South Dakota Solar Panel Buyers Guide (Installation & Efficiency 2023)
By Dan Simms /
In this guide to making solar more affordable using solar incentives in SD, you’ll learn:
Yes. For most South Dakota homeowners, solar incentives help bring down the cost of installing solar panels and maximize the value you see from your system.
The typical cost of a solar installation in South Dakota is about $25,095, slightly more costly than the national average. This is primarily based on the above-average energy demands in the state. Though the cost-per-watt for installing solar photovoltaic (PV) systems is nearly 10% cheaper than average, the larger systems required in the Mount Rushmore State leave the all-in conversion costs above the nationwide average.
Unfortunately, solar customers have relatively few state-level solar incentives. However, federal and local programs can still save you thousands on your system over time.
In the chart below, we list all of the available incentives in South Dakota, along with a description of how each works. We also include the average savings you’re likely to see when you take advantage of each of these perks.
|Solar Incentives in South Dakota||Incentive Type||Description||Occurrence||Estimated Dollar Amount You Can Receive|
|Federal Solar Investment Tax Credit (ITC)||Federal||Credits your income tax liability with 30% of your system costs, including panels, inverters and batteries.||One-time: The credit amount gets calculated once when you file your taxes. However, unused credits can carry over for up to five years.||$7,529, on average|
|Renewable Energy Systems Property Tax Exemption||State||Prevents the value of your system from driving up your home’s assessed value and your real property taxes.||Ongoing: You’ll see savings on your property tax bill for as long as your solar power system retains value.||$5,420, on average (not accounting for system depreciation)|
|Net Metering||Local||Credits you for any excess power you generate and push to the grid. Net energy metering is NOT mandated in the state.||Always in Effect: If you have access to this perk, you’ll continuously accrue energy credits that get applied to future electric bills.||Varies based on the size of your system and your monthly utility bills|
|Local Incentives||Local||Additional incentives offered by utility providers or local municipalities.||Varies, depending on the incentive.||Varies based on the perk, your energy efficiency upgrades and other factors|
The federal solar tax credit is offered to all U.S. taxpayers by the federal government. It reduces your income tax burden by 30% of the total cost of your solar panel system installation. Given the average cost of $25,095 for solar systems in South Dakota, that amounts to a typical credit of $7,529.
This perk has been available since 2005, although it has gone through some changes since then. The original rate schedule called for a 30% credit for systems installed between 2005 and 2021. Installations done in 2022 and 2023 were due for a 26% or 22% credit, respectively, and the credit would be discontinued in 2024.
In August 2022, Congress passed the Inflation Reduction Act (IRA), which changed the schedule quite a bit. The changes were as follows:
We strongly recommend taking the federal credit, as there is no downside to filing for it. You can follow the steps below to make sure you get access to it.
If you use tax software to file digitally, you’ll more than likely be asked if you completed any energy efficiency home improvements during the previous tax year. If you answer “yes” and then include information about your solar system, you can avoid having to follow the steps above.
We love the federal credit for solar customers and were overjoyed when the IRA was passed to extend the program. In our opinion, this is the most valuable solar perk available in your area, and we strongly recommend not missing out on it.
It takes just a few minutes to complete the IRS application, but it can still potentially save you an average of over $7,500.
We say “potentially” because this is not a solar rebate, and the savings are not guaranteed. This is a tax credit, which means you’ll see no actual value from it if you don’t owe money on your income taxes.
Thankfully, you don’t need to owe the entire amount the first year your solar system is commissioned. You can carry over unused credit for four additional tax years — a total of five years. Given the typical credit value, you’ll need to owe an average of $1,500 per year for the five years following your conversion to take the full amount.
Normally, when you carry out a home improvement project that raises your home value, your assessed value will also increase – and so will your property taxes. Installing solar panels usually bumps up your property value by approximately 4%.1 That means conversion could, under normal circumstances, make your taxes go up a bit.
Thankfully, the state offers an exemption for solar equipment from property taxes, which means your tax assessor will not consider the value added by your system when calculating your taxes.
Given the average system value of $25,095 and the statewide property tax rate of 1.08%, that’s an estimated annual savings of about $271.2 Since your panels should hold value for around 20 years, that’s a maximum lifetime savings of $5,420.
Your actual savings will be lower as your system depreciates in value, but since calculating depreciation is challenging, this maximum should illustrate the potential of the perk.
The best part about exemption for property taxes for solar equipment is that the savings are applied automatically. You don’t have to spend time or energy filling out applications or paperwork.
Instead, your tax assessor will automatically ignore any value added to your home by your PV equipment. The monthly tax bills you get for your home will reflect the savings right away and will continue to do so until your panels diminish in value.
