North Dakota Solar – Everything You Need to Know
Information about Solar Panels in North Dakota
North Dakota ranks dead last when comparing each state’s total solar capacity, with just 250 kW of solar installed. That's less than 50 homes' worth of solar! In comparison, over 700,000 homes in California have solar installed. Why is the solar industry so stagnant in North Dakota?
Residents already enjoy low electricity prices, so there's no real urge to explore other electricity options. On top of that, the state has also passed very little regulation to encourage growth of the solar industry. All of this together means few homeowners have found solar a truly beneficial step.
North Dakota solar, though, is not a total bust. While low now, electricity rates are rising faster than the national average, and even with the low utility rates, residents can still save money by installing solar. You won’t save as much as a California homeowner, but by choosing financing wisely and keeping costs as low as possible, going green can be a worthwhile decision for both you and the planet.
Below, we have the overall information you need on going solar in North Dakota, including savings estimates as well as an overview of relevant regulations and incentives.
#1 Are Solar Panels Worth it in North Dakota?
Avg. Payback Time (For Cash Purchase)
Estimated IRR (Return on your investment on cash purchase over 25 years)
Your Net Profit Over 25 Years (Cash Purchase)
* Note that these are estimated values for informational purposes only, and do not take into account the full complexity of all financial projections. They also only apply to cash purchases, which means your numbers will be different if you lease your system or pay for it with a loan (factoring in interest). Also note that we are not financial advisors, so this information should not be construed as financial advice.
#2 Options for Buying Solar Panels in North Dakota
Purchasing your solar installation, either via cash or loan, is the way to go in North Dakota. Well, it’s the only way to go.
Paying for your solar installation in cash offers quite a few benefits. First, your total savings are higher than with a loan or lease since you’re avoiding paying interest or any other additional fees. Secondly, since you’ll completely own the system (unlike a solar lease), you’re eligible for the 30% federal tax credit to further lower your total cost.
Lastly, since your solar installation is a home improvement, you’re adding a valuable asset to your property which you may see a financial return on when you sell your home (more on that later).
Of course, with all these benefits, there’s that one big drawback: you actually have to put all that cash down upfront as well. Not an easy task for most of us. On top of that, North Dakota residents enjoy pretty low electricity prices, and there’s little help to drop the cost of going solar beyond the federal tax credit. Savings simply aren’t as high as in other nearby states like Colorado, Minnesota, or Wyoming.
Exactly how much you can save by installing in North Dakota depends on your system size, location, and utility rates. When we looked at installation costs from a few different sources, we found that an average-sized 5kW installation in North Dakota should cost about $17,650, or $12,355 after the 30% federal tax credit.
This installation will produce clean, free electricity each year – electricity you’ll no longer have to purchase from the utility. By Year 17, you’ll have paid off your entire initial investment. By Year 25, you can expect to have saved around $8,597 – a 4.1% internal return on your investment (after taking into account the federal tax credit, solar production in North Dakota, and the average utility rate in the state).
If you enter into a solar lease, your solar company both installs and retains ownership of your solar installation. You make small monthly payments to your installer for the privilege to use the equipment over the lease term, typically around 20 years, and you save money by avoiding that costly utility-sourced electricity.
By allowing homeowners to bypass that high purchase price of solar, leases helped start the solar boom back in the late 2000s. At their height in 2014, leases and PPAs accounted for over 70% of the residential solar market, but since have quickly lost ground as installation costs continue to drop and more homeowners realize the benefits of solar ownership.
Leases require additional costs that cash and loans don’t. There are additional fees, as well as inherent interest tacked onto the monthly payments. So while leases, like loans, don’t require any cash up front, they limit homeowners’ total savings when compared to ownership.
With electricity prices so low in North Dakota, it’s unlikely you could even save money with a solar lease and solar lease companies like Sunrun have yet to enter the state. If you want to finance your installation via a lease, you better look elsewhere.
More: Solar Leases
If you don’t have the cash in your bank account to pay for your installation upfront, loans are the next best thing. Sure, you have to pay interest – which cuts into your savings – but you still get to take advantage of the federal tax credit and benefit from the increased value the system adds to your property.
If you took out a standard 15 year loan with 5% interest, you’d add an extra $7,001 to your total investment, bringing your cost up to $19,356 (after the federal tax credit). With this increased investment, your total savings also drop pretty significantly, to just $1,596 with a 24-year payback period. Yikes!
Needless to say, that’s a pretty long time. However, if you’re dead set on going solar and just want to do your part for the environment, loans require little investment on your own part and the financial savings you’ll see from your reduced utility bills will more than cover the costs in the long term.
