South Dakota Solar Power: Check Your Savings, Costs, Tax Breaks, Incentives and Rebates
South Dakota offers very peculiar conditions for solar power. With an average of five peak sun-hours per day, it is possible to save a lot money with a residential PV system.
However, the largest savings actually come from the property tax exemption:
In South Dakota, a solar PV system is exempt from that tax, and on top of that it also reduces the yearly tax for the home where it is installed!
Other than the federal tax credit, there are no additional incentives in South Dakota.
However, the thousands of dollars om solar savings and property taxes are by themselves a very strong reason to go solar.
Return on Investment for Residential Solar Power in South Dakota
Most homes can get good results with a 5-kilowatt solar PV system, which is a system size that strikes a nice balance between upfront cost and lifetime savings.
The ideal capacity may vary according to energy consumption habits and rooftop area of a household. However, a 5-kW PV system is an excellent point of reference, so we will break down the project financials according to that installed capacity.
- You can expect to pay $20,000 upfront for a 5-kW solar PV system in South Dakota.
- However, $6,000 will be deducted on your next tax declaration thanks to the 30% ITC, so the net cost is reduced to $14,000.
First-year savings will be around $720, resulting in a net outlay of around $13,280.
- You can expect a payback period of 15 years and total savings of more than $14,000 over the 25-year warranty period of solar panels, based on energy savings alone. However, the outlook improves drastically with the property tax exemption.
- Assuming your home is worth $150,000, and considering a yearly property tax of around 1.3%, you would be paying $1950 per year before going solar.
- Solar increases home value by around $14,500, for a total of $164,500, but now 70% of that value is exempt from property taxes!
- Your property tax has effectively been reduced from $1950 to $642, or $1308 per year.
- When you add energy savings and property tax savings, the payback period is reduced to just 7 years.
- The benefits for you are lower electric bills and property taxes, but the environment also wins: your PV system has the same impact as planting 120 trees per year.
Remember this analysis is for a 5-kilowatt system assuming the average sunshine available in South Dakota.
- A location to the southwest of South Dakota, which gets the most sunshine. - Having a south-facing rooftop area that is large enough to accommodate the whole array. - No obstacles, natural or man-made, blocking off the sun.
- A location to the southwest of South Dakota, which gets the most sunshine.
- Having a south-facing rooftop area that is large enough to accommodate the whole array.
- No obstacles, natural or man-made, blocking off the sun.
You can check out the solar radiation available at your exact location, by going to the NASA Atmospheric Science Data Center website and inputting your coordinates (you can get them from Google).
The site provides you with a wealth of meteorological data tables, including a section that is dedicated to solar PV modules.
The data available includes:
- Solar radiation by month
- Solar radiation by surface tilt angle
- Optimal tilt angle for solar panels
South Dakota Solar Power Incentives, Tax Breaks and Rebates
There are two main incentives for solar power in South Dakota: the 30% federal tax credit, and the 70% property tax exemption after you install a solar PV system.
The state lacks a Renewable Portfolio Standard, which is a law that establishes a minimum renewable generation percentage for utility companies, subject to a deadline.
No RPS means there are neither rebates nor solar performance payments available. There was a voluntary RPS of 10% renewable generation by 2015, but it wasn’t effective and has not been updated with new targets.
South Dakota Tax Credit
There are no local tax credits for solar power in South Dakota, but this is not an issue because the state doesn’t have an income tax in the first place.
This leaves only the federal tax, and thanks to the 30% ITC you can get back nearly a third of your solar power investment in less than a year, in the form of a tax deduction.
You are allowed to split the deduction if you are not taxed high enough to use it all in one year.
South Dakota Tax Exemptions
The property tax exemption in South Dakota is the best in the USA, hands down.
In addition, you earn a 70% exemption on the whole value of your property. If your property is currently worth $150,000, you pay roughly 1.3% of that value in property taxes each year.
However, after going solar, you only pay taxes based on a value of$49,350 (30% of the new value of your property, which is $164,500).
This benefit varies according to property value but it is a great incentive nevertheless. For a 150,000-dollar property, tax savings are nearly twice the energy savings!
The state has no sales tax exemption for solar power, but with that huge property tax exemption you don’t really need it.
South Dakota Electricity Rates
South Dakota has very cheap electricity: the average rate is $0.11/kWh, which is two cents under the US average. However, this is possible thanks to fossil fuels such as coal, and energy prices will rise as harsher regulations come into play.
