The complete list of South Dakota solar incentives and tax credits for 2023
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South Dakota isn’t the best place to install solar in the U.S. but, hey, at least it’s not North Dakota! South Dakota ranks 50th (to North Dakota’s, 51st), with enough solar installed to power a staggering… 65 homes.
Why are residential and utility-scale solar lagging so far behind in South Dakota? Mostly because the state has done barely anything to incentivize renewable energy projects. Homeowners in the state can’t claim any solar state tax credits, rebates, or even a sales tax exemption. Net metering rules are terrible in South Dakota and solar customers may actually be charged more for having installed renewable energy equipment.
The one good thing for solar in South Dakota is a state property tax exemption. So, if you are planning to install solar at home here, you can at least avoid your property tax bill rising because you’ve added value to your home. There’s also the federal tax credit, which could help you save 30% on the cost of installing home solar, even in South Dakota!
South Dakota Solar Incentives
| Incentive | Description |
|---|---|
| State property tax exemption | Solar energy equipment up to $50,000 is exempt from property tax in South Dakota. |
| Net metering in SD | Utilities don’t have to offer net metering but some do; some also charge solar customers additional fees. |
State property tax exemptions in South Dakota
Despite few other incentives in the state, South Dakota offers a very generous property tax exemption. This law allows for the first $50,000 or 70% of the assessed value of solar energy systems, whichever is greater, to be exempt from property taxes.
The solar property tax exemption is available for solar arrays up to 5 MWs. This easily covers every residential solar array and community solar array. It even covers most utility-scale arrays, although there’s only one of these in South Dakota, installed in 2016, which has just 1 MW of capacity.
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Net metering in South Dakota
South Dakota does not mandate net metering, though some utilities may begin to offer their own programs. Customers who install home solar and request interconnection to the grid may be charged a rate rider by some utilities, including OTPCO.
In 2021, Black Hills Energy submitted a legal request to the state to be allowed to charge residential solar producers differently than non-solar customers; this request has not been approved or denied as of July 2022.
In light of the miserly net metering rules in South Dakota, it may make sense for homeowners installing solar here to discuss off-grid options with their preferred installer. This way, with battery storage set up, homeowners can skip interconnection and avoid paying any extra fees to their utility while continuing to have back-up power available in case their solar array and battery storage can’t meet all their electricity needs.
Final thoughts on state solar incentives in South Dakota
South Dakota has more than average peak sun hours in the U.S. but low electricity costs. Without state incentives, very few homeowners have gone solar in the Mount Rushmore State. According to SEIA, there were just 65 solar installations in South Dakota as of August 2022. This includes just one utility-scale solar project and a handful of commercial installations.
If you’re one of the few dozen homeowners who have already gone solar in South Dakota, congratulations on leading the way! If you’re planning to join those plucky few, make sure to take advantage of the federal tax credit and the property tax exemption in South Dakota. But beware net metering rules where you may end up being charged extra by your utility for feeding into the grid.