You have two options if you want to go solar. Either you invest upfront, or you let someone else finance the system.
Each model has its pros and cons. One thing is sure- switching to solar can help you reduce your monthly energy costs by at least 70%-80%, regardless of whether you own the system.
How do you choose the right system for your business? To better understand, let’s dive deep into CAPEX vs OPEX.
CAPEX Solar Model
The CAPEX model is a capital expenditure model where the customer pays for installing, operating, and maintaining a solar energy system. The consumer is responsible for the initial capital cost of the solar system.
The CAPEX model is expensive but gives the consumer full ownership of their solar asset. This right includes tax and depreciation advantages and the ability to send excess energy into the grid in exchange for compensation.
Solar loans are also available to consumers, allowing them to invest in solar energy without having the cost-burdened.
CAPEX is the model for those with the capital required to invest in solar. Energy savings can recover The initial investment within 5-6 years.
OPEX: Its advantages
Consumers only pay for electricity
Third parties bear the investment and performance risks
The developer is responsible for the management and operation of the plant.
Disadvantages
Investments with high initial cost
The consumer is also responsible for the risks and uncertainty involved since they have full rights to the plant.
OPEX Solar Model
OPEX, or Open Expenditure, shifts the solar plant installation responsibility to a third party. This compensates for the disadvantages of CAPEX.
If a consumer wants to switch from dirty energy to clean but does not have the money to do so, they can hire a Renewable Energy Service Company to install a solar power plant.
The developer provides the space, and the consumer supplies the equipment. This type of installation can also be called a land-lease model.
What are the benefits to consumers? The electricity is cheaper and free of risk!
The solar developer enters into Power Purchase Agreements (PPAs) for a set tenure (15-25 Years). The developer will supply them with energy during this time at a discounted rate compared to grid power.
After the PPA expires, the rights to the solar plant are transferred at no cost to the consumer.
OPEX: Its advantages
Consumers only pay for electricity
Third parties bear the investment and performance risks
The developer is responsible for the management and operation of the plant.
Disadvantages
The developer is entitled to tax rebates and benefits
Longer breakeven period
Electricity tariffs are not under the control of consumers.
How to choose the suitable model?
Before making a decision, consider the following
Budget and Financial Resources
When deciding on the CAPEX or OPEX model, your primary consideration should be finance. CAPEX is the right model for you if you’re willing to invest in solar panels. This investment may also take the form of EMIs or a solar loan.
If you want to reduce your carbon footprint without having to invest in solar and have enough roof space for a solar farm, the OPEX option is the best.
Risk and Responsibility Attitude
Businesses often install large-scale solar plants that can pose performance risks. Solar generation can be affected in many ways, including location, panel orientation, and weather conditions.
They also need regular maintenance. CAPEX is a suitable model for you if you’re willing to take on this risk. It’s best to leave it up to a third-party developer if you don’t want the chance.
Ownership rights
The rights to the asset are a great way to get certain benefits. For example, commercial and industrial solar installations can benefit from up to 40% of accelerated depreciation.
CAPEX installations offer you such benefits, while OPEX does not.
About Ornate Solar
Ornate Solar has been in the solar industry for over eight years. We have partnered with the world’s best solar brands to offer you a range of high-quality, reliable, and affordable solar panels, inverters, and accessories.
We also developed India’s first Integrated InRoof System. The Ornate InRoof has a leak-proof and aesthetically pleasing solar panel roof.