Michigan is no longer a 1:1 retail net metering state, and that fact alone changes residential solar economics. The state replaced traditional net metering with the Distributed Generation (DG) inflow/outflow program in 2018. PA 235 (2023) raised program caps and system sizes but kept the inflow/outflow method. The 1:1 era is not coming back.

Under DG inflow/outflow:

The Michigan Public Service Commission (MPSC) explicitly confirms that outflow is credited at less than full retail. This matters because many sources still claim that small residential systems (≤20 kW) get full-retail credit on outflow. They are wrong. MPSC is unambiguous.

With the federal credit gone, no state income tax credit, no SREC market, and outflow at less than half retail, our model puts typical payback near ~22 years at standard install pricing (~$3.95/W). A cheaper install bid will move that meaningfully shorter. Self-consumption — using the power directly rather than exporting — is critical for the math to work in Michigan.

What changed

The federal Residential Clean Energy Credit (§25D) — the 30% homeowner credit — was repealed for systems installed after December 31, 2025. For 2026 Michigan buyers, the federal credit on a purchased system is $0. The same applies to home batteries purchased outright. The §48E commercial credit (30%) still exists, but only for leased or third-party-owned systems — the lessor claims it, not you. Full federal context here.

VERIFIED 2026-06 · irs.gov

DG inflow/outflow — what actually happens

Michigan's mechanism is structurally similar to Illinois's supply-only net metering and Arizona's net billing: self-consumption is valued at one rate (retail), exports are valued at a lower rate (the power-supply component). The combined effect is that you get the full value of solar when you use it yourself and a discounted value when you export it.

DTE Energy (modeled here).

Consumers Energy. Same inflow/outflow structure, but Consumers uses seasonal and time-of-day outflow rates that vary by season and hour — more complex than DTE's fixed rate. This calculator models the DTE case; if you're on Consumers in Grand Rapids, Lansing, or other Lower Peninsula areas, your specific outflow rate is different and worth verifying with Consumers directly.

System size. PA 235 caps Level 1 residential at 20 kW and the total program at 10% of utility peak load (raised from 1% under the prior rules). Size to ≤110% of your annual consumption — generation beyond that gets the low outflow rate and provides little additional value.

The co-op exception. A few rural co-ops — Cloverland Electric Cooperative and Alpena Power — still offer true 1:1 net metering. If you're a member of one of these and considering rooftop solar, your math is materially better than what this calculator shows. This calculator does not model co-op cases.

VERIFIED 2026-06 · Michigan MPSC Distributed Generation program; DTE Rider 18 / D1-DG; PA 235 (2023)

The "outflow = full retail" myth

This is the single most common misinformation in Michigan solar coverage in 2026. Multiple solar marketing sources (Palmetto and others) claim that small residential systems — typically framed as "systems under 20 kW" or "Level 1 residential" — receive full retail credit on outflow. This is incorrect.

The Michigan PSC has stated unambiguously that outflow is credited at less than full retail, regardless of system size, under DG inflow/outflow rules. PA 235 (2023) raised the program cap and the eligible system size — it did not restore 1:1 outflow credit for small systems. If you see a quote or article claiming small Michigan systems get full-retail outflow, the math behind that claim is wrong.

If you want to verify: ask your installer for the specific outflow rate on your utility's tariff (DTE Rider 18 or Consumers' equivalent). The number will be the power-supply component, not the full retail rate. It will be less than what you pay per kWh on grid power.

The driver: ~16.4¢/kWh retail (only on what you self-consume)

DTE residential retail is about ~16.4¢/kWh under D1-DG — above the Midwest average. That's the rate that matters for the kWh of solar you use directly. Higher retail makes self-consumption more valuable.

But self-consumption is also the only part of your solar production that captures full retail. The export portion is worth less than half that. So unlike states with 1:1 net metering — where you can think of your system as offsetting bills regardless of whether you use the power instantly — in Michigan, how much you use vs. export materially changes the value of your system.

The practical implications: load-shifting (running appliances during daylight), modest sizing relative to consumption, and battery storage all have more impact on Michigan payback than in 1:1 states.

VERIFIED 2026-06 · eia.gov

No state credit, no SREC market

Michigan has no state income tax credit for residential solar. There is no SREC market in Michigan — you cannot earn or sell solar renewable energy credits the way you can in Maryland, Virginia, or New Jersey. The Michigan state-level incentive picture for residential solar is the property tax exemption (below) plus the inflow/outflow tariff itself. That's all.

Sales tax — DISPUTED, don't budget for an exemption

This is unusual: Michigan's sales tax exemption status for residential solar is disputed. Sources conflict — some claim the 6% state sales tax exempts solar equipment, others say the 6% applies. There is no clear authoritative state source pointing one way or the other for residential rooftop systems.

The conservative position — and what this calculator uses — is that the 6% sales tax applies. If you budget assuming the exemption and it turns out not to apply, you have a surprise tax bill. Verify with the Michigan Department of Treasury before installing if you're counting on the exemption to make the math work. In the calculator above, you'll see this reflected in the Exemptions card as "Sales tax exemption: No" with the disputed-status note.

Property tax — exempt 100% on added value

Michigan exempts 100% of the added home value from solar from property tax for systems up to 150 kW (reinstated in 2019). Most residential systems are well under that ceiling, so the exemption applies cleanly. Your solar system doesn't raise your local property tax assessment.

VERIFIED 2026-06 · Michigan property tax exemption (systems ≤150 kW; reinstated 2019)

Battery in Michigan — modest arbitrage, real storm resilience

The retail-vs-outflow gap on DTE is ~$0.087 ($0.164 self vs $0.0775 outflow) — comparable to Illinois ($0.07) and Arizona ($0.06), bigger than the 1:1 retail states (gap 0), far less than Hawaii ($0.25) or California NEM 3.0 ($0.26). A battery in Michigan has some real arbitrage value — store excess that would have exported at the low outflow rate, then use it at retail later — but the arbitrage alone typically does not pay back a $12,000+ battery capex within typical residential horizons.

The other side of the Michigan battery case is resilience. Michigan has frequent storm-driven outages, and the avoided cost per outage hour at ~16¢ retail is more meaningful than in low-retail states like Montana or Washington. Multi-day outages are a real consideration in many parts of the state.

There's no federal credit on the battery purchase in 2026 (§25D repealed), and Michigan has no state battery incentive. If you're considering a battery here, the case is arbitrage + resilience together, not arbitrage alone.

The honest picture

Michigan solar in 2026:

Michigan's case for solar in 2026 is harder than a 1:1 retail state at the same retail rate would be. Compare to Maine, which has similar mid-teens-to-high-twenties retail (CMP ~27¢) and 1:1 NEB — payback there is ~8 years. Michigan's ~16¢ retail with below-retail outflow stretches that out. The state's structural choice was that exports should be valued at the power-supply component, not the full retail rate, and the 2023 update doubled down on that choice. As a buyer in 2026, you live with it.

What can shorten Michigan payback significantly:

Before you commit:

Run your real Michigan payback →

Estimates only — outflow rates differ DTE vs Consumers; sales-tax status disputed; co-ops may differ. Verify with your utility and the Michigan Treasury. This is not financial advice.