Is Solar Worth It in South Dakota? (2023 Homeowner's Guide)
Here’s a quick overview of solar viability in South Dakota:
- South Dakota ranks 50th in the country for solar installations*
- The average electricity rate is 11.75 cents per kilowatt-hour (kWh)**
- The average solar payback period is 12 years***
- Homeowners are eligible for the Renewable Energy Systems Exemption and the federal solar investment tax credit (ITC)
- The average homeowner saves $22,923 over the lifetime of their solar system ***
South Dakota residents pay below-average prices for electricity and the state as a whole ranks 50th in the country for solar conversions. These facts leave most residents wondering if going solar is a worthwhile investment in the Mount Rushmore State. For most homeowners in the area, solar panels are a good option, but they aren’t unilaterally worth it in South Dakota. Below, you’ll find information on how to figure out if going solar will save you money in the long run. We’ll also discuss the benefits your solar panels will afford you and some things you need to think about once you determine if they’re right for you.
To speak with an EcoWatch-vetted professional who can help you determine whether solar is worth it for your South Dakota home, follow the links below.
GenPro Energy Solutions
Lakota Solar Enterprises
Black Hills Solar
How to Figure Out if Solar Panels are Worth It in South Dakota
Solar panels save most South Dakotans a significant amount of money, but they will be nothing but an expense for others. Below are some metrics you can use to determine if solar is right for your home or not.
What’s Your Home Electricity Consumption?
First, you should take a look at your past energy bills to see if you consume enough electricity to make solar panels worthwhile. Solar saves you money on electricity, so the higher your energy needs, the more value you’ll get out of your panels. A good benchmark for solar viability is around 500 kWh per month. Most South Dakotans use about 1,037 kWh monthly, putting them well above the national average and at more than double the standard cutoff for solar panels being worth it. This means that most residents in South Dakota will benefit immensely from going solar and that solar energy is more valuable in the area than in many other states.
How Much Is It To Go Solar in South Dakota?
The price of solar panels in South Dakota hovers around $2.39 per watt, making it the second most affordable state for solar equipment. Residents typically need around a 10.5-kW system to offset electric bills, which puts the average total price at around $18,570 after the federal tax credit is considered. Solar panels reduce your electricity bills, which means they are most valuable in areas where electricity rates or consumption is high. South Dakotans pay below-average prices for energy but use far more than the national average. As such, solar panels provide more value to South Dakotans than to residents in most other states.
What’s the Payback Period for Solar in South Dakota?
An enormous upside to going solar is that your system will almost always pay for itself in energy savings over time. The timeline for panels to pay for themselves depends on many factors, but the average in South Dakota is around 12 years, which is right in line with the national average. Most South Dakotan’s solar panel systems will pay themselves off within 9 and 15 years. If you estimate your solar panel payback period — with a solar calculator or by having a solar installer assess your home — to be longer than 15 years, your return on investment (ROI) will be below average. You’ll still save money, as long as your payback period isn’t longer than 25 years, but it will take longer to recuperate your investment, and you’ll save less overall.
What Are Average Buy-Back Rates in South Dakota?
Net metering is a billing policy mandated by most states that allows solar customers who opt into interconnection to overproduce solar electricity with their solar systems and sell the excess energy production back to their utility companies for a reduction on future bills. Net metering helps solar customers save money and eliminate their energy bills in some cases. Unfortunately, the Public Utilities Commission (PUC) in South Dakota does not mandate net metering, so it’s left up to the local utility companies to offer it or not. You should check with your provider before committing to solar, as a lack of net metering or a below-average policy leads many residents to add solar batteries onto their solar photovoltaic (PV) system to maximize savings.
How Much Sun Does Your Roof Receive?
Solar panels produce energy — and, by extension, save you money — when they receive sunlight and produce electricity for your home. The more sun your roof receives, the more value you’ll get from your solar panels. The average number of sunny days in South Dakota totals around 213, which is above the national average of 205. The above-average sunlight availability makes solar power in South Dakota more valuable than in most other states. You need to assess your home on an individual basis, as not all roofs will receive the same amount of sunlight. Most importantly, the direction your roof faces matters, with south-facing roofs being optimal in the US and west-facing roofs often being suitable as well. You will also need to check for shading on your property from trees or buildings. Any blockage of sunlight will reduce production and solar panel value, especially during peak production hours.
