Financing is one of the most significant challenges for companies when considering going solar. For those who find the whole process intimidating and expensive, solar PV systems can have high upfront costs.
Do you need an estimate of the cost of a solar power plant in India? A 1MW solar power plant costs around Rs. 4 crores or more. The quality and efficiency of the solar panel, as well as the cost of the components, will affect the price.
You are not alone if sticker shock is making you think twice. For little to no down payment, businesses can get financial assistance, such as solar loans or solar leases (Capex).
Opex vs. Capex Solar Model
Businesses can install solar panels commercially with a solar loan or a lease without affecting their cash flow and reserves. You can enjoy significant energy savings and reduce your carbon footprint by deciding between renting (opex) or purchasing the system (loan/ Capex).
What does it mean to rent a solar system? – Opex Model
You can install solar panels using an Opex or solar lease. The monthly payment is made to a third-party solar installer. Only the electricity consumed is charged to the consumer monthly. A solar plant built through an opex model requires less capital. However, the electricity generated by the solar plant will be cheaper than conventional grid electricity bills. Guaranteed savings will be yours from day one.
A power purchase agreement is binding on both the developer and the customer. It includes the per-unit tariff as well as other terms. Depending on the tariff model, your tax can be flat or follow the market.
The Benefits of the Opex Model
- Zero upfront cost
- Monthly payments that are lower than regular utility bills have lower monthly costs
- Developers provide maintenance and installation support. They are the owners and operators of solar assets. Their revenue is dependent on the performance of their solar plant.
Drawbacks to Opex Model
- Subsidy and rebates are unavailable if the asset owner is a third party.
- Price escalations caused by a rise in market rates (if there is a floating tariff model)
- The system is not yours.
The RESCO model for Indian solar power is a low-cost option for solar energy. It stands for Renewable Energy Service Company and is growing in popularity over the last few years. The RESCO model was one of the main reasons commercial and industrial customers started to adopt solar. They didn’t need to pay upfront for solar plants, but they were already saving money. This is similar to leasing. A third-party solar developer finances the system and manages its maintenance. It is currently offered for rooftop solar projects in the commercial and industrial segments.
What Does Owning the System Entail? – Capex Model
Capex is the model in which the company owns the solar system but purchases it from its books of accounts. This model allows businesses to purchase solar power without any investment. They can finance the system through solar loans. You will also enjoy substantial savings over the life of the system. Consumers are also eligible for the incentives and favorable policies they would not be suitable for under an opex or leasing model.
The Benefits of Choosing a Capex Model
- The system is yours to own.
- You are eligible for government subsidies, rebates, and other benefits.
- Market price escalations have no effect.
Drawbacks to Buying Through A Solar Loan
- It is possible to be discouraged by the initial cost.
- It is capital-intensive and requires high investments to reach the scale of millions for an MW solar system.
Consider the Financials of Your Company
The most critical factors in determining the best option for solar financing are the length of your business and the available funds. If you are financially stable, making a sound financial decision is possible by purchasing an off-grid or on-grid system. You can install a grid-connected solar system of up to 25 kW in schools, hospitals, factories, offices, and other commercial spaces.
The electricity bill should be around Rs. Savings of up to 90% can be achieved if the monthly electricity bill is around Rs.25,000 To get the total return on your investment in solar, it will take 6-8 years. This will vary depending on the efficiency rating of your solar system. Discuss the costs of solar energy and other details with your company.
The OPEX model, on the other hand, is the best way to get solar energy started quickly and enjoy increased savings.
What’s the