Reduce Cost of Solar Panels In South Dakota: Solar Incentives, Tax Credits

As solar panel technology is becoming more efficient, making the switch from grid power to a home solar power system can not only reduce electricity costs for residents in the state, but it also provides a reliable source of energy that can be channeled back into the grid.

Moreover, thanks to South Dakota solar incentives that lower the cost of solar panels in South Dakota, both residents and businesses can take advantage of the reduced up front price of solar installation and simultaneously lower their energy emissions.

This guide explains the incentives available in the state, and outlines how to qualify for solar tax credits and the benefits you can enjoy with a home solar system.

South Dakota Solar Incentives

Fossil fuel resources and related technologies are still the energy infrastructure norm in the modern world. Depending on the energy or economy experts you inquire about, anywhere between 80% to 84% of the world is still fully powered by fossil fuel sources.²

The modern world’s almost vice-like dependence on fossil fuels will not drop to zero anytime soon. But it is vital to note that back in 2015, barely 5% of the planet’s electricity was generated via renewable energy sources.³

The world looks to the United States for unique guidance on many issues, and while the country is heavily reliant on fossil fuels, many states are making legislative strides to adopt cleaner energy alternatives.

South Dakota, which is in 50th place when it comes to state-wide solar energy generation and utilization for residential or commercial endeavors, will embrace solar energy solutions sometime in the long-term future.⁴

Cost of Solar Panels in South Dakota

If you’re a state resident, then you need to invest in the cost of solar panels in South Dakota now. As a state resident, you can recoup over 30% or more of your original installation costs via federal solar tax credits.

And while South Dakota does not have any state solar tax incentives, it will in the future as solar energy resources and related technologies become more commonplace.

The typical cost of a solar panel array system being installed on a South Dakota residential property is about $25,000.⁵ So, after taking full advantage of a 30% federal solar tax savings, a South Dakotan homeowner can potentially save up to $7,500.

The South Dakota Public Utilities Commission’s official estimate for solar energy startup costs is a little higher than $25,000. The S.C.P.U.C. estimates that a South Dakota resident would probably need to pay almost $29,000 for a 10 kW solar power installation at a relative expense of $1.34 per solar watt.⁶

So, the 30% federal tax credit would amount to $8,700 in this circumstance.

Still, the state of South Dakota has many hurdles to overcome before it fully embraces solar energy and its multitude of benefits.

For instance, while the state already vitally embraces the use of several sources of renewable energy, solar is not among them. (More on that later.)

It will take time for South Dakota to catch up with states that have already incrementally started their own ambitious solar energy infrastructure turnovers and initiatives.

You are going to learn why the cost of solar panels in South Dakota for a state resident will become a valuable investment in years to come in this comprehensive guide. And why it’s important to make such a crucial investment as soon as possible.

Before learning all about the financial and environmental South Dakota solar incentives available to you, you first need to fully understand the obstacles you may encounter as well as all of the maximum benefits you can enjoy.

Cost of Solar Panels in South Dakota (Obstacles To Investing in Residential Solar Energy)

Before you learn about solar energy tax incentives and financially mitigating the cost of solar panels in South Dakota, you must first learn about the obstacles you will encounter.

The point of outright discussing these facts is not meant to dissuade South Dakotan homeowners from making this decision. The overriding imperative of this South Dakota solar incentives guide is to make persuasive and proactive arguments for residential solar panel investment.

Still, South Dakotan homeowners should take long-term considerations when it comes to South Dakota solar incentives. Here are several compelling initial obstacles you may encounter to think about before a list of persuasive benefits.

Does South Dakota Need Solar Energy Resources?

This section of this South Dakota solar incentives guide will first present you with some not-so-good and then some very good news relative to solar energy. Again, this information is not being presented to dissuade you, only to help make informed decisions with as much information as possible.

If you want to make the most of the solar tax incentives available to help reduce the cost of solar panels in South Dakota, then you need to face the good and not-so-good facts of the situation.

