If you want to go solar, you have two options: either invest upfront or let someone else finance the system.
The CAPEX and OPEX models are both solar models with pros and cons. One thing is for sure—switching to solar can help you reduce your monthly energy costs by 70-80%, regardless of whether you own the system.
How do you choose the right system for your business? To better understand, let’s examine CAPEX and OPEX.
CAPEX Solar Model
The CAPEX model is a capital expenditure model in which the customer pays for the installation, operation, and maintenance of a solar energy system. The consumer is responsible for the initial capital cost of the solar system.
The CAPEX model is expensive, but it gives the consumer full ownership of their solar asset. This right includes tax and depreciation advantages, as well as the ability to send excess energy into the grid in exchange for compensation.
Solar loans are also available to consumers, which reduces the cost of solar investment but compromises the benefits.
CAPEX is for those with the capital required to invest in solar. The initial investment recovered within 5-6 years with energy savings.
CAPEX: Its advantages
Owning the entire system gives you access to government rebates, tax incentives, and subsidies.
Return on InvestInvestmentster
For at least 25 Years, you will be protected from rising electricity rates.
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 responsibility for the solar plant installation 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.
The developer provides the equipment and invests in installation, commissioning, and maintenance. This type of installation is also known as a land-lease model.
What are the benefits to consumers? Electricity that is cheaper and free of risk!
The solar developer enters into a Power Purchase Agreement for a set period (between 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.
1. Budget and Financial Resources
When deciding on the CAPEX or OPEX model, your main consideration should be finance. CAPEX is the right model for you if you’re willing to invest in solar panels. This investInvestmentlso takes the form of EMIs or a solar loan.
The OPEX option is the best option if you want to reduce your carbon footprint without having to invest in solar and have enough roof space for a solar farm.
2. Risk and Responsibility Attitude
Businesses often install large-scale solar plants that can pose performance risks. Solar generation can be affected by many factors, including location, panel orientation, and weather conditions.
They also need regular maintenance. CAPEX is the right model for you if you’re willing to take on this risk. If you don’t want the risk, it’s best to leave it up to a third-party developer.
3. Ownership rights
The rights to the asset are a great way to get certain benefits. Commercial and industrial solar installations, for example, 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 up 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 solar panel roof that is both leak-proof and aesthetically pleasing.