice as much, which is why the northern, cloudier states dominate the top of the table.
The export rule is the main event here
Michigan credits exported electricity at 55% of retail. The distributed generation tariff pays an outflow credit equal to the power supply portion of retail, not the whole bill. On the reference system, about 7,122 kWh a year leaves the house rather than being used in it, and the gap between what that power is worth on your bill and what the utility pays for it costs $705 a year.
That single number is the difference between the answer on this page and the answer on a calculator that values every kWh at retail — which is what almost all of them do. It is also why self-consumption is the lever that matters most in Michigan: shifting load into daylight hours, or adding a battery, an EV or a heat pump, converts exported kWh worth $0.121 into avoided kWh worth $0.220.
What the state actually pays you
Michigan has no state solar tax credit or rebate. Legacy net metering closed and new systems go onto the distributed generation tariff, where the outflow credit equals the power supply portion of the retail rate rather than the whole bill — you still pay distribution on every kWh you take back. Michigan combines a high retail price with an export rule that captures only about half of it, so the gap between using your own power and selling it is the number that matters.
So there is no cash incentive to model. That matters more than it used to: while the 30% federal credit existed, a state with no programme of its own was still fine. Now, Michigan buyers are on their own entirely, and the whole case has to come from the bill savings.
The financing trap
A solar loan is worth -$8,901 here against $1,050 for the same system bought outright — a gap of $9,951. The interest rate is not what causes that. A 20% dealer fee is embedded in the financed price, which is how a "1.99% APR" offer ends up costing more than a bank loan at 8%. It is rarely on the quote. Ask for it by name.
Lease and PPA look different from a purchase for a structural reason: the third-party owner still claims the 30% §48E credit, which a homeowner buying outright can no longer get. How much of that credit reaches you in the price is a negotiation, and we assume half. The owner also carries the upkeep and the inverter replacement that a buyer pays for. That is why a third-party option is competitive in Michigan in a way it would not have been in 2025. Both are tied to systems placed in service by December 31, 2027 — see the 2027 deadline.
Before you accept a Michigan quote
- Confirm it does not apply the expired 30% federal credit.
- Ask what export rate it assumed. Michigan credits exports at 55% of retail; if the quote valued every kWh at $0.220, its savings figure is overstated.
- Check the price per watt. Above about $3.12/W the purchase stops paying for itself in Michigan.
- Ask for the dealer fee on any financed offer, as a dollar amount.
- If it is a lease or PPA, ask for a placed-in-service commitment — §48E requires the system running by December 31, 2027.
More: the 2026 credit change, when solar is not worth it, our assumptions and sources.