If you are considering solar in Michigan, understanding how solar billing works is an important first step before hiring a solar installer. Many homeowners assume solar billing still follows the old net metering model, where excess production simply cancels out usage dollar for dollar. or new solar customers in Michigan, that is no longer how billing works.
Major Michigan utilities now use a Distributed Generation model. This framework changes how electricity is measured, how credits are calculated, and where real solar savings come from. This article explains what Distributed Generation is, how it compares to old net metering programs, and why system design matters more than ever under current Michigan solar rules.
Key Points
- Traditional net metering has been replaced for new customers by Distributed Generation programs
- Electricity used directly from your solar system provides the highest financial value
- Energy exported to the grid earns credits at a lower rate than retail electricity
- Solar bills now show inflow and outflow separately rather than a single net total
- Accurate system sizing and usage analysis are critical for long-term savings
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How Grid-Tied Solar Works
Most residential and commercial solar systems in Michigan are grid-tied. That means your home or business remains connected to the utility grid while also producing its own electricity from solar panels.
When your solar system is producing power, your building uses that energy first. If production exceeds real-time usage, the excess electricity flows back to the grid. When solar production is low or nonexistent, such as at night or during excessively cloudy weather, electricity is pulled from the grid as usual.
This two-way flow of electricity is the foundation of both net metering and Distributed Generation. The difference lies in how those flows are measured and valued.
Distributed Generation vs. Net Metering Programs
The key differences between Distributed Generation and net metering include:
| Item | Distributed Generation | Net Metering |
|---|---|---|
| How energy is measured | Inflow and outflow are tracked separately | Usage and production were combined into a single net figure |
| Value of exported energy | Exported solar earns a lower-value credit | Exported solar offset usage at or near retail rates |
| Primary source of savings | Using solar energy directly on site | Exporting excess energy to the grid |
| Impact of system sizing | System sizing is critical to financial performance | Oversizing was rarely a financial issue |
| Importance of usage patterns | Usage timing strongly affects savings | Usage timing mattered far less |
These differences explain why some solar systems designed under old assumptions can underperform financially today.
What net metering used to mean in Michigan
For many years, Michigan solar customers were enrolled in programs called “net metering”. Under traditional net metering programs, excess solar production offset electricity usage at nearly the same retail rate. If your system produced more than you used in a given month, credits rolled forward and were applied to future bills.
Because exported energy held nearly the same value as grid electricity, system sizing was forgiving. Oversizing rarely caused financial issues because excess production still carried strong value.
Net metering made solar billing simple, predictable, and easy for homeowners to understand.
Why Michigan utilities moved away from net metering
Michigan utilities transitioned away from net metering following regulatory changes approved by the Michigan Public Service Commission (More Info from MI Public Service Commission). Utilities argued that net metering did not fully account for grid infrastructure costs, maintenance, and long-term capacity planning.
As a result, the state moved toward a Distributed Generation framework that values exported solar energy closer to wholesale or avoided-cost rates rather than full retail prices. This shift fundamentally changed how solar savings are calculated and where financial value is created.
Current Distributed Generation Programs
Under Distributed Generation, electricity flowing in each direction is tracked and billed separately. Instead of a single net usage number, your bill now reflects two distinct values, which your electric meter records separately:
- Inflow: electricity pulled from the grid
- Outflow: excess solar energy exported to the grid
Electricity you use directly from your solar system provides the greatest financial benefit. Electricity exported to the grid earns a lower credit that does not fully offset retail usage charges. This structure makes solar savings more dependent on how and when energy is used, not just how much a system produces over the year.
How Electricity Utility Companies Calculate Your Solar Credits
These credits are applied as dollar amounts on your bill, not as one-to-one energy offsets. The specific credit rate can also change over time as utility rates and regulatory decisions are updated. Because of this structure, exporting large amounts of solar energy is no longer the primary source of savings for most customers.
Many homeowners expect solar credits to cancel out grid usage dollar for dollar, but current billing structures with Distributed Generation do not work that way. Solar credits only apply to certain portions of your bill and do not offset all charges.
Grid delivery costs, fixed customer charges, and some utility riders remain in place regardless of how much solar energy you export. This is why two homes with similar solar systems can see very different bills. How and when energy is used often matters just as much as how much solar energy a system produces.
