To calculate your potential revenue, you need the Avoided Cost rate. This is the price a utility (like DTE or Consumers Energy) is legally required to pay a “Qualifying Facility” (your dam) under the federal PURPA law.
In Michigan, these rates have seen a massive spike due to the state’s aggressive clean energy transition goals.
1. Current Avoided Cost Rates (Early 2026)
While rates vary by project size and contract length, the benchmark for “Standard Offer” contracts in Michigan is currently among the most attractive in the Midwest.
| Utility | Rate Type | Projected Rate (2026) |
|---|---|---|
| Consumers Energy | Special Hydro PPA* | $160.00 / MWh ($0.16 per kWh) |
| DTE Electric | Standard PURPA Rate | $95.00 – $115.00 / MWh ($0.09 – $0.11 per kWh) |
| Consumers Energy | Standard PURPA Rate | $85.00 – $105.00 / MWh ($0.08 – $0.10 per kWh) |
*The “Hull Street” Factor: As part of the sale to Confluence Hydro (Hull Street Energy), Consumers Energy agreed to a $160/MWh starting rate with a 2.5% annual increase. This is considered “above-market” to help cover the repair costs of old dams. As a private corporation, you can use this as a precedent when negotiating your own contract.
2. Estimating Your Annual Revenue
If you acquire a small dam that produces 2 Megawatts (MW) of power:
- Generation: 2 MW x 8,760 hours/year x 50% capacity factor = 8,760 MWh/year.
- Revenue (at $100/MWh): 8,760 x $100 = $876,000 per year.
- Operating Expenses (OpEx): Typically 20%–30% for small hydro ($175k – $260k).
- Net Operating Income (NOI): Approximately $616,000.
3. Applying the 70/30 Crowdfunding Split
Using the model we built earlier, here is how you would distribute that $616k NOI to your shareholders:
- The 8% Pref: If you raised $5M to buy and fix the dam, you pay the investors $400,000 first.
- The Remainder: $616,000 – $400,000 = $216,000.
- The Split:
- Investors (70%): $151,200
- Your Corp (30%): $64,800
4. Key Regulatory Hurdles for 2026
- The “Must-Buy” Limit: Michigan utilities are typically required to offer these “Standard Rates” to projects up to 5 MW (recently lowered from 20 MW for some utilities). If your dam is larger, you must negotiate a custom contract.
- Carbon Credits (RECs): In 2026, Michigan’s new 100% Clean Energy Standard makes your “Renewable Energy Credits” (RECs) extremely valuable. You can often sell these separately from the electricity for an additional $10–$25 per MWh.
Final Pro-Tip for Your LOI
When you send your Letter of Intent to a dam owner, include a clause that says:
“The purchase is contingent upon the Buyer successfully securing a 20-year Power Purchase Agreement (PPA) with the interconnecting utility at a rate no less than $[Your Minimum Rate] per MWh.”
Would you like me to help you find the “Interconnection Queue” for DTE or Consumers Energy? This will show you if there are already other projects waiting to plug into the grid near the dam you are looking at.