So, here is the not-so-good news to start with, there is no immediate demand or need for solar energy in South Dakota. But the real reason for this interesting situation is surprising and also a very persuasive factor for investing in solar energy.

South Dakota, just like North Dakota, is virtually dead last when it comes to state-wide solar energy generation and utilization for residential and commercial purposes. Currently, there just isn’t a state-wide or fully-developed solar energy infrastructure in either of these states.

Don’t surmise that such solar energy infrastructures will never exist, it’s just that currently, they don’t.

When counting the District of Columbia, North Dakota actually comes in 51st when it comes to nationwide solar energy infrastructure rankings.⁷ Significantly less than 1% of North Dakota’s current state-wide energy output is nominally created by solar energy.

North Dakota barely generates enough solar energy annually to power a refrigerator for a year or more.

North Dakota is an extremely fossil fuel-friendly state and relies on it for all of its energy needs. Although recent state legislation has started slowly started the initial processes for state residents to easily gain access to solar energy, progress won’t happen overnight.

South Dakota is in 50th place when it comes to its state-wide solar power capabilities. The state’s current solar energy output barely amounts of 0.2%. South Dakota has enough solar power capacity within the state to provide electricity to less than 300 residences.

Frankly, if you’re interested in reducing the cost of solar panels in South Dakota, you need a long-term financial and energy mitigation plan. There is some tax incentive policy for state residents, but the infrastructure for solar energy generation is nascent at best.

And that is a very good thing for South Dakota residents. While North Dakota is very fossil fuel friendly and reliant, South Dakota is extremely renewable energy friendly, just not for solar energy as of yet.

Now, here is a good part about South Dakota’s lack of a state-wide solar energy infrastructure to think about.

South Dakota only acquires about 18% of its state-wide energy needs from fossil fuels.⁸ The state generates over 82% of its electricity entirely with renewable energy sources.

About 52% of South Dakota’s electricity is created via wind turbines. Another 30% of the state’s energy is generated through hydropower.

Until South Dakota state residents are better informed and marketed to about South Dakota solar incentives, investing in solar may be a hard sell when they already get plentifully cheap electricity from hydroelectric and wind turbines.

Why are solar panels so expensive? Parts, installation costs, and sourcing production materials factor into costs.

Cost of Solar Panels in South Dakota Greater Than Grid Power

A bigger obstacle for a South Dakota resident to get solar panels is the fact that electricity is already primarily green and affordable.

But, that doesn’t mean that having a reliable back up (or a completely off-grid system) wouldn’t help reduce emissions and make you energy independent.

It will.

Solar Power South Dakota

As previously mentioned, the cost of solar panels in South Dakota is almost $29,000. The average and most likely conservative cost for such a setup is about $24,000.

Unfortunately, in a state with a nascent solar energy industry and likely few solar contractor options, you should assume it might cost you a little more to get solar panels.

In the United States, a typical residential property pays $121 monthly for 886 kWh of energy.⁹ That amounts to about $0.13 per kWh.

But this is a 2021 statistic that may not be applicable due to recent inflation surges.

Currently, a South Dakota resident probably pays $0.11 per kWh while the average American home probably pays $0.15 per kWh.¹⁰ A South Dakotan household probably pays $128 monthly to cover their energy needs while the average American household pays over $138.¹¹

Getting exacting rate quotes for energy will differ depending on who you ask, especially in these times of rising inflation and increasing cost of living standards. But relatively speaking, South Dakota residents pay less than the national price standard for electricity, it might even be less depending on specific counties in South Dakota.

So, why should you even consider thinking about the cost of solar panels in South Dakota, or South Dakota solar incentives, when it costs so much and the solar tax incentives are only plentiful on the federal level?

Energy prices are not going to stay the same forever. The price you pay for energy in South Dakota now will inevitably increase a decade from now.