What a Solar Bill Looks Like with Distributed Generation
An electricity bill for a solar customer usually includes several line items. You will still see a customer charge and usage-based charges for electricity pulled from the grid. Below that, solar generation credits are applied to reduce the total balance.
Most bills include:
- A fixed monthly customer charge
- Energy charges based on inflow
- Credits for exported solar energy (outflow)
- Taxes and utility riders
Solar billing changes throughout the year. In spring and summer, longer days and stronger sunlight increase production. In winter, shorter days and snow cover reduce output while heating-related electricity use often increases.
Even in high-production months, most customers should expect a remaining balance due to fixed and delivery-related costs. These credits may roll forward, but they are typically used quickly during the winter.
Why Solar System Design Matters More Than Ever
Because exported energy earns a lower credit, modern solar systems without storage must be designed with usage patterns in mind. Oversizing a system can reduce financial efficiency rather than improve it. With the right design, equipment, and installers – solar customers can still see a great return on investment for their solar energy system.
Effective designs focus on:
- Matching system size to actual energy needs
- Prioritizing daytime usage offset
- Avoiding unnecessary excess production
Strawberry Solar’s expert solar designers and installers bring decades of experience to ensure you’re getting the maximum benefit from your grid-tied solar. We design systems based on data, not assumptions. Each project starts with a detailed review of historical usage and a realistic production model.
This approach ensures homeowners understand expected savings, tradeoffs, and long-term performance before installation begins.
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Use Battery Storage to Maximize Your Solar System’s Financial Potential
Battery storage allows excess solar energy to be stored and used later instead of being exported at a lower credit rate. This increases self-consumption and reduces reliance on the grid during peak usage hours.
Additional benefits include backup power during outages and greater energy independence.
Batteries are not necessary for every home, but they can make sense for households with high evening usage, frequent outages, or long-term resilience goals. A detailed analysis helps determine whether storage adds meaningful value.
Learn More About Solar Battery StorageHow the Interconnection and Approval Process Fits In
Before your solar system can operate and interact with the grid, it must go through your utility company’s interconnection and approval process. This process exists to ensure your system is safe, properly designed, and compatible with the local electric grid.
Interconnection typically begins before installation, with an application that outlines system size, equipment, and electrical design. Once approved to move forward, the system is installed and then inspected to confirm it matches the approved plans and meets all technical requirements.
After installation and inspection, the utility company issues final permission to operate. Only at this point can your system legally export energy to the grid and begin earning solar credits. Until approval is granted, the system must remain inactive, even if installation is complete.
Why Michigan Homeowners Choose Strawberry Solar
Choosing the right installer is crucial to maximize your energy savings. Because Distributed Generation programs involve detailed requirements and periodic updates, local experience directly affects system performance, approval timelines, and long-term satisfaction.
Installers without Michigan and Distributed Generation-specific experience may design systems that look good on paper but underperform financially, run into interconnection delays, or fail to clearly explain how billing will actually work once the system is live.
Strawberry Solar is a Michigan-based company focused on education, transparency, and craftsmanship. Our team works regularly with local utility companies’ Distributed Generation programs and design systems that align with real customer savings.
Get Started NowFrequently Asked Questions
No. Even with solar, customers typically continue to receive a monthly electricity bill from their utility provider. This is because certain charges, such as customer fees, grid delivery costs, and riders, are not offset by solar credits. Seasonal changes also matter. During winter months or extended cloudy periods, homes rely more heavily on grid electricity, which increases billed usage.
Yes, solar credits can roll forward, but they usually do not accumulate for long periods. Credits earned during high-production months are often used quickly during lower-production seasons. Because credits are applied as dollar amounts rather than energy units, they reduce your bill balance rather than creating long-term surplus value.
Under net metering, excess solar production offset electricity usage at nearly the same retail rate. Under Distributed Generation, electricity flowing to and from the grid is measured separately. Energy you use directly from your solar system provides the greatest value, while exported energy earns a lower credit. This shift makes usage patterns and system design far more important.
Yes. Distributed Generation credit rates are set through regulatory processes and can change over time. While changes typically occur gradually rather than suddenly, long-term solar planning should assume that credit rates may be adjusted as utility pricing and energy policies evolve.
For many homeowners and businesses, solar can still be a strong long-term investment. The key is designing a system based on realistic energy usage, current billing rules, and clear financial expectations. Well-designed systems focused on self-consumption tend to perform best under the Distributed Generation model. Many systems designed with battery storage can also increase energy independence and use less grid power.