The Pablo Davis Elder Living Center in Southwest Detroit just got a new roof. But it’s not just any roof—this one includes a 154.28-kilowatt solar array designed to generate electricity.
The project was part of a larger renovation subsidized by low-income housing tax credits that includes energy efficiency as well as general facility improvements.
For Phyllis Edwards, executive director of the nonprofit Bridging Communities, which owns the center, incorporating energy efficiency and solar panels into the 17-year-old, 80-unit facility’s resyndication made financial sense.
“As a building owner, it’s something that I will promote among my colleagues around the city who are developing multifamily units,” Edwards says. “I was looking at it not from the owner’s perspective, but trying to keep the building affordable for the residents.”
The project is among the first to be completed under Michigan’s new “inflow-outflow” law, adopted in May, which replaced net metering. Under the old system, utilities paid rooftop solar owners the full retail value of the electricity they generated for the grid. Under inflow-outflow, the value of grid maintenance is subtracted from the credit, reducing it by about 45 percent.
Some fear the new law will cloud the outlook on solar energy development in Michigan, as it has in other states where it’s been adopted. But even with those reduced credits, many projects are underway in Detroit.
The Pablo Davis project is still able to pay for itself within 6.5 years and garner a 10 percent return on investment (ROI), according to Tim Skrotzki of the nonprofit Elevate Energy, who helped Edwards develop the project. That’s a bit worse than the initial forecast, which projected a 5.6-year payout with a 12 percent ROI under the old net metering law. But neither is it a deal-killer.
One reason the project penciled out so well was the declining cost of solar panels. The original 2018 projection estimated a $300,000 installation cost. That dropped by $30,000 over the two years it took to bring the project to fruition, a period in which President Donald Trump imposed a 30 percent tariff on imported solar panels. The federal solar tax credit has remained at 30 percent, and is expected to taper off over the next several years as the tariffs also fade.
“It’s a credit to the industry that solar installers are still dropping their costs even though there is a tariff on solar panels,” Skrotzki says.
Solar for single-family residential
When it comes to the single-family residential sector, which accounts for 73 percent of the housing units in Detroit and nearly 30 percent of its land area, solar panels must offset close to 100 percent of a building’s energy load to be economical. Here, the barriers imposed by the new inflow-outflow law are trickier to overcome.
Mark Hagerty is the president of solar installer Michigan Solar Solutions, a company he launched in 2007 just in time for the Obama-era TARP credits that funded many municipal and school projects. Early projects he completed included solar panels on Cass Tech, Mark Twain, Sherman Academy, and Henry Ford High School. When those incentives faded away, his company started doing more single-family residential projects.
Hagerty says the new inflow-outflow law is changing how he approaches single-family residential clients. Now, he is more careful to design systems to even out the generation produced throughout the day by positioning panels facing south, east, and west, and sizing systems to optimize on the resident’s expected usage profile.
“We place panels so that we are producing power throughout a longer period of the day,” he says, “so that you can consume more of the power at the time of production without having to put it up on the grid.”
This kind of fine-tuning can increase installation costs, which in turn can increase time to payout and decrease ROI. But according to Hagerty, the future of solar is “sunny.”
“The cost of electricity is going to keep going up; solar panels are not,” he says. “The fossil fuel industry is in a downward spiral. The more of their products that are used, the more the cost will go up. The more solar panels are used, the less they will cost because of economies of scale.”
But recent high-visibility residential solar projects in Detroit, such as the Midtown Eco Homes and Tiny Homes, tend to land at the higher end of the market, and investment in solar panels remains out of reach for the many low-income Detroit residents who live in single-family homes. Meanwhile, the low-income energy burden in Detroit—the percentage of residents’ income that is consumed by energy utilities like electricity and gas—is sky-high.
Brandon Knight, president of solar installation company Distributed Power LLC, is trying to address that issue by developing a model that aggregates multiple installations in a low-income neighborhood to reduce upfront costs. His concept is to optimize a single design for a neighborhood’s housing type, which he then plans to replicate throughout the neighborhood, reducing costs through economies of scale.
