The benefits of installing solar in South Dakota

by Bill Powers

While South Dakota may be particularly unfriendly to solar installation regarding payments for excess electricity, there is one state aspect that is particularly friendly to solar installations, and that is with regard to property taxes.

According to SDCL 10-4-44 (2010): For eligible facilities less than 5 megawatts (MW) in capacity, all real property used or constructed for the purpose of producing electricity is assessed in the same manner as other real property. However, the first $50,000 or 70% of the assessed value of eligible property, whichever is greater, is exempt from the real property tax. For geothermal systems that produce thermal energy, but not electricity, this exemption is limited to the first four continuous years for residential systems and to the first three continuous years for commercial systems.

It is not wholly clear how much installing a solar electricity system would increase the assessed value of a house. It would not be unreasonable to assume that for a $20,000 system that it would increase it by $15,000. At something like $17/$1000 of assessed property, that would represent about $255/year. Since this additional property tax would not be charged, the value of the property can be increased without paying higher property taxes. You could think of it as saving $255/year.

So by installing a solar system you (1) save on electricity costs, (2) receive a 30% federal tax credit, (3) reduce your property taxes per market value of the house, and (4) recover most of the cost of the installation upon sale of the house. In computing the time to payback all of these considerations ought to be accounted for. I have not tried to run the numbers, but it seems to me that even without a substantial net-metering rate, the payback period might be on the order of 5 years. Moreover, the more people we can persuade of this, the more amenable will be the state and even utilities to come to some more satisfactory terms with home generation systems. Consider what might happen if a large fraction of the new homes going up in Sioux Falls had solar generation systems.

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