Americans paid over 14% more for their energy needs in 2022 compared to 2021.¹² Energy prices fluctuate all of the time, but the laws of inflation dictate that the prices you pay now as a South Dakota resident will increase a decade from now.

Aren’t your energy costs significantly higher now compared to a decade ago?

Investing in the cost of solar panels in South Dakota now will allow you to create energy on your own terms in the renewable energy future that will unfold instead of paying for it at the rates dictated by the state and the American energy market.

It may take a decade or longer, but solar energy will be just as prevalent in South Dakota as wind turbines and hydroelectric power, so why not get ahead of the inevitable curve now?

Additionally, you will be one of the first to take full advantage of state solar tax incentives, which aren’t available now, but should become available in the future. (More on that later.)

How to get solar panels for free? You can’t, you will end up leasing or renting equipment that could be installed for free or at a discount.

Relatively Small Population

Another obstacle for state residents to consider South Dakota solar incentives is the fact that the solar energy infrastructure is nascent and barely existent, and the population number is low.

About 900,000 people live in South Dakota. Meanwhile, less than 300 South Dakota residents have solar panel arrays installed on their properties.

Only two commercial entities have been green-lighted to build solar energy generation facilities.

These two facilities are projected to create over 238 MW of solar energy in the future for South Dakota.¹³ Currently, South Dakota barely generates 3 MW of solar energy annually.

The state’s solar energy initiative may influence people who will see the benefit of generating their own power instead of paying utility company rates. For the moment, it is more convenient to enjoy the current benefits of renewable energy currently supplied by wind and hydroelectric.

It may take a few years or a decade, but solar energy access will only become more widely accessible. The population will grow and will be more persuasive to adopting solar energy.

You should get ahead of the crowd now while it benefits you and invest in the cost of solar panels in South Dakota.

Solar Power South Dakota (Solar Incentives)

South Dakota currently has no state-derived solar tax incentives. While the federal solar tax incentive is plentiful at 30%, which you will learn more in-depth about in this comprehensive guide, South Dakota residents can’t combine state and local solar tax incentives with the federal version for added tax savings.

However, this is not as big an obstacle to investing in solar panels as you might believe. As solar energy infrastructures grow in the state, state government officials will have to ratify state solar incentives.

The federal solar tax incentive ended recently but was extended through to 2034 via the Inflation Reduction Act of 2022.¹⁴ Even the federal government understood that not enough people were informed about the benefits of solar energy and needed more time to be persuaded of its financial and financial benefits.

State governments that lack a state-level solar tax incentive will have to follow suit as infrastructure and capacity grows. It is not enough for South Dakota to invest in solar energy facilities on a commercial level, as this process expands in the future, the state will have to persuade residents like you to invest in residential solar.

And state-level solar tax credits can be claimed retroactively when they become available, even if you invested in solar panels years earlier. (More on that later.)

Solar Panels South Dakota: Lack of Solar Energy Industry and Infrastructure

Currently, there are not a lot of solar panel contractors or companies in the state. So, interested South Dakota residents will really have to consider their options carefully.

And even then, the cost to install solar panels can range anywhere between $24,000 and $28,000.

There might be less than 14 commercial solar energy facilities in the state, and only two were recently authorized to build large-scale solar energy facilities.

It will be a sacrifice, but investing in solar energy will be a sacrifice and a crucial investment that will pay off in the years and decades to come.

Now that you understand the obstacles to investing in the cost of solar panels in South Dakota, here are several beneficial reasons that should convince you otherwise.

Cost of Solar Panels in South Dakota (Benefits That Make the Investment Worthwhile)

It won’t be easy to invest in solar panel equipment right now. And there are only one or two major solar tax incentives that make it worth it currently.

But here are several reasons why South Dakota residents should move South Dakota solar incentives in the future.

South Dakota Is Preparing for Its Solar Energy Future Right Now

As previously mentioned, while South Dakota is not heavily reliant on fossil fuels for its energy needs, over 82% of its energy needs are already covered by renewable energy sources like hydroelectric and wind turbine energy.

