Michigan Community Solar Legislative Guide for Asset Owners & Developers

Prospects for Community Solar in Michigan

Like many states, Michigan has begun updating and expanding their renewable energy policies in the wake of the Inflation Reduction Act. Among the state’s priorities are the creation of a community solar program, expanding the Renewable Portfolio Standard (RPS), and instituting labor requirements for clean energy project development.

Known for its history as a leader in labor and manufacturing, Michigan is poised to notch a few more wins, this time for clean energy development, in line with its modernizing industrial sector. It seems only appropriate to pair the state’s transition to electric vehicle manufacturing and empowered labor movement with a cleaner grid to power it. And not a moment too soon: according to the Energy Information Administration (EIA), Michiganders saw an average monthly electricity bill increase by 15% between 2020 and 2022, not to mention a rate of electrical service interruption higher than the national average.

The bill that expands the RPS, SB 271, sets an ambitious goal of 100% renewable energy by 2040 with interim benchmarks. This bill is a win for clean energy in Michigan but has been criticized for being too conciliatory to the utilities and fossil fuel interests as it bill classifies some gas sources and solid waste incinerators as “renewable”. While SB 271 was passed strictly partisan lines, the community solar bills, SB 152 and SB 153, have bipartisan senate sponsorship–indicating a potentially easier passage. There is an appetite among the general public and the state’s government to develop a strong renewable energy sector–solar in particular–potentially making Michigan the next state to open a community solar market.

Bills Enabling & Impacting Community Solar

Bills Enabling Community Solar

SB 152 and SB 153

These two bills work in conjunction to establish the parameters of a community solar program, definitions, consumer protection, bill credit specifications, and duties of the utilities and subscriber organizations. If passed, the Michigan Public Service Commission (MPSC) will be instructed to draft the full rules for the creation of the program and financing of community solar projects.

Legislative Status

Both bills have been introduced in the Senate and were referred to the Senate Energy and Environment Committee.

• Lead Sponsors: Sens. Jeff Irwin (D-Ann Arbor) and Ed McBroom (R-Vulcan)
• Cosponsors: Erika Geiss, Mallory McMorrow, Stephanie Chang, Sylvia A. Santana, Rosemary Bayer, Dayna Polehanki, Sue Shink, Mary Cavanagh, Darrin Camilleri, Sam Singh, Kevin Daley

Senate Energy and Environment Committee

• Sean McCann (D) Chair, Kristen McDonald Rivet (D) Majority Vice Chair, Sam Singh (D) (Senate Majority Leader), Rosemary Bayer (D), Sue Shink (D), Kevin Hertel (D), Darrin Camilleri (D), Stephanie Chang (D), Dayna Polehanki (D), Dan Lauwers (R) Minority Vice Chair, John Damoose (R), Rick Outman (R), Roger Hauck (R), Joseph Bellino (R)

Proposed Program Details

• Ensure that all customer classes have opportunities to participate as subscribers to a community solar facility.
• Utilities must facilitate efficient and cost-effective interconnection
• Allows utilities to recover costs of administering bill credits and reasonable interconnection costs
• The Commission must set applicable bill credit rates that are derived from the electric provider's total aggregate retail rate on a per-customer-class basis, excluding the commission-approved distribution cost components

Project Specifications & Subscription Details

• 5 MW project size maximum
• Subscriptions are transferable and portable within the same utility territory
• Minimum of 3 subscribers per project
• At least 60% of its capacity subscribed by subscriptions of 40 kilowatts or less
• Maximum subscriber size of 40% of a solar project’s energy output

LMI Provisions & Definitions

• Minimum requirement of 30% of project capacity be reserved for low-income households
• "Low-income household" means a household that meets any of the following conditions:
  • Has a household income of not more than 80% of the area median household income, as published by the United States Department of Housing and Urban Development.
  • Has a household income of not more than 200% of the federal poverty line.
  • Is enrolled in a low-income program facilitated by this state or overseen by the electric utility.

Bill Credit Details

• 25-year bill credit term length
• The commission will establish applicable bill credit rates that meet both of the following requirements:
  • Result in access to subscriptions for all customer classes.
  • Are derived from the electric provider's total aggregate retail rate on a per-customer-class basis, excluding the commission-approved distribution cost components.
• The value of the bill credit shall be calculated by multiplying the subscriber's portion of the kilowatt-hour electricity production from the community solar facility by the applicable bill credit rate for the subscriber.
• Any amount of the bill credit that exceeds the subscriber's monthly bill will be carried over and applied to the next monthly bill as many times as necessary until the entire credit has been applied.
• A subscriber organization may accumulate bill credits if all of the electricity generated by a community solar facility is not allocated to subscribers in a given month.
• On an annual basis, the subscriber organization shall provide to the electric provider whose service territory includes the location of the subscriber organization's community solar facility instructions for distributing excess bill credits to subscribers.
• Renewable energy credits for electricity generated by a community solar facility are the property of the owner or operator of the community solar facility. The subscriber organization may sell, accumulate, retire, or distribute to subscribers the subscriber organization's renewable energy credits.

