How to Save Money on Solar Panels in South Dakota

How to Save Money on Solar Panels in South Dakota

Introduction

With nearly 300 days of sunshine per year, South Dakota has incredible untapped potential for solar energy. Yet as of 2022, the state only has about 3 megawatts (MW) of solar energy installed. Compared to leading solar states like California with over 30,000 MW installed, South Dakota‘s solar landscape is essentially non-existent.

However, if properly analyzed, solar can still save SD homeowners money over time. In this expert guide, we‘ll break down exactly how homeowners can maximize savings on solar in South Dakota despite a lack of solar incentives and support in the state.

Key Money-Saving Tactics for SD Solar

1. Claim the Federal Solar Tax Credit

The most valuable incentive available to SD solar owners is the federal solar tax credit (ITC). This tax credit allows homeowners to deduct 30% of their total solar installation costs from their federal taxes.

According to the Solar Energy Industry Association (SEIA), the average cost to install a 6 kW solar system in SD is about $14,340. With the 30% ITC, that cuts $4,302 off the price immediately.

Qualifications to receive the full 30% ITC are straightforward:

• You must own the solar system (no leasing)
• Equipment must be new (not used)
• System must be installed on your primary residence

This applies to all installation-related costs: equipment, labor, permitting fees, sales tax, etc. There is no maximum limit.

2. Understand Lack of State-Level Credits

While the federal credit provides a great foundation, most leading solar states additionally have robust state-level credits and rebates to make solar even more affordable for residents. Not so in South Dakota.

Specifically, homeowners will not find any of the following credits/rebates available:

• SD state tax credit
• State or local cash rebate
• Sales tax exemption

You also cannot lease solar in SD, which eliminates that option for $0 down installs.

The one partial rebate available is an equipment rebate some installers offer by sourcing components at lower costs. But even those tend to be minimal compared to states with incentives.

3. Size System Properly With No Net Metering

Sizing a solar system appropriately is always important for optimal ROI. But it becomes even more crucial in places without net metering laws, like South Dakota.

Net metering allows homeowners to oversize their system up to 125% of previous annual usage, as any excess energy produced gets sold back to the utility at near retail rates.

Without net metering in SD, system owners need to stay much closer to true annual usage to avoid significant overproduction. Installers should provide detailed analysis on this to size accordingly.

4. Leverage Property Tax and Sales Tax Exemptions

Though credits and rebates don‘t exist in the state, South Dakota does offer both valuable property tax and sales tax exemptions for solar owners:

Property Tax Exemption:

• Exempts the added value solar gives your home from increased property taxes
• Additionally exempts up to $50,000 or 70% of total home value from property taxes (whichever is greater)

Sales Tax Exemption:

• Solar equipment is 100% exempt from state + local sales tax

This combination of exemptions can save thousands long-term and make the ROI on solar in South Dakota more favorable.

Financial Breakdown: Total Savings from SD Solar Incentives

Now let‘s analyze the total savings a typical 6 kW solar installation would yield from all available incentives:

System Cost = $14,340
Federal Tax Credit (30%) = $4,302
Property Tax Exemption = Avg. $15,000+ over system life
Sales Tax Exemption (~7%) = $1,004

Total Savings = $20,306

As you can see, the lack of state rebates aside, solar owners in SD can still reduce costs dramatically through federal and local programs.

Paired with 25 years of utility savings from solar production, lifetime savings can reasonably surpass $45,000 in South Dakota.

Frequently Asked Questions

Q: How much can I actually save with solar in South Dakota?
With average utility rates of $0.12/kWh and sufficient solar resources, households can save $25,000+ over the lifetime of their solar systems after all incentives.

Q: How long is the payback period for solar in SD?
With total incentive savings and a $14,340 system cost, payback takes around 8.8 years in South Dakota.

Q: Are there any solar panel grants or free installation programs in South Dakota?
Unfortunately, no. All current solar incentives in SD apply as credits/deductions off system purchase and installation costs rather than outright grants.

Conclusion

Despite South Dakota‘s small solar market today, homeowners absolutely can realize substantial long term cost savings by going solar – even without strong state policies. Saving roughly $20,000 upfront from the federal tax credit and state exemptions makes systems feasible.

Simplify your path to energy independence through solar by first reviewing all the ways South Dakotans can save today. Reach out to reputable local solar installers to assess your specific savings potential. Every solar project, much like Mount Rushmore, takes vision, diligence and skills in execution – so choose your installation partner wisely.