His goal is to keep monthly payments at or below the resident’s average monthly utility fee.
Knight is currently working with Jefferson-Chalmers resident Tammy Black to install solar panels on 22 homes in the neighborhood. He expects all of them to be net metered under the old law, but he’s working against a November 27 deadline imposed by DTE Energy, the electric utility for Southeast Michigan. And the group has so far not yet identified a financing mechanism.
His priority at this point is to complete the installation, even if that means his company donates some of the panels. Long-term, he’s hoping to develop a concept that makes the work financially sustainable, which may entail forming a nonprofit to receive grants and donations. He also points to California’s fund for low-income single-family solar as a legislative goal worth pursuing.
“All of these people have opted in. They want to do it and they have site plans. We have had the site visits; we’ve had everything submitted to DTE,” says Knight. “I have a lot of faith that this will work out for us as a business over the long term.”
Residents who rent or live in multifamily housing cannot install their own solar panels. That is why solar proponents have advocated for a law enabling community solar in Michigan, whereby multiple individuals can subscribe to a solar installation or “solar garden” and receive a credit on their utility bill for the electricity it generates.
As with net metering, community solar represents a threat to utilities’ business model. A 2018 bill to establish community solar in Michigan, part of a bipartisan “Energy Freedom Package” of bills, never made it out of committee. In September, State Rep. Michele Hoitenga (R) introduced a new bill to enable community solar.
According to Jackson Koeppel, the executive director of Highland Park-based Soulardarity, a nonprofit that advocates for renewable energy on behalf of low-income communities, the new bill shows that the desire for community solar is broad and bipartisan. He views the end of net metering as a “real blow” to those his organization represents.
“We have dozens of members just in our organization that want solar,” Koeppel says. “Either they can’t access the financing tools, or the financing options are too expensive, or the company won’t get enough payback on this project.”
Koeppel, who penned a scathing editorial in Bridge Magazine arguing that DTE Energy has been using dark money to quash distributed renewable energy generation, says that it’s about more than just “going green”—it’s also about building up the local economy.
“That’s a lot of local money—probably tens of millions of dollars—leaving the city every year in the form of a utility bill,” he says.
Planning for solar in Detroit
Joel Howrani-Heeres directs the city of Detroit’s Sustainability Office. He says the Pablo Davis project is something the city would like to see replicated, pointing to a recent bid calling for a green renovation of the Adam Butzel Recreation Complex.
“They essentially did a green capital needs assessment on the property, integrating energy efficiency and renewables,” he says. “And so we’re working with the housing department to think through what that could look like across the city.”
Howrani-Heeres’s office has also been working with Elevate Energy on developing a “Detroit Solar Feasibility Study” as part of the city’s Sustainability Action Agenda. The study will include a toolkit to enable private developers looking to evaluate opportunities for solar development in the city, including design guidelines and a solar potential map. The project was funded by a U.S. Housing and Urban Development grant.
His office is also working with the city’s Buildings, Safety, Engineering, and Environmental Department to develop a more streamlined application process for solar permits. Although the end of net metering may present a bit more of a financial hurdle for projects, he sees a future for solar development in the city.
“It now takes a little bit longer for it to pay off under the new inflow-outflow rules, but I don’t think it’s a death knell by any means,” Howrani-Heeres says. “Given the price of solar has come down so much, it’s a challenge, but not an overwhelming one.”
Skrotzki believes a perfect storm of market forces will advance solar development, regardless of net metering’s end. Financing will remain a challenge, especially for low-income single-family households. But with innovative community models, new financing tools, and the increasing cost of utilities, he believes there’s plenty of room for growth.
“I see increasing electric prices in Detroit increasing demand for adoption of solar to offset the cost,” says Skrotzki. “More and more Detroit families will be needing help with high energy burdens.”