There is no need for solar energy, right now anyway. But South Dakota is already actively preparing for its solar energy future.

Commercial Solar Panels South Dakota

The state government is already authorizing the construction of new commercial solar energy power facilities. The largest commercial solar energy facility in the state started its initial construction in January 2023, it is projected to provide 128 MW of solar energy when it is completed.¹⁵

South Dakota is also a part of the so-called Community Solar Collective, a national initiative to get every state in the country to ramp up their solar energy infrastructures.¹⁶

You will be better prepared for this solar energy future now instead of trying to catch up in a decade or so.

What are carbon footprint solar panels? Solar panels don’t have a carbon footprint, but their manufacturing process does leave one.

Federal Energy Credits

As previously mentioned, you might have to pay anywhere between $24,000 to almost $29,000 to install residential solar panels in South Dakota.

The federal energy credits offered by the government are a one-time solar tax incentive that will save you over 30% on your solar panel installation costs.¹⁷ It isn’t a tax deduction, the amount of taxes that you pay on your installation will be reduced by 30% against your installation cost.

So, if you do pay $29,000 for a residential solar panel system, you will get a tax credit of $8,700. The average tax savings for homeowners who claim this solar tax credit is usually just $7,500 or less.

This one-time solar tax credit won’t last forever unless it is extended by the federal government, the federal solar tax credit will become discontinued in 2035.

The best way to ensure that the federal solar tax credit gets extended past 2035 is for more American homeowners to invest in solar energy.

South Dakota Solar Incentives: The South Dakota Solar Tax Credit Will Become Retroactive Once Ratified

The state of South Dakota does not have a state-level version of the federal solar tax credit. The state has barely begun preparing for its solar energy future, so enacting such a tax credit is not a priority right now.

But South Dakota is a pro-renewable energy state. Over 82% of its energy comes from renewable energies.

It is pledged to join the national community solar collective. Once solar energy is more readily accessible, the state government will have to market its efforts and an incentive to get residents to install solar energy systems at home.

It’s already happening in other states now. So, it is only a matter of time before South Dakota ratifies a state-level tax credit.

And if you installed your residential solar panel system before 2022, any tax credit you apply for afterward will still be retroactively eligible as long as you apply before 2035.¹⁸

You could get even more tax savings by investing in solar right now.

The federal solar tax credit was discontinued in 2021 and re-extended in 2022 but the Inflation Reduction Act of 2022.

As more states without state solar tax incentives build up their solar energy infrastructures in the years to come, they will have to offer this incentive to entice homeowners to take advantage.

Just like the federal government, which is only offering the 30% federal solar tax credit to advertise its renewable energy efforts to entice Americans to buy homes and install solar panels, state governments will have to do the same, sooner or later.

South Dakota Solar: Number of Sunny Days Annually in South Dakota

South Dakota has an average amount of sunny days annually, about 200 to 213 sunny days every year.

As long as your solar panel array is properly installed and angled towards the sky to receive unobstructed sunshine at least 6 hours a day, it will be a worthwhile investment.

Modern solar panels are also designed to capture indirect and ambient sunshine as well. South Dakotan homeowners live in a climate region where investing in solar power is a good bet.

Solar Panels for Home in South Dakota: Generate Energy at Home on Your Terms

South Dakotans currently spend about $128 on their energy need every month. It’s relatively cheap compared to the national standard.

South Dakotan residents pay about $1,536 annually on their energy costs. That amounts to $15,360 spent on energy costs per decade.

However, you could completely offset your current energy bill costs within a decade by investing in solar panels right now. A $29,000 solar panel array could fully pay for itself within 20 years with proper upkeep.

You could save $1,500 annually on your annual energy expenses if your solar panel equipment is 6 kW or more.¹⁹ Additionally, you could save anywhere between $25,500 to $30,000 over the operational life span of your solar panels.

Modern solar panels are constructed to last 20 to 30 years with proper upkeep and maintenance.