What’s the Outlook on Solar in South Dakota?
As one of the least popular states for solar installations, the solar industry has little to do but improve in the Mount Rushmore State. However, South Dakota consistently ranks as one of the most eco-friendly states, primarily because a massive portion of its energy comes from hydroelectric power.3 4 Thankfully, the lack of solar popularity in South Dakota is not due to a lack of renewable energy popularity as a whole. South Dakota has a relatively unimpressive Renewable Portfolio Standard Goal (RPS), and that goal is reached with hydroelectric power. Although solar installations have increased in prevalence significantly over the past decade, the likelihood is that solar adoption will continue to be slow because of the availability of other clean energy sources. Overall, however, renewable energy is quite popular throughout South Dakota.
Benefits of Solar Energy in South Dakota
Installing solar panels in South Dakota will provide you with quite a few benefits that you might not be aware of. We’ll discuss the most substantial upsides to installing solar panels in South Dakota below.
Electricity Bill Savings
The most significant financial benefit of converting to solar power in South Dakota will come from the savings you’ll enjoy on your electric bills. When your solar power system produces electricity, the amount you generate will offset your energy bills by an equal amount. With most South Dakotans paying around $121.77 per month for electricity, the potential savings in the area totals about $1,461. Over time, your solar panels are expected to pay themselves off and then provide an additional $22,923 in energy savings in South Dakota. Your (ROI) could be significantly higher if the electricity rates continue to go up in the future, as they are expected to do. Installing solar panels means you’ll largely avoid the price increases of electricity for the 25+ years of expected solar panel life.
Lower Taxes & Access to Other Incentives
Although South Dakota isn’t the most solar-friendly state, there are some fairly significant solar incentives offered by the state and federal governments. One such incentive is the federal solar tax credit, commonly called the ITC. The ITC is a credit to your federal income taxes owed, which amounts to 26% of your total installation expense. In South Dakota, most residents will enjoy a federal tax credit in the amount of $6,525 in 2022. Some additional South Dakota solar incentives are listed below:
- Renewable Energy Systems Exemption: This is a property tax exemption that prevents your property taxes from increasing as a result of going solar, even though your home value will go up when you convert.
- Local Energy Efficiency Upgrades: Although there are no solar rebates, specifically, some local utility companies offer rebates and incentive programs for energy-efficiency upgrades, which can be used to make your solar panels even more valuable.
Home Resale Value Increase
One of the often-forgotten solar benefits is the bump in home value solar panels provide. According to Zillow, solar panel installation will cause your property value to go up by approximately 4.1%.5 Given the average home value in South Dakota of $241,500, the value increase will total around $9,902 for most homeowners.6 It’s important to note that this benefit will only be enjoyed by residents who use cash or a solar loan to pay for their solar energy systems. Solar leases and power purchase agreements (PPAs) are not expected to increase home value.
Clean, Renewable Energy
South Dakota is often cited as one of the most eco-friendly states, so many homeowners will also enjoy the environmental benefits solar panels provide. Perhaps most importantly, you’ll be reducing your carbon footprint, the pollution and emissions you create and your reliance on fossil fuels as a whole. Your newfound energy independence will also mean you’ll rely less on your utility company, which means you can avoid energy rate hikes in the future.
What to Look Out For When Considering Solar in South Dakota
Going solar isn’t a terribly complicated process, but there are some things you should be aware of before you start the process. We’ll discuss some important considerations to make below.
Most homeowners will automatically be concerned with the upfront system fees, as PV equipment is quite expensive. This is the case even in South Dakota, where the per-watt price is well below the national average. Many homeowners can keep their upfront expenses down by choosing a solar loan with a small down payment requirement. You can also choose a cheaper solar panel brand at the expense of efficiency and durability, and you can stick to panels only and avoid solar batteries and other add-on products that can drive up your upfront fees.
Your estimated solar panel payback period is a wonderful metric for determining your solar viability, but you can also use it to estimate your ROI. The average payback period in South Dakota is 12 years, with a standard range of 9 to 15 years. While the average savings after your panels pay themselves off are around $22,923, your ROI will be lower than this if your payback period is longer than 15 years, and solar might not make sense for you.
