Your 2020 guide to getting solar panels for your home in South Dakota
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your South Dakota home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2020 **
Breaking news for 2020: We rated South Dakota one of the worst states in the country to get home solar panels. Yep, that's right. Read on to find out why you rarely see any solar on any rooftops here, and compare the policy performance and solar energy jobs here to other states. We urge anyone who cares about being part of a cleaner energy future to demand more from your state representatives. Share this page with them!
What you'll find on this page:
The Solar Strategy section is focused on the 3 ways of paying for solar in South Dakota, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in South Dakota. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in South Dakota.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your South Dakota Solar Strategy|
|South Dakota Solar Policy Information|
|South Dakota Solar Incentives|
|Your South Dakota Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in South Dakota|
|Solar Loans in South Dakota|
|Solar PPAs in South Dakota|
|Solar Purchase Payback Time in South Dakota|
|South Dakota Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in South Dakota
Figuring out the best way to go solar in South Dakota can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
How to pay for solar panels in South Dakota
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan. Because South Dakota has a voluntary RPS and low electricity prices, the state isn't quite financially right for leasing yet, so we included two different sizes of solar loans—one for people with a lot of equity (or credit), and one for people with just a little.
What South Dakota does have is a good deal of sun—as much as Florida, on an average annual basis! But let's be honest here, folks: as you can see from the chart, it takes 16 years for solar to pay itself back. Now, that really isn't as bad as it sounds, because by the end of the warranty life of your panels, you'll still end up $14,406 ahead. But buying solar requires a big up-front investment.
If you're strapped for cash, but you still want to go solar in SoDak, the best option is to take a home equity line of credit (HELOC). You'll put $0 down and end up with a big, big tax break at the end of the first year. Your loan payments over 15 years will be more than your electric bill savings, but you'll still come out thousands of dollars ahead by the end of our 25-year estimate, with the potential to continue the savings long after our calculations end.
Read on to find out more about each option for solar in South Dakota!
Option 1: Paying cash for solar
Paying up front used to be the only way to get panels on your roof, and it's still the option that allows you the most control. Furthermore, an outright purchase returns the most money over time, because you own the system from day one and reap all the benefits—including a Federal solar tax credit of 30% of the costs, which combined with electricity savings will bring your first-year costs way down.
In our example, you put down $20,000, but by the end of year 1, incentives and energy savings will erase a bunch of it. Over 25 years, your system will have produced over $14,000 in income.
Here’s how the numbers work for a South Dakota solar purchase of a 5-kW rooftop solar system:
- Installing a typical 5-kW solar system should start at about $20,000. Don’t worry–with tax credits and energy savings, it'll be a lot cheaper after year 1.
- Since the Feds calculate their incentive based on actual out of pocket costs, no state rebates means a bigger tax credit. You'll get 30% of the $20,000—that's $6,000—back next year as a tax credit, bringing your 1-year cost down to $14,000. Note: you can take the credit over two years if you don't owe $6,000 in Federal taxes this year.
- Next, subtract your first-year energy savings of $729, bringing the final cost after the first year to just $13,271. That's just two-thirds of the original price! Those savings will continue for the life of your system, and will only get bigger over time, considering that utility companies raise their rates 3.5% annually on average.
- By the time your system pays itself back in year 16, you’ll be seeing over $1,150 per year in savings until the end of your system’s life.
- When all is said and done, our 25-year estimate shows a total net profit of $14,406, with an internal rate of return of 5.9%. That's a solid investment, if you have the cash to put down.
- On top of those returns, your home's value just increased by just more than $14,500, too (your expected electricity savings over 20 years)!
- And speaking of doing good for the environment... your system will create some green for the earth by not using electricity from fossil-fuels. In fact, the energy you’re not using has the carbon equivalent of planting 120 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in South Dakota. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 2: Using a loan to pay for solar
Usually, this is where we tell you that taking a loan for solar panels is a no-brainer, because it means investing in an income-generating asset. And technically, that's true in South Dakota, too. It's just not a sure-thing like it is in other states, because South Dakota has some of the lowest electricity prices in the nation, and the savings aren't as great.
Okay, on to the important stuff:
As you can see from the chart above, you'll start out with a big windfall, because with a loan, you're not putting any money down, and you get the Federal 30% tax credit for the whole installed cost of your system. Then, over the 15-year repayment term of your loan, you'll be spending more than you're saving in electricity costs, to the tune of about $1,100 per year until you pay the loan off.
But from there, it's up-up-up! After your loan is paid off, you'll be saving over $1,200 per year in electricity costs from your fully-owned solar panels. You'll end up $5,938 to the good after 25 years, which is okay for an investment where you put nothing down!
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can get a home-equity line of credit (HELOC) for $20,000 with a fixed rate of 5% or lower and a 15-year repayment period.