We love to see exemptions for property taxes for solar energy equipment. Not only do they provide decent savings over the lifespan of your system, but they’re also automatic perks that apply with no effort on your part.
Unlike in other states, the local tax exemption is limited to systems up to $50,000 in value. This is an unusual limitation, but it shouldn’t affect many residential solar customers in the state and doesn’t diminish our opinion of the perk in general.
Net energy metering — also just called NEM — is one of the most popular solar incentive programs offered throughout the country. According to the Solar Energy Industries Association (SEIA), it’s also one of the most beneficial perks.3
Net energy metering measures the power you pull from the grid as well as the excess energy your system generates and sends to the grid. The net energy — production minus consumption — gets credited to your utility account to help offset future energy bills.
Net energy metering helps maximize the value and the savings you’ll see from your panels, reducing your effective electricity rates based on your energy production.
Unfortunately, NEM is not mandated by the South Dakota Public Utilities Commission (PUC). However, some electric utility companies do opt to offer net energy metering. You’ll need to contact your electric company to see if you have access to the program.
If NEM is available to you, chances are your solar contractor will enroll you automatically.. You can follow the steps below to see if net energy metering is open to you and enroll if it is.
Net energy metering is an outstanding program that provides several benefits. Among other things, it:
Net metering is also great because it doesn’t require any action for most solar customers. Even if your solar company doesn’t enroll you automatically, the application process is quick and painless.
The only downside to net metering in South Dakota is that it’s not mandated by the PUC and it’s not likely to be required anytime soon. It’s left up to each individual utility company to decide if they will offer it or not, and many choose not to.
Unfortunately, local incentives for PV equipment are non-existent.
However, there are some incentives and cash-back perks available for other energy efficiency upgrades – like LED lights, solar water heaters, insulation installation and energy-efficient appliances – from the following companies:
We recommend contacting your electric company to see if there are benefit programs available for efficiency upgrades. You can also check the Database of State Incentives for Renewables and Efficiency for more information on available perks.
There aren’t many incentives available in South Dakota, which means taking advantage of everything that’s available is crucial. As such, we suggest applying for the federal credit and taking advantage of the exemption for property taxes and net energy metering if it’s available.
Applying for the federal credit is a must, simply because there are so few other perks available to help make solar more affordable. Plus, this perk requires so little time and energy to apply for, making the average credit value of $7,529 well worth the effort.
The tax exemption for property taxes is another great perk that provides long-term savings and reduces the financial burden of adopting solar power. This incentive should be considered a must as well, especially since you don’t have to apply for it.
Finally, we strongly suggest enrolling in net energy metering if you have the option. This perk helps maximize your long-term energy savings and increase the value of your solar energy system overall. If the program is available to you, enrolling is a breeze, and your installer will likely complete the process for you.
There are no pieces of legislation in the works that will increase solar perks in the state in the near future. It’s unlikely that there will be new perks popping up in the coming years.
That could change if a new renewable energy goal is set. Usually, a progressive goal will trigger local utility companies and government agencies to offer more incentives to increase the use of renewable energy.
Below, we’ll answer some of the questions we see most often from South Dakota homeowners pertaining to incentive programs and solar rebates.
At this time, there are no plans in place for new incentives to be offered or for the existing ones to be upgraded in any way. This could change if a new Renewable Portfolio Standard goal is set — the most recent one expired in 2015 — but we don’t expect that to happen in the next two years.
The Inflation Reduction Act (IRA) extended the federal tax credit program by ten years to 2034. It also increased the credit rate for 2022, 2023 and 2024 to 30%. Previously, these sat at 26%, 22% and 0%, respectively.
The IRA also made the tax credits for electric vehicles (EVs) more valuable, increasing the maximum credit to $7,500.
There doesn’t appear to be any threat to the solar perks available in the state, at least for the next two years. In most cases, we’d say states with an expired RPS goal are at risk of losing net energy metering, but the policy already isn’t mandated in South Dakota as it is.
The federal credit is guaranteed through 2034, and it’s unlikely that the property tax exemption in the state will be reduced or discontinued in the near future.
No, Solar Renewable Energy Certificates (SRECs) are not available in North Dakota. These certificates earned for every 1,000 kilowatt-hours (kWh) your solar system generates. These are separate from net energy metering credits and accrue for all production, even if you consume some or all of the energy on-site. SRECs can be sold for a profit if there is a local market for them.
Unfortunately, there is no open SREC market in South Dakota. This is largely due to the fact that the state doesn’t have an active RPS goal, which means there is little incentive for electric companies to buy clean energy credits.
Unfortunately, the state does not offer an exemption for sales tax for residential systems. That means you should expect to pay sales tax on all solar components, as well as the solar panel installation. There is a sales tax exemption for larger solar PV systems, but this only applies to things like community solar farms and larger commercial systems.
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