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South Dakota Public Utilities Commission
Frequently Asked Questions about Solar Energy

September 16, 2016                                                           Printer Friendly Version

SOLAR ENERGY BASICS

The South Dakota Public Utilities Commission’s role in solar development involves education and regulation. For utilities within the PUC’s jurisdiction, the PUC regulates generator interconnection practices and the price that solar generators get paid for excess generation. The PUC also has siting authority for solar farms with a capacity of 100 MWs or more.

How popular is solar power in the U.S.?

While solar power accounts for less than 2 percent of U.S. electrical generating capacity overall, it is one of the fastest growing generating technologies in the country.

How much solar generation is in South Dakota?

Relative to other states, South Dakota doesn’t have a large amount of solar generation though it is increasing. In 2015, the state’s total generation was 9,734,000 MWh. Approximately1,000 MWh of that came from solar power. That represents a 29.3 percent increase in solar generation in South Dakota from 2014.

What are the big benefits of solar energy?

The sun is a renewable source of clean energy that can have a minimal impact on the environment.  While community and utility scale solar farms can go on for miles, residential and commercial solar energy systems can be placed on existing buildings and don’t require major land allocations or infrastructure development.  

What challenges does solar energy face?

Solar energy faces what are often referred to as solar integration challenges. Solar energy varies depending on location, time of day, time of year and weather conditions. Unfortunately, the times that we have the greatest access to solar energy happen to be the times that we use or need the least electricity. Daily consumption of electricity is greater in the mornings and evenings (when people are home from work), but sunshine is most abundant in the hours between these two peaks making solar less effective at meeting that intra-day peak demand.

The other hurdle for solar energy has to do with the ability to store electricity. While the earth receives plenty of sunlight, our current power grid system isn’t able to cost-effectively store that energy for later use. Storage technologies, such as batteries, are currently cost-prohibitive, however the industry is working to make those technologies more cost-effective.  

What does solar energy cost?

Ongoing advancements in solar technology have made this form of energy significantly more affordable in recent years. The U.S. Department of Energy estimates the cost of photovoltaic solar panels dropped 60 percent between 2008 and 2014. The installed costs of PV solar panels vary between residential and utility scale solar farms, with the latter benefiting from economies of scale. In 2014 the median installed price for residential systems was approximately $4.3 per watt DC and the median installed price for utility scale systems was $2.3 per watt DC. Based on the median residential PV system price, it would cost a homeowner approximately $43,000 to install a 10 kW PV system.

SOLAR POWER FOR YOUR HOME

Eight Basic Steps to Going Solar

  1. Get a home energy checkup.
  2. Complete cost-effective energy efficient home improvements.
  3. Understand your utility bills, local incentives (tax credits, rebates, etc.) and rules.
  4. Research local building codes and permitting requirements.
  5. Explore solar system types and your available solar access.
  6. Weigh buying versus leasing considerations.
  7. Get proposals from several reputable, established solar system providers.
  8. Analyze costs, projected savings and contracts to make the best choice for you and your home.

What are the main types of solar installations and what's the difference?

There are four main types of solar installations: residential, nonresidential, community solar farms and utility-scale solar farms. Residential refers to systems that serve single-family residences and may also include multi-family housing. Non-residential includes non-residential roof-mounted systems regardless of size, and non-residential ground-mounted systems up to 5 MW.

Community solar farms are shared renewable energy arrangements that allow several energy customers to share the benefit of one local renewable energy power plant. This kind of installation pools investments from multiple members of the community and provides power and/or financial benefit in return. Shared renewable projects are often located on public or jointly-owned property and provide an option for those who can’t install solar on their property, like renters and condominium owners or homeowners with roofs that are improper for solar installation.

Utility-scale solar is distinguished from other installations by project size, utility-scale projects are generally large, and the fact that the electricity is sold to wholesale utility buyers, not end-use consumers.

What do I need to consider when installing a solar energy system?

Going solar is a significant decision. You should understand the basics of solar energy, your options to go solar, and what questions to ask solar professionals.

How do residential solar systems work?

Most residential solar systems are photovoltaic (PV) systems. PV systems generate electricity through two main components: panels (or modules) made up of PV cells that convert sunlight to electricity and inverters that convert direct current (DC) to alternating current (AC) for use in your home.

