South Dakota solar incentives, tax credits and rebates
Resources to make solar panels more affordable in 2024
There’s no way around it: Installing solar panels is expensive. On the bright side, South Dakota residents can take advantage of government programs designed to make renewable energy investments more affordable.
Here’s everything you need to know about how federal and local incentives can make installing panels more affordable in the Mount Rushmore State.
A typical residential solar panel system costs $8,365 to $23,900.
Jump to insightThe federal solar investment tax credit (ITC) is the best financial incentive for most South Dakota homeowners to buy solar panels.
Jump to insightThere is no statewide net metering policy in South Dakota.
Jump to insightResidential solar panel incentives in South Dakota
The ITC drops to 26% in 2033 and then 22% in 2034.
The federal solar investment tax credit (ITC) is the most significant financial incentive for most homeowners buying solar panels in South Dakota. It reduces your federal tax liability by 30% of how much it costs to install solar panels.
The ITC is a credit, meaning it directly decreases the amount of taxes you owe. For example, if you spend $10,000 installing a solar panel system, the ITC is worth $3,000. If in the year your system becomes operational you owe $15,000 in taxes, the ITC reduces what you owe to $12,000.
Property tax exemption
South Dakota doesn’t have as many solar incentives as other states, but it does have a big one that can save you thousands of dollars in the long run. The South Dakota Department of Revenue exempts up to $50,000 or 70% of the assessed value of an eligible property (whichever is greater) from property taxes.
The following solar technologies are eligible for this property tax exemption incentive:
- Solar panels
- Solar water heating
- Solar space heating
- Solar thermal electric
- Solar thermal process heating
- Solar pool heating
A solar property tax exemption means that — for tax purposes — adding a solar energy system won’t increase your property's assessed value. Essentially, your property tax bill won’t go up because your solar panels increase the market value of your home.
Additional solar incentives in South Dakota
Check the DSIRE for the most comprehensive source of information about solar incentives and policies in South Dakota.
| Incentive type | Amount | Eligible solar equipment | Applicable sectors | Administrator | |
|---|---|---|---|---|---|
| Large Commercial Wind and Solar Alternative Taxes | Property tax incentive | Varies | Solar panels | Commercial | South Dakota Department of Revenue |
| Renewable Energy Facility Sales and Use Tax Reimbursement | Sales tax exemption | Up to 100% | Solar panels, geothermal electric, solar thermal electric | Commercial, industrial, installers/contractors, agricultural | South Dakota Governor's Office of Economic Development |
| Business Energy Investment Tax Credit (ITC) | Corporate tax credit | 6% to 30% | Solar panels, solar water heat, solar space heat, geothermal electric, solar thermal electric, solar thermal process heat | Commercial, industrial, investor-owned utility, cooperative utilities, agricultural | U.S. Internal Revenue Service |
How much are solar panels in South Dakota?
After considering the federal solar tax credit, solar panel costs in South Dakota typically range from $8,365 to $16,730.
Your system size greatly affects how much you pay overall. The typical system size for solar systems in South Dakota is 10.09 kW (kilowatts). You might need a larger or smaller system, depending on your average household energy usage.
Average solar cost by system size in South Dakota
| 5 kW | 6 kW | 7 kW | 8 kW | 9 kW | 10 kW | |
|---|---|---|---|---|---|---|
| Before federal tax credit | $11,950 | $14,340 | $16,730 | $19,120 | $21,510 | $23,900 |
| After federal tax credit | $8,365 | $10,038 | $11,711 | $13,384 | $15,057 | $16,730 |
What to know about net metering in South Dakota
In most states, net metering compensates you for sending any extra solar power into the local power grid. Unfortunately, South Dakota doesn’t offer net metering. Some companies, like Xcel Energy, offer programs similar to net metering, so be sure to check with your local power company. If there isn’t a buyback program, you might be better off investing in a solar battery along with panels.
Solar resources in South Dakota
Below are some additional resources that might help you go solar in South Dakota.
Find solar companies in South Dakota
A good solar company helps you navigate local incentives and permitting policies. Compare our picks for South Dakota’s top solar companies to learn more.
| Company | Customer rating | Pro install | Payment options | Year founded | |
|---|---|---|---|---|---|
 | 5.0 | Yes | Cash, loan | 2022 | Learn more |
 | 2.1 | Yes | Cash and loan | 2015 | Learn more |
 | 4.7 | No | Cash, loan | 2018 | Learn more |
FAQ
Is my HOA allowed to restrict solar panels?
No laws prohibit homeowners associations from restricting solar panels in South Dakota.
Can I get free solar panels in South Dakota?
There are no programs for free solar panels in South Dakota, but you can lease solar equipment for minimal upfront costs. It’s not free, though — solar leases generally require a flat monthly fee.
» FREE SOLAR PANELS: Are they really free?
How can I pay for solar panels?
You can pay cash, but most people finance solar panels with a solar loan. It works a lot like any other type of loan — there’s an application and approval process, and you pay it back over time (with interest). You also have the option of leasing the equipment.
» SOLAR PANELS: Lease vs. buy
How much can I save with solar panels in South Dakota?
On average, South Dakota homeowners with solar panels avoid $54,751 in utility costs over 25 years. Even if you don’t generate 100% of your energy needs, you can still save a lot of money versus paying traditional utility bills. In South Dakota, solar panels usually pay for themselves within 11 years.
» EXPLORE: Where your solar savings go the furthest
What has South Dakota’s investment in solar been so far?
Total solar investments in the state amount to $283 million, according to the Solar Energy Industries Association.
Bottom line
South Dakota may not have many solar incentives to lower the slightly higher cost of solar in the state, but what it does have will save big. Make sure to take advantage of the ITC and the property tax exemption to save thousands of dollars.
The ConsumerAffairs Research Team conducted an in-depth analysis to determine the average costs of going solar. Turns out, it’s worth it for many homeowners, particularly in South Dakota.
Solar costs vs. savings: South Dakota and nearby states
| 6-kW system cost (before incentives) | 10-kW system cost (before incentives) | Typical system size needed* | Average cost per watt | Total utility power cost savings** | |
|---|---|---|---|---|---|
| Iowa | $18,720 | $31,200 | 10.19 kW | $3.12 | $46,588 |
| Minnesota | $18,540 | $30,900 | 10.1 kW | $3.09 | $59,279 |
| Montana | $16,800 | $28,000 | 11.47 kW | $2.80 | $67,246 |
| Nebraska | $13,440 | $22,400 | 9.28 kW | $2.24 | $53,725 |
| North Dakota | $14,520 | $24,200 | 13.75 kW | $2.42 | $58,265 |
| South Dakota | $14,340 | $23,900 | 10.09 kW | $2.39 | $54,751 |
| Wyoming | $22,560 | $37,600 | 11.48 kW | $3.76 | $85,447 |
Article sources
- DSIRE, "South Dakota Programs." Accessed March 29, 2024.
- EnergySage, "The cost of solar panels in South Dakota." Accessed March 29, 2024.
- Solar Energy Industries Association, "South Dakota Solar." Accessed March 29, 2024.
- SolarReviews, "How much do solar panels cost in South Dakota, 2024?" Accessed March 29, 2024.