There are special lenders focused exclusively on financing solar installations, but you can also use a HELOC or HELOAN from your own bank as well. Just remember, the lower the interest rate and shorter the period, the more you can save. If you can pay off your loan early, you can decrease your total interest and add that to your savings!
More: Solar Loans
#3 North Dakota Solar Policy Information
Policy is hugely important to helping the fledging solar industry grow. Good pro-solar policy can jumpstart a state’s entire renewable industry, but a lack of supportive policies resigns the local industry to stagnation. How is North Dakota’s solar policy? Well, remember how there’s only about 50 homes with solar in the entire state? That is a good tip off that it’s not great.
Renewable Portfolio Standard (RPS)
Renewable portfolio standards, or RPSs for short, are goals that states pass mandating that local utilities must source a certain percentage of all the electricity they sell from renewable resources by a certain date.
As of 2018, 29 states have passed renewable portfolio standards, and Montana’s 15% by 2015 and North Carolina’s 12.5% by 2021 are pretty standard examples. These goals force utilities to adopt renewable energy much faster than they otherwise would, either through building their own renewable energy plants, purchasing renewable electricity from a private company, or buying RECs.
In contrast to the states above, North Dakota adopted a renewable portfolio goal (instead of a standard) of 10% renewable by 2015. In comparison to a mandatory standard, a goal is completely voluntary. Utilities aren’t required to adopt renewable energy and there’s no penalty if they don’t comply.
While we’d like to see an actual mandatory goal, renewable energy in North Dakota is actually doing really well, thanks to their proliferation of wind power. In 2017, 25% of all electricity sold in North Dakota came from wind and 5% came from hydro-power. In fact, North Dakota is 5th in the nation for wind power capacity. Not bad!
However, if the state wants to begin pushing the local renewable energy industry forward – especially the solar industry – adopting an updated RPS is an important step forward.
North Dakota’s proliferation of coal allows residents to benefit from the 2nd cheapest electricity in the country (besides Louisiana). While the US average hovers around $0.13 per kWh, North Dakota residents pay a scant $0.09/kWh as of March 2018. A four cent difference might not sound like much, but when you consider that the average North Dakota homes uses 12,500 kWh each year, that’s a $500 difference annually.
We can’t complain about low electricity prices, but it does make saving money by installing solar more difficult. If your utility charges more, then you can save more by installing a solar system on your roof and avoiding that high-priced electricity.
While you can still save money with solar in an area with low electricity rates, it just takes longer to recoup your initial investment. And as we saw above, this is the case in North Dakota, where you’ll have to wait 17 years to see that return on your cash purchase.
North Dakota Net Metering
North Dakota passed what they call net metering regulations in 1991, but they’re a far cry from what many in the utility/solar sector consider ‘real’ net metering, wherein utilities provide solar homeowners one-to-one, full retail rate credit for all excess electricity they put into the grid. With full retail rate net metering, if you pay the utility $0.13 per kWh, they’ll credit your account at $0.13 per kWh for all the solar electricity you add to the grid as well.
North Dakota requires all investor-owned utilities (ie publicly-traded utilities) to pay homeowners for all excess generation at their avoided cost – essentially what they pay to purchase or produce that same amount of electricity. Typically this works out to around $0.03 to $0.05 per kWh – a fraction of the retail rate.
This might not sound too bad, but even utilities in states without any net metering regulations will offer solar homeowners bill credits or payment at their avoided-cost. Net metering credits at avoided cost simply aren’t anything special.
Without full retail rate net metering, your total solar savings depends on how much of your solar electricity you can use directly in your own home.
For simplicity in our savings examples above, we assumed you use 100% of all your solar electricity in your own home without sending any to the grid. In the real world, though, this is virtually impossible.
During the day, when you’re at work and your installation is pumping out electricity, it’s inevitable you’ll send some to the grid. At this time, instead of avoiding $0.09 per kWh, you’ll be credited at $0.04 per kWh or whatever your utility’s avoided cost is (you’ll need to ask them).
You’re still coming out ahead financially, as you can use that money to pay for electricity down the road, but it’s not quite as much as homeowners in other states.
North Dakota’s less-than-stellar net metering regulations certainly aren’t a deal breaker, but it’s crucial to work with your installer to estimate exactly how they will affect your total savings.
More: Net Metering
In tandem with net metering regulations, many states also pass regulations making the process for homeowners to connect their solar installation to the utility grid – known as interconnection – as easy as possible.
North Dakota has yet to pass any sort of interconnection standards, so each utility can charge whatever fees they deem worthy, require homeowners to install extra safety features that add costs to the installation, and take as long as they want in the approval process.
From a practical standpoint, you don’t need to worry too much, as your solar installer will have the inside scoop on your utility’s requirements and likely even fill out all the paperwork for you. However, state-wide interconnection standards make the process of installing solar easier for everyone, and we’d love to see North Dakota adopt one in the future.