Bills Impacting Community Solar

SB 271

Sponsored by Sen. Erika Geiss, this bill updates the state’s RPS requiring utilities to produce 80% of their energy from clean energy sources by 2035 and 100% by 2040. It would also require energy companies to generate 50% of their energy through renewable sources by 2030 and 60% by 2035. This bill has notable carveouts for incinerators and includes some types of gas such as landfill gas, biomass, and others as renewable. It also considers gas as “clean energy” as long as at least 90% of associated carbon emissions are captured and stored.

The bill would raise Michigan’s cap on distributed energy from 1% of average peak load to 10%, which was a priority for Republicans in the Upper Peninsula where solar is generally popular. This bill would also require energy companies to construct or acquire a total of 2,500 MW of energy storage systems by 2030.

Environmental groups were split on support, with notable environmental justice groups speaking against the impact that gas will have on disadvantaged communities, and others pleased with what they considered progress albeit limited. Utilities remained neutral on this legislation. The bill passed the Senate without Republican support.

SB 502

Sponsored by Sen. Sue Shink This bill includes language requiring prevailing wages and project labor agreements for the construction and maintenance of clean energy projects. It also requires the MPSC to weigh factors like equity, environmental justice, affordability, compliance with clean energy standards, and public health when considering energy companies’ plans for future operations. Additionally, it requires environmental justice and public health assessments for these plans.

Analysis and Next Steps

Michigan’s legislature appears ready to pass a flurry of energy and environmental legislation to both broaden its industrial base with new jobs in the clean energy industry and leverage the substantial funds available in the Inflation Reduction Act (IRA). With 16% more square miles than the leading state in community solar, New York, Michigan has abundant opportunities for renewable energy deployment on its industrial brownfields in the Lower Peninsula and from mining in the U.P., or its abundant farmland where many farmers are eager to find another source of revenue.

However, that appetite may not be found in every corner of the state with many rural communities divided on the issue of solar siting permitting. The permitting ire has been focused on larger, utility-scale developments heightened by the Michigan legislature’s action to strip municipalities of their standard zoning approval authority for these large wind and solar projects. This may have a negative downstream impact on the smaller community solar developments looking for approval in Michigan’s rural areas.

On the other hand, there are many Michiganders who would be benefit from community solar and no shortage of potential anchor customers in one of the United States’ best known industrial heartlands. More than a third of Michigan households, or about 1.7 million, are considered low-income earning less than $30,000 a year. Many have high annual energy burdens and live in energy inefficient homes. With a population of just over 10 million, there is a large market for community solar.

Once the bills enabling community solar are passed, the MPSC has ample national and regional programs to look to when crafting the finer points of their program. While opposition from the utilities to community solar can be expected in general, the commission should start off on the right foot and lead with industry best practices like implementing utility consolidated billing (UCB), utilizing self-attestation for LMI customers such that it aligns with the Treasury Department’s guidance for low-income community solar programs, and avoiding an arbitrary cap on development.

Michigan’s Electric Utilities and their Territories

• Consumers Energy – 1.8 million electric customers
  • Territory includes the Lower Peninsula from the base of the mitten to the fingertips, excluding the Detroit metro area
• DTE Energy – 2.3 million electric customers
  • Territory includes southeast Michigan, including the thumb of the mitten and Detroit metro area
• Indiana Michigan Power – 600k electric customers
  • Territory covers southwest corner of Michigan with most customers located in Indiana
• Xcel – 9,000 electric customers
  • Located in the upper peninsula adjacent to Wisconsin
• Alpena Power – 16,650 electric customers
  • Located in Alpena, Alcona, Montmorency and Presque Isle counties
• Upper Peninsula Power Company (UPPCO) - 54,000 electric customers
  • Located in 10 of the 15 counties in Michigan's Upper Peninsula
• Upper Michigan Energy Resources – 42,000 electricity and natural gas customers
  • Located in Michigan's Upper Peninsula

State Utility Map

Other state community solar policy guides from Perch

• Colorado Community Solar Policy
• Minnesota Community Solar Policy
• Midwest Community Solar Policy (Michigan, Ohio, Wisconsin)
• New Mexico Community Solar Policy
• New Jersey Community Solar Policy
• Maine Community Solar Policy
• Maryland Community Solar Policy
• Washington DC Community Solar Policy
• Illinois Community Solar Policy
• New York Community Solar Policy
• Massachusetts Community Solar Policy
• Delaware Community Solar Policy
• California Community Solar Policy
• Pennsylvania Community Solar Policy