Are solar panels worth it in South Dakota?

6 factors to consider before getting solar panels in South Dakota

ConsumerAffairs has heard from thousands of solar customers who have already gone through the installation process. Here’s what to consider before making the switch.

1. Solar panel installation costs
2. Your energy consumption
3. How long you stay in your house
4. South Dakota solar incentives
5. How you pay
6. The solar company you hire

1. Solar panel installation costs: $10,000 to $30,000

Average solar panel costs in South Dakota are comparable to the national average. Before the federal solar investment tax credit (ITC), a typical residential system ranges from $11,950 to $23,900. That price drops to $8,365 to $16,730 after considering the full 30% federal tax credit.

Average solar installation cost by system size in South Dakota

2. Your current energy consumption

A typical South Dakota household needs a 10.09 kW system to offset its electricity needs with solar energy. You might need a larger or smaller system, depending on your current energy consumption. Once you know your current energy consumption, you can calculate your potential savings and the time it should take for your solar installation to pay for itself.

Homeowners with solar panels typically save $20,000 to $90,000 over 25 years.

Get your electrical loads as low as possible before going solar. (For instance, if you have older electrical appliances, upgrade those before investing in solar panels.) That way, you can get a smaller system, which will be cheaper overall.

3. How long you plan to stay in your house

It takes years for electric bill savings to make up for the initial cost — about 11 years on average in South Dakota. If you sell your house and move before then, you might not fully realize the financial benefits of your solar investment.

A Zillow study found that, on average, houses with solar panels sell for 4.1% more. Let’s say you spend $25,000 putting solar panels on a house that costs $400,000. It might sell for $16,400 more in a few years, according to Zillow. But, you miss out on some of that $54,751 in total avoided utility costs over 25 years.

Solar panels last 25 to 30 years.

In other words, don't get solar panels just because you want to sell your house soon. Consider a home improvement project with a better return on investment, like remodeling the bathroom or kitchen, instead.

4. South Dakota solar incentives: federal and state 

Compared to some other states, South Dakota solar incentives are relatively sparse. There’s a property tax exemption on the value that the panels add to your house, but that doesn’t help make the installation cheaper upfront. South Dakota also doesn’t have statewide net metering. However, some utilities, including Xcel Energy, offer similar programs.

The federal solar investment tax credit (ITC) is the biggest incentive for most homeowners going solar. The ITC provides a 30% tax credit on your total system costs, including equipment, labor and permits. It drops to 26% in 2033 and 22% in 2034.

5. How you pay

A solar panel installation costs roughly the same as a new car. You could pay cash, but people tend to finance or lease. Homeowners can also borrow against their home equity to finance a solar panel system.

• Loans: Solar loans work like any other type of loan. They have relatively low fixed interest rates. Once you pay it off, you own your system outright.
• Leases: Leasing panels is one way to get the benefits of solar energy without the high upfront cost, which can be good if you have limited savings. Agreements typically last 20 to 25 years.

6. The solar company you hire

One of the most common complaints is related to pushy sales reps who make promises that can’t be delivered. That’s why it’s so important to thoroughly research and verify claims made by sales teams before making a decision. Use NREL’s PVWatts Calculator to estimate how much electricity a solar panel can produce over a year on your house — just type in your address. Project Sunroof is a free solar savings estimator powered by Google Earth imagery.

In the best-case scenario, it’s easy to make the switch and you’re happy with your system’s performance. In the worst-case scenario, you end up paying thousands for mid-tier solar equipment from a company with poor customer service and no follow-up or support.

Monthly costs: solar payments vs. savings

Think of going solar in terms of your monthly costs. Given rising energy costs in South Dakota and elsewhere, financing solar panels makes sense if your monthly loan payment is less than what you would be paying the utility company anyway.

Is my house a good candidate for solar panels?

Going solar ends up being worth it for many homeowners as long as their house is a good candidate to support the panel installation. Here’s what to think about before you commit:

• How much sunlight do I get? Solar panels need regular exposure to sunlight to produce the most energy possible. South Dakota averages 4.5 to 5 peak sun hours each day. However, lots of shading — like trees or tall buildings above your roof — could make your solar system less efficient.
• What is the size and angle of my roof? South Dakota (and the rest of the United States) is in the northern hemisphere, so solar panels perform best on south-facing roofs. The worst place to install would be on north-facing roofs, especially if those roofs have a high pitch. For example, if the only place you can install is a north-facing roof with a 30-degree pitch, your costs will likely go up by 30% to 40%.
• What is the condition of my roof? If you have to replace your roof, do that before you install solar panels. Solar panels are designed to last up to 30 years, so you want your roof to last just as long. Otherwise, it could cost thousands to remove the panels, fix your roof and reinstall the panels again.

Pros and cons of solar panels in South Dakota

It’s a common misconception that solar panels will completely eliminate your monthly power bill — this is not always the case. Still, you’ll likely be paying much less than you would for traditional utility bills.

Benefits of solar panels in South Dakota

• Cheaper energy bills: Going solar now means that your monthly energy expenses will be more predictable (and very often significantly lower). Solar panels also protect you from future energy cost increases.
• Better for the environment: Installing solar panels on your roof helps the environment by reducing greenhouse gas emissions and dependence on fossil fuels.
• More energy independence: Embracing solar paves the path toward true energy independence. It especially works out for people in areas susceptible to power outages.

Drawbacks of solar panels in South Dakota

• Energy production varies: Solar panels are dependent on weather conditions and seasonality. Solar panels still work on cloudy days, but less available sunlight does affect how efficiently they produce energy. Snow cover may also temporarily reduce efficiency until it's removed or melts off.
• Solar equipment is expensive: Even with rebates and other financial incentives, the price typically starts between $10,000 and $30,000. It’s even more expensive if you want a solar battery for energy storage. Solar battery costs are generally between $7,000 and $18,000.
• Potential roof leaks: The installation process involves drilling holes into the roof to anchor the panel mounting systems. If not done correctly, this can lead to leaks or structural damage.

» MORE: Solar energy pros and cons

Find solar companies in South Dakota

A good solar company helps you navigate local incentives, permitting and net metering policies. Compare our picks for South Dakota’s top solar companies to learn more.

Bottom line: Is going solar in South Dakota worth it for you?

Going solar in South Dakota might be easier than you think. The main obstacle to going solar is the high upfront cost of purchasing and installing solar panels, inverters and other equipment. For most homeowners, it ends up being worth it as long as their cost savings over time outweigh the initial investment.

Solar costs vs. savings: South Dakota and nearby states