Old Saloon #10, Deadwood
With Mount Rushmore, the Crazy Horse Memorial, the Badlands, and the Black Hills, who wouldn’t want to be out in the sun in South Dakota. Oh yeah, it’s the home of the Sturgis Harley rally too. With people coming from all around the world to visit, South Dakota should use renewable energy to keep powered up while protecting its great natural environment. Here’s what the state legislature has done to promote clean solar energy so far…
South Dakota’s Renewables Portfolio Standard
A Renewables Portfolio Standard (“RPS”) is a law or other piece of regulation that mandates that a certain percentage of at state’s energy production comes from renewable resources by specified target dates. A strong RPS is important because it forces utility companies to promote conversion to renewable energy. That generally means free money for you in the form of rebates and performance payments when you switch to solar power.
South Dakota has set a voluntary goal of 10% renewable energy by 2015. That’s right, voluntary; there are no penalties or other sanctions for utility companies that do not meet the 10% goal.
Unfortunately the patterns we’ve seen elsewhere is repeated here: A voluntary RPS simply is not enough to spark meaningful incentives for solar power. For instance …
Solar Performance Payments and Rebates in South Dakota
South Dakota lacks any performance payments or utility rebates for solar power. If the RPS set mandatory levels of renewable energy production, we can guarantee the utility companies would offer incentives to help you make the switch to solar. How do we know? It’s worked everywhere that a real RPS has been implemented!
South Dakota Solar Tax Credits
The legislature isn’t picking up the slack either; there are no tax credits for installing a solar power system here.
South Dakota Solar Tax Exemptions
While you won’t save money on your state income taxes, you will save bags and bags of cash with South Dakota’s property tax exemption. All solar power systems less than 5 megawatts (all but the very largest solar power systems), are assessed in the same manner as a conventional energy system (even though the solar power system is actually worth significantly more because of long-term savings on your electric bill). That’s what we’re used to seeing in a property tax exemption. South Dakota then takes it one dramatic step farther: The first $50,000 or 70% of the assessed value of the property used for producing solar power (i.e., your home), whichever is greater, is exempt from property taxes for four years. That may well be the strongest property tax exemption we’ve seen in the country.
It may seem like nit-picking given the thousands the property tax exemption is going to save you, but we’d like to see lawmakers add a sales tax exemption as well. Especially because the lack of utility rebates, that 4-6% a sales tax exemption would save you can really add up, typically to savings of more than $1,000 on the typical residential solar power system.
Utility Prices in South Dakota
South Dakota pays an average of 10.47 cents per kilowatt-hour (“kwh”) of electricity, almost a full cent below the national average of 11.43 cents/kwh. We know you like lower bills now, but here at SPR we actually think electricity is far too cheap. That’s right, too cheap! Electricity prices are kept low by burning millions and millions of tons of earth-killing fossil fuels. When the environmental costs of burning all that oil and coal really start to take their toll, we’re going to pay for all of the cheap electricity in ways much more important than monthly bills (though monthly electricity bills will inevitably rise as well …) Of course, you’ll be looking like a genius to all your friends, because you made the early switch to producing your own cheap, reliable solar power!
South Dakota Net Metering and Interconnection
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume, and make sure you get credit for any surplus. South Dakota currently lacks any statewide regulations governing net metering, or (more importantly) ensuring that utilities offer net metering in the first place.
Curiously for a state without standard net metering South Dakota does have statewide interconnection standards governing how you get tied onto the grid. The standards are solid overall, adopting the same 4-tiered system we’ve seen in other states. There is, of course, always room for improvement. First we’d like to see requirements for a redundant external disconnect switch prohibited. Currently that decision is left to the utility. We’d also like to see insurance requirements eliminated for residential systems. Currently a tier 1 system (those under 10 kw, which covers most residential systems) require only “proof of adequate homeowners, general liability or commercial liability insurance sufficient to insure against all reasonably foreseeable direct liabilities given the size of the small generator facility.” While that requirement is certainly less onerous than others we’ve seen, we think that any insurance requirement is unnecessarily constraining on small systems and their very low risk of accident or injury.
5kW Example Return on Investment in South Dakota
Installing a typical 5kW solar system should start at about $25,000. Don’t worry – even without state incentives, you can still knock a big chunk off the price.
- Since the feds calculate their incentive based on actual out of pocket costs, no state incentives means a bigger federal tax credit. Subtract $7,500 (30% of $25,000) for a new price of $17,500.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be about $694. That brings your cost after the first year to $16,806.
- With a conservative estimate for the future rise of electricity prices, you can expect your new solar power system to pay for itself in about 16 years. Even with that somewhat slower payback time frame, you can still expect to get about 9 years of profits (yes, profits) out of your solar power system. We estimate those profits to be $16,708 through 2036.
- In addition to those direct wallet-fattening savings, you also increased your home value by $13,883; and don’t forget about those property tax benefits we talked about above!
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using all that fossil-fuel backed electricity. In fact, the fossil-fuel energy you’re not using is the carbon-saving equivalent of planting 117 trees a year, every year your solar power system is humming.
These numbers are estimates. Your home is unique and how much power you generate and how much money you save depends on that uniqueness. The best way to find out how much cash switching to solar can save you is to get one of our free quotes, and an expert installer in your area can draw up a home-specific estimate for you. Your quote is 100% free (yes, that’s right, 100% free) and you can get as many of them as that smart shopper in you desires!
South Dakota Solar Consensus
Despite our reputation for cold weather, we actually get a lot of sun here. As much as most parts of Florida in fact. Unfortunately that tremendous solar power potential is being squandered. The lack of state or utility backed incentives is keeping costs high (compared to solar-friendly states) for homeowners like you to make the switch, and keeping payback time frames slow. Even without any incentives, solar power is an excellent investment, but the legislature should be harnessing our natural solar resources to help bring down initial costs. That property tax exemption is tremendous, but without any mandatory renewables standards, or any state incentives in place, we can’t give South Dakota anything but an “F” at the moment.