Net Metering Policies in South Dakota
As we mentioned above, South Dakota is one of few states that don’t mandate net metering. However, individual electric companies can opt to offer a net metering policy privately, so you should check with yours before signing any contracts. Net metering isn’t usually a make-or-break factor, but solar customers who don’t have a good policy often choose to install a solar battery as well to help lower and eliminate their electric bills.
Pending Policies & Changes to Incentives
Solar policies are always subject to change, and new incentives or rebate programs could pop up as solar becomes more prevalent in South Dakota. You’ll usually save less by waiting for better incentives to come along, but you should certainly check for changes to policies, incentives that have expired and new incentives that might have popped up before you commit to solar.
Weather & Climate in South Dakota
Solar panels provide the most value in areas near the equator, where the sunlight is most intense. As such, some South Dakotans worry that their northern location will make solar a poor investment. However, the state receives more sunny days per year than the national average, and there’s generally plenty of intense sunlight to make solar a worthwhile investment. Other residents understandably worry about the severe weather conditions that sometimes hit the area, including tornadoes and heavy snowfall. A good warranty should allay any concerns with tornadoes damaging your panels, and the snow will only serve to keep your panels clean, which will improve efficiency overall.
Companies Pushing Solar Leases or PPAs
Finally, you should be careful with the company you choose to install your solar panels, as not all installers are created equal. In fact, some solar companies don’t even have your best interests at heart, like those that advertise “free panels,” a marketing tactic to get you to sign a solar lease. Solar leases are far less beneficial than a solar financing option, as they take longer to pay off, provide fewer savings, don’t let you take the ITC and don’t add to your home value. There have been warnings issued in South Dakota about solar scams, including investments into solar timeshares that can cause homeowners to lose thousands and aggressively-pitched solar leases and power purchase agreements (PPAs).7 You should be careful which installer you choose, and you should always work only with a trusted, vetted and reputable solar panel installation company.
Wrap Up: Is Solar Worth it in South Dakota?
In general, solar panels are an outstanding investment opportunity for South Dakotans, saving solar customers an average of $22,923 after they pay for themselves. However, solar conversion isn’t for everyone, so you should do your homework before you commit to determine if going solar is a viable option for you. Some things you’ll want to consider as a part of the process include shading on your roof, the direction your property faces, your average monthly energy bills, your estimated payback period, and more. We suggest contacting a reputable solar installer to help you decide if solar panels are worth your investment.
See also: Calculate the costs and savings you can get from installing solar panels
Read More About Going Solar
Frequently Asked Questions
The EcoWatch team is pleased to get questions regularly from South Dakota residents about the viability of solar panels. We’ll include some of the questions we see most often below, along with our responses. If you have specific questions that aren’t answered here, reach out to our team of solar experts at email@example.com.
Your solar panel payback period will depend on many factors. The two primary ones to consider are the total expense of your system and the savings it will provide on your monthly electric bills. Other factors include shading on your property, the direction your roof faces, the system size required, and more. With that being said, most South Dakota residents will find that their system pays for itself in about 12 years, or somewhere between 9 and 15 years. You can use a solar calculator to estimate your payback period or contact an experienced installer in your area for a more accurate and customized estimate.
Despite how expensive solar panels are, the investment in this clean energy source will usually save you money in South Dakota. The average South Dakota homeowner pays $121.77 per month for electricity. If you have a good net metering policy or a solar battery to eliminate your energy bills, you stand to save around $1,461 every year your panels are producing energy. Over the lifespan of your panels in South Dakota, they’re expected to pay for themselves and then provide additional savings totaling $22,923.
Yes, solar panels will bump up your home value as long as you pay with cash or solar financing. Solar leases and power purchase agreements (PPAs) will not provide an increase in home value. The average home in South Dakota will increase in value by around 4.1%, according to Zillow, which averages around $9,902 in added value. This total amount could be even greater in areas like Sioux Falls and the Black Hills, where property values are higher.
Yes, permits are required for solar panel installation in South Dakota. Permits will add to your total installation expenses and will take time to pull, in most cases. However, your solar panel installer will typically handle the permitting process for you and will work in the estimated permit lead time into their installation timeline.
DIY solar panel installation is possible in South Dakota, but it’s not recommended. Getting up on your roof with thousands of dollars worth of equipment is dangerous and risky, and installing solar panels improperly can lead to roof leaks and other property damage. We strongly recommend leaving the work to a trusted solar panel company that can do it safely and provide a warranty for the system.
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