Higher electricity prices are bad news for a homeowner who fully depends on energy from the grid, because the bill rises proportionally. However, homeowners who get 100% of their energy from solar power need not worry: they are actually saving more cash each time electric rates rise!
Is There Net Metering in South Dakota?
There is no net metering framework in South Dakota, which means each utility company determines the conditions for its customers.
There is a state-wide interconnection standard, however, and two rules apply across the board:
- Solar PV systems require an external redundant disconnect switch.
- Homeowners who go solar must carry liability insurance.
With no net metering standards, and considering the extra interconnection requirements, the smartest choice is to hire the services of a trusted solar contractor who is familiarized with the process.
Are There $0 Down Payment Financing Options in South Dakota?
Solar leases and Power Purchase Agreements (PPAs) are not available in South Dakota, which means the only option to go solar for $0 down is to get a low interest loan, ideally a HELOC (home equity line of credit).
The purpose of a solar loan is to install a PV system without paying any cash down, allowing you to claim benefits and get monthly energy savings, which can then be used to start paying the loan.
- The typical terms for a HELOC can be a 5% interest rate and 15-year repayment period.
- The federal tax credit, claimed within one year of your investment, allows you to pay off a considerable portion of the loan.
- Yearly energy savings and tax exemptions further contribute to covering loan payments.
Purchasing a solar PV system through a loan reduces the project lifetime savings, since there is interest to pay. However, in many cases you can fully pay of the loan with the tax benefits and energy savings generated by the PV system, without ever having to pay a single penny out of your pocket.
In South Dakota, purchasing a solar PV system through a loan yields energy savings of around $6000 over a 25-year period.
It is less than the $14,000 available from a cash purchase, but consider a loan allows you to go solar for $0 down. Also, don’t forget that you get a huge property tax exemption in either scenario, which is added to your energy savings.
Cash Purchase VS Loan: What’s Best for South Dakota Homeowners?
The best decision depends on the assets you own, and your personal preference as well. There is no single answer that applies for all scenarios.
Purchasing a PV system in South Dakota in cash
Purchasing a PV system in South Dakota in cash yields the highest dollar savings over the 25-year project life time. However, this option requires you to pay a sizable sum upfront. We recommend a cash purchase if you are unwilling to pay interest on a loan and prefer to maximize total savings.
Purchasing a PV system in South Dakota through a loan
Purchasing a PV system in South Dakota through a loan yields the highest percentage return on investment. With this option, energy savings are reduced to $6000 but you can install a residential PV system for $0 down.
What is the Solar Power Installation Process in South Dakota?
Solar PV system installation in South Dakota can be challenging due to the lack of a net metering policy, as well as the extra requirements placed by local interconnection standards.
The best recommendation we can give you is to leave this task to a reliable and experienced solar contractor: you will save valuable time and are guaranteed to get top quality workmanship and give you the best solar panel reviews for todays solar market.
We can provide assistance if you have already decided to purchase a solar PV system in South Dakota.
1. Fill our solar installation form, providing basic information on your property. 2. Talk with trusted solar contractors near you to get accurate quotes. 3. Compare quotes (we recommend you get at least three) and choose the best option for you. 4. Have your contractor install the PV system, and enjoy clean power while helping the planet.
1. Fill our solar installation form, providing basic information on your property.
2. Talk with trusted solar contractors near you to get accurate quotes.
3. Compare quotes (we recommend you get at least three) and choose the best option for you.
4. Have your contractor install the PV system, and enjoy clean power while helping the planet.
Keep in mind this article is for a 5-kW photo-voltaic system subject to the average sunlight conditions in South Dakota. When you get a proposal from your contract of choice, it is normal to have variations in project price, installed capacity and expected yearly savings.
The actual installation is typically completed in less than four days after you sign the agreement.
Energy savings are a good reason to install a residential PV system in South Dakota, but tax savings are an even better reason! When you combine the property tax reduction and the 30% federal tax credit, there resulting benefit is equivalent to thousands of dollars you won’t owe the government over the next few decades.
The main area of opportunity to improve the outlook for solar power in South Dakota is to introduce a mandatory RPS, which would surely drive utilities to offer rebates and other incentives.
It would also be great to have net metering policy that favors home and business owners, while improving the interconnection standards by removing unnecessary requirements.
A sales tax exemption would be welcome, but is not really needed when you consider the magnitude of the property tax exemption.