Solar Access Rights and Homeowners Associations
In addition to RPSs, net metering, and interconnection regulations, solar-friendly states often pass laws protecting solar installations as well, in two different aspects:
First, solar installations obviously need sunlight and many states allow homeowners to create property easements for the airspace directly south of the solar panels. This prevents neighbors from building additions or planting trees that would block sunlight and render the panels useless. North Dakota allows solar homeowners to obtain a solar easement with neighbor’s approval.
Many states also protect their residents’ right to install solar, banning HOAs or any other covenants from blocking solar. Without these protections, a cantankerous HOA can simply deny a homeowner’s request for approval for their solar installation, with little legal recourse to counter the denial.
North Dakota has yet to pass any laws offering such protection. If you live in a covenant-controlled community, the best course of action is to speak early with the approval board, stay friendly and flexible, and provide as much information as possible on the benefits of solar. Remember – solar raises home values, and that’s certainly a selling point for the community!
#4 North Dakota Solar Incentives, Rebates, and Tax Credits
North Dakota residents can look to the federal tax credit and a state property tax exemption for help in lowering their total solar investment, but that’s about all there is.
Federal Tax Credit
The federal government offers a personal income tax credit (known as the solar tax credit, Investment Tax Credit, or ITC) for homeowners installing solar, worth 30% of the cost of the entire installation. As a tax credit (as opposed to a deduction, which lowers your taxable income), the ITC lowers your actual taxes dollar-for-dollar, so it’s an incredible deal – as long as you owe enough in taxes to benefit.
As a nonrefundable credit, the feds won’t cut you a check if you owe less than $0. However, if your tax liability isn’t high enough in a single year to claim the full credit, you can break it out in chunks over several years.
With the ITC, you just slashed $5k off your $17,000 installation. Not bad, huh? If you want to take advantage, you’ll need to get in gear. The full credit expires at the end of 2019, at which point it drops to 26% for a year, then 22% the next year, after which it’s toast forever (unless it gets extended again, but don’t count on it).
More: Solar Federal Tax Credit
North Dakota Tax Credits/Rebates
Though they’re becoming less and less common, some individual states also provide tax credits for solar installations. North Dakota isn’t one of them.
Solar Property Tax Exemption
North Dakota does offer a property tax exemption on the additional value your solar installation adds to your house. Homeowners can exempt 100% of the value of their solar installation for the first 5 years. With the average North Dakota property tax at 1.34%, that’s more than $1,000 over the life of the exemption for an average-sized installation worth about $17k. Pretty cool!
Solar Sales Tax Exemption
In an effort to further lower the cost of going solar, some states also exempt solar equipment and labor from state sales tax. With the North Dakota state sales tax at 5%, you could save about $850 on an average-sized system. Unfortunately, the state doesn’t offer a sales tax exemption for solar installations at this time.
General Increase in Home Value
Just like remodeling your kitchen or adding hardwood floors, installing solar on your roof is a valuable asset that can raise the resale value of your home. However, unlike hardwoods that are purely aesthetic, solar adds value because it lowers your home’s operating expenses (ie cheaper electricity).
Exactly how much value solar brings depends on the size and age of your installation. In 2015, the Lawrence Berkeley National Lab studied home sales across 8 states (though not including North Dakota) over 14 years and found that, on average, homes with solar sold for a $4/watt premium.
At this rate, a 5kW installation would then add $20k to the value of your home. Brand new systems were valued at over $5.90/watt and decreased to $2.60/watt for the oldest systems (around 20 years old). (p.18)
While a solar installation in North Dakota might not fetch $4/watt, due to the low electricity prices and less-than-perfect net metering laws, even just a quarter of that premium would allow you to recoup a major portion of your initial investment.
If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.
#5 Fargo Solar Information
If you live in the biggest city in North Dakota, you might be wondering if you need to know anything special.
While Cass County Electric Cooperative, Fargo’s local electric utility, doesn’t offer any rebates or credits for solar residents, they do offer a couple programs for their renewably-minded customers.
First, in 2016 they completed the state’s first ever community solar garden, Prairie Sun, a 102-kW system located in Fargo. Community solar allows homeowners who can’t install solar panels on their roof (renters, shade issues, etc) to join in on the solar game. According to their website, they’re still accepting reservations from co-op members.
While North Dakota isn’t the state you probably think of when you think ‘solar’, homeowners can actually save a decent chunk of money by going green. However, it’s a long-term investment, and you need patience to see that investment come to fruition. Beyond that, you’ll have the peace of mind knowing you’re taking a lighter step in the environment – and that’s what it’s all about, right?