Rooftop solar bills would lift caps in Michigan law

David Eggert is a senior reporter covering politics and policy for Crain's Detroit Business. He joined Crain's in 2022 after a combined 15 years at The Associated Press in Lansing and jobs at MLive, the Lansing State Journal and various other newspapers.

LANSING — Michigan's cap on rooftop solar as an electricity generator would be eliminated under newly proposed legislation that supporters say would provide a cleaner, cheaper source of energy and a boost to advanced-energy companies looking to enter the market.

The measures, Senate Bills 362-63, were introduced Thursday by Democratic Sens. Jeff Irwin of Ann Arbor and Rosemary Bayer of Keego Harbor. Similar legislation stalled in past sessions amid opposition from utilities. It is unclear if the bills will gain more traction following the flip in power to Democrats.

Another measure would require the state Public Service Commission to set a "fair" payment rate to better compensate customers for excess power their solar panels supply to the grid.

A 2016 law says utilities can cap distributed generation, essentially rooftop solar, at 1% of their average in-state peak load for the preceding five years. That 1% is split among three categories: 0.5% for customers whose panels produce 20 kilowatts or less, 0.25% for those generating more than 20 kilowatts but under 150 and 0.25% for customers with a methane digester.

"This issue is probably the No. 1 thing that restricts rooftop solar in the state," said Justin Carpenter, policy director for the Michigan Energy Innovation Business Council, an advanced-energy industry group that supports the legislation. "We have a lot of rooftop solar developers, and a lot of them are really gearing up to expand and scale up their business due to federal opportunities from the infrastructure bill and the Inflation Reduction Act. But when it comes to Michigan, as long as there is this cap and it's at 1%, it's just an absolute no-go because there's no certainty of it really being raised through the commission process and there's no certainty that there will be a market."

The number of participants in the distribution generation program, though small, has been growing. There were about 14,000 in 2021, a 13-fold increase from a decade earlier. Most are customers of Michigan's two largest power companies, DTE Electric and Consumers Energy.

Consumers raised its cap to 2% after reaching limits in 2020 and then to 4% this year as part of a rate case. DTE, which has not increased the cap, expects to reach the limit for smaller systems before July but will continue connecting new users through year's end while talks continue with regulators.

Irwin said the caps need to go regardless of utilities voluntarily relaxing them.

"Business thrives on certainty, and the solar business is no different," he said. "They need to know that there's a green light for investment here in Michigan. Residents need to know that there's a green light for putting systems on their homes and their businesses. ... Solar's more efficient. It's becoming really competitive from a price perspective. We have laws that frustrate the deployment of solar."

The 2016 law also gradually phased out a net metering program in favor of the new distributed generation program, though customers in the old program can stay in it for 10 years from when they enrolled. The change, Irwin said, has led to newer customers with panels being paid less for their electricity.

"They'd like to see rooftop solar customers who are putting energy back on the grid get paid something not all that different than wholesale prices at non-peak times," he said. "I just think that's not fair because solar users are generating electricity when rates are at their absolutely highest. When everybody wants to turn their air conditioner on a hot summer day, that's when the solar panels are really doing the best."

DTE declined to comment on the bills specifically but said the "so-called cap" does not limit the number of customers who can install rooftop solar, connect to the grid and sell the utility excess energy.

"The cap applies to a Michigan law and related MPSC orders that require DTE to purchase any excess energy from private solar customers at a rate that is above the true market value of that energy," spokesperson Peter Ternes said. "This overpayment is essentially a subsidy that is paid for by non-solar customers."

Regulators last November requested that DTE submit a filing outlining other options to connect their system. The utility did so in February and "discussions are ongoing on that issue," he said.

Consumers spokesperson Tracy Wimmer noted the company doubled its cap twice.

"But the reality is that equal access to solar energy will not come from this legislation, and instead will allow solar access for the affluent in a way that is ultimately subsidized by the most vulnerable, " she said. "Rooftop systems are an excellent option for those who can afford them, but they're also triple the cost of utility-scale systems and require 24/7 access to the traditional grid for storage at night and during Michigan winters, as well as holding any excess they generate and cannot store themselves. We look forward to continuing the conversation about how to achieve the clean energy future Michigan deserves at a price point every Michigander can afford."

Irwin said he has "renewed hope" about the new bills but added that opposition from the politically influential utilities could be hard to overcome. One Republican, Sen. Ed McBroom of Vulcan, co-sponsored the legislation.

"We do have a reshuffling of the deck. We've got different leadership," Irwin said. "So hopefully the continued support from a bipartisan group will allow this to get over the finish line."