How much electricity will your solar system generate?

In any solar system, this is dependent on two factors. The power rating of the system (measured in kilowatts or kW) is the first factor. The second factor is known as the system capacity factor, which is typically around 15 percent for residential solar. This means your system will produce only 15 percent of the energy it is capable of producing should it generate full power every hour of every day of the year. Calculating the capacity factor is dependent on several elements, one of which is the location of your home. The amount of sunlight your system will receive has a big impact on how much energy will be produced by your system. For example, a home in Phoenix will receive more sunlight than one in Seattle. A second element is the orientation of the planned system. The angle and pitch of your roof along with the compass direction impact how much sunlight will hit the panels. Shading from nearby objects like chimneys, trees and neighboring buildings also has an impact on the capacity factor. Finally, the efficiency of the solar panels and inverter installed will have an impact.

What are my ownership options?

The first option is to purchase. You would purchase the solar system outright with cash or a loan. You would be the owner of the system and all the electricity the system produces. The second option is to lease. For a specific rate agreed upon by both parties, a solar company will lease you a system. You make monthly payments and can use their system and benefit from the electricity it produces. The final option are power purchase agreements (PPA) that offer consumers the chance to pay for electricity generated from a solar system rather than entering into a lease for the system itself.

How can I decide if a solar system is right for me?

Everyone’s situation is different so it’s important to do your homework and be an active participant in the process. Know your electricity usage and whether or not your roof is appropriate for solar. Know your finances. Sunlight may be free, but solar systems are not. Research your solar company and get the best deal. Before entering into any agreement with a solar company, thoroughly vet their company. Asking for references and proof of licensure and checking with the secretary of state to ensure the company is in good standing should all be a part of the process of selecting a reputable company to work with. Getting multiple bids for your solar system should also be a part of the buying process. The market can be quite competitive and having multiple solar companies competing for your business can save you a few bucks. Finally, when looking for deals, don’t forget about tax credits and incentives. These can save you money as well, but make sure you fully understand any potential tax implications of these money savers.

What incentives are currently offered for solar in South Dakota?

  • Federal Tax Credit: A taxpayer may claim a credit of 30 percent of qualified solar energy system expenditures with no upper limit.
    • This incentive applies to the installation of both solar water heaters and solar panels.
  • South Dakota property tax credit: The first $50,000 or 70 percent of the assessed value of solar energy systems (less than 5 MWs), whichever is greater, is exempt from the real property tax (SDCL §§ 10-4-42 to 10-4-45).

Why doesn't South Dakota have net metering? What will I get paid from my utility for my excess generation?

Net metering is a policy in which a utility must purchase power generated by its customers at the same retail price it sells electricity to the customer. Typically used as an incentive for customers who install renewable energy systems like solar, net metering was first considered as a result of the Public Utility Regulatory Policies Act of 1978. At the time, South Dakota policymakers debated and chose not to implement it. Having considered this on numerous occasions, since then, the state legislature concluded mandatory net metering is not of the public interest.

Net metering hasn’t been adopted for several reasons. First, the utility would be forced to pay the generator an above market cost of generation. Further, the utility would not be able to schedule the generation of electricity and it would be worth less than electricity they are already buying for a lower price.

Retail electricity rates are based on the variable cost of energy generation and a portion of the fixed costs of generation, distribution and transmission facilities. If utilities must pay above market rates for substandard power, rates will eventually have to rise to cover increased expenses. Increased rates will have the largest effect on low income customers, who couldn’t afford the upfront costs of renewable energy systems in the first place.

Small generators have the opportunity to sell power to a utility without net metering. The purchase price the utility pays must reflect the value of generation and be similar to the utility’s wholesale cost of power. It doesn’t include costs of transmission, distribution and overhead, as well as other costs of providing electrical service that are included in net-metered rates.

All electric utilities regulated by the PUC are obligated to interconnect with and purchase power from small solar facilities if the generator desires and agrees to the terms. For solar facilities with a capacity less than 100 kW, the rates utilities pay for the power must be filed with and approved by the PUC. This transparency allows producers to compare rates and make informed decisions regarding the economics of a small renewable power facility.

What other resources are available?

U.S. Department of Energy

National Renewable Energy Labratory

Estimate Energy Production and Cost of PV Systems

Solar Energy Industries Assocation