You could completely offset the energy costs you pay for now and generate your own energy at home completely on your terms.

Now, here is what you must know about the primary way to reduce the cost of solar panels in South Dakota, taking advantage of the federal solar tax credit.

Does solar increase home value? Yes, to a degree, but only relative to your local real estate market metrics.

Solar Investment Tax Credit (ITC)

The Federal Solar Investment Tax Credit has a few names. Some people called the Investment Tax Credit, or ITC.

Its official designation is the Residential Clean Energy Credit.²⁰ It is a one-time federal solar tax credit that you can file along with your federal income tax claim, along with personal documentation attesting to the existence of your residential solar panel system.

You can file for this credit through IRS form 5695.²¹ It is recommended that you file it along your Standard Form 1040.

The ITC will cover up to 30% of the installation price for your solar panels. As long as you live in the United States, own your residence and the solar panels, and the solar panels are installed on your property and they are in working order, then you qualify.

If you have unused solar tax credits, they will be carried over to successive tax returns up to five years. If you owe nothing in taxes, then your solar tax credit becomes negated.

After all, you can’t save $8,700 and reduce $8,700 from a zero-tax bill.

Most homeowners can save $7,500 by claiming a federal tax credit. The federal solar tax credit allows you to reduce your tax bill, it is not a deduction.

The ITC has deadline milestones for the percentage of solar tax savings you may qualify for. You only have a decade to take advantage of this major tax credit.

If you invested in solar panels between 2017 and 2019 you qualify for a 30% tax credit. The ITC was reduced to 26% during the 2020 – 2021 tax year and was slated to end.

The ITC was extended through to 2032 in 2022 via the Inflation Reduction Act. The tax credit was increased back to 30%.

The solar tax credit will fall again to 26% by 2033, and then to 22% by 2034. Unless it is legislatively extended again, it will be discontinued by the year 2035.

Primary ITC Qualifications

To qualify for the ITC, you must own your home and property. You must live on the property in question in the United States.

And your solar panel equipment must be operational and productive during the tax year you file your claim. And it must be a photovoltaic solar panel system.

Items Covered by The Solar Tax Credit

Here is a list of items that you can claim via your solar tax credit filing:

• Solar panel modules
• Water heaters powered by solar
• Geothermal heat pumps powered by solar
• Contractor work and labor
• Solar-generated electric systems
• Wind turbine energy
• Solar battery storage systems
• Biomass fuel reserves

How does the solar tax credit work if I don’t owe taxes? It doesn’t. If you don’t owe taxes, the solar tax credit can’t reduce something from zero.

Solar Panel Installation Cost South Dakota

South Dakota’s property tax rate is just over 1%. While that is a spectacularly low amount, your property tax rates will increase once you install solar panels.

Placing solar panels on residential properties increases their real estate market value.

If you install solar panels on your property, then up to $50,000 can be automatically exempted from your property taxes to compensate for any future property tax increases. Or, 70% of the market value of the cost of the system can be exempted as well.

The greater amount between the $50,000 limit or 70% solar panel system value will be exempted.

South Dakota Net Metering

South Dakota does not have any legally mandated net metering laws. You could engage in a net metering contract with any utility company that offers such.

But you will be bound by the company’s terms, which will ultimately benefit the utility company more than you.

Is Net Metering Worth It?

Probably not at the moment. South Dakota does not have a legal mandate to offer net metering to its state residents, so it technically does not exist on a state regulatory level.

Your local utility company, unbound by non-existent state net metering mandates, could offer you net metering. But such an arrangement will benefit the company more than you.

The time to take advantage of this 30% tax credit is as soon as possible. The longer you wait, the more homeowners will apply a decade from now for the federal tax credit you may be equivocating over now.

Take control of your energy needs now to reduce the cost of solar panels in South Dakota, and to make the most of South Dakota solar incentives when they become available.

Frequently Asked Questions About South Dakota Solar Incentives