- You have an appetite for making a little money with a long-term investment, while also producing benefits for the environment.
Here’s how the numbers pencil out for a South Dakota solar purchase with a HELOC:
- Installing a typical 5-kW solar system should start at about $20,000. That's how big your loan will need to be to cover it.
- The electricity you'll save in the first year of operation would have cost $729, but your loan payments will total $1,898, for a difference of $1,169, or about $97 per month.
- That's not so bad when you consider your tax savings for the year will be $6,000! You'll come out a little over $4,800 ahead in year 1, which should help ease the burden of loan payments for a few years, at least.
- When your loan’s paid off in year 15, you’ll start to see about $1,200 per year in savings until the end of your system’s life.
- For our 25-year estimate, you'll see a decent-sized return of $5,938 after all the payments. That's a nice amount of money for a zero-down investment!
- Finally, the environmental benefits cannot be overstated. Operating your system will take as much carbon out of the air as planting 120 trees every year!
Keep in mind, the numbers above are based on an average home in South Dakota. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
South Dakota does not offer solar Power Purchase Agreements or leases. Perhaps it would be a good idea to contact a solar advocacy organization and ask them to fight for solar in your state!
South Dakota Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in South Dakota:
South Dakota's Renewable Portfolio Standard
10% by 2015 (voluntary)
A Renewables Portfolio Standard (RPS) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels.
South Dakota has set an objective of 10% renewable energy by 2015. While that would ordinarily be an adequate first step for an RPS, South Dakota’s RPS is entirely voluntary. There are no penalties or other sanctions for utility companies that do not meet the 10% goal.
Unfortunately, the pattern we’ve seen elsewhere is repeated in South Dakota: a voluntary RPS simply is not enough to spark meaningful incentives for solar power. This voluntary status makes an otherwise respectable RPS seem pretty weak in comparison. Additionally, the program lacks a solar carve out. More on that next.
South Dakota’s RPS is critical to strong renewable energy policy. Utility companies aren't really all that gung-ho about you producing your own power. After all, it costs them money when you use less of their electricity. They also don’t naturally want to give you big payments for energy you're feeding back into the grid. The main reason the utilities are aiding your transition to lower electric bills and offering you incentives to put solar on your roof is because the state forces them via compliance fees. For South Dakota’s solar scene to really take off, they’ll need to drop the “voluntary” compliance and crack down on utilities if they don’t step up their solar game.
South Dakota's Solar carve-out and SRECs
As mentioned above, South Dakota’s RPS lacks a solar carve out, or specified targets for solar production. If the RPS contained specific carve-outs for clean and efficient technologies like solar panels, or mandates for the environmentally necessary increases in distributed generation, you’d see even stronger incentives for residential solar power.
South Dakota Electricity Prices
South Dakota homeowners pay an average of 11 cents per kilowatt-hour (kWh) of electricity. That’s definitely on the lower end of the spectrum and well below the national average of 13 cents/kWh. We know you like paying less now, but the long term costs of cheap electricity are through the roof. All that cheap electricity is produced by burning fossil fuels -- tons and tons of earth-killing fossil fuels.
When the astronomical environmental costs start to mount, monthly electricity bills are inevitably going to rise as well. When that happens you’re going to feel pretty darn smart for making the early switch to producing your own clean, efficient solar power.
South Dakota Net Metering
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume to 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.
South Dakota Interconnection Rules
Statewide with caveats
Curiously, for a state without standard net metering, South Dakota does have statewide interconnection standards governing how you get tied into 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. Right now, 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) requires “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 given their very low risk of accident or injury.
South Dakota Solar Incentives
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 26% of your total system costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how South Dakota measures up:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
South Dakota Solar Power Rebates
South Dakota currently lacks any sort of solar rebate programs. If the state switched from a voluntary renewable energy objective to a strong RPS with 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, including in Colorado, where Black Hills Energy has long offered solar rebates. That's right—a South Dakota energy company offers rebates for customers in another state, but not in South Dakota. Boooooo!
South Dakota Solar Tax Credits
No State Income Tax
Since South Dakota doesn’t have any income tax, there aren’t any solar tax credits to redeem!
Luckily, you will still benefit from the Federal Solar Tax Credit. There's no cap on the federal tax credit and fortunately for South Dakota, having no state rebate to deduct means a larger tax credit coming your way.
Property Tax Exemption
$50,000 or 70% (greater amount) of total property value
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.
Sales Tax Exemption
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 due to 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.
Low-income Solar Programs
Grade: FLearn more about low-income solar programs available in the U.S.
The consensus on South Dakota solar power rebates and incentives
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. The legislature should be harnessing our natural solar resources to help bring down initial costs. That tax credit and the property tax exemption are tremendous, but without any mandatory renewables standards, or any state incentives in place, we’ve gotta give South Dakota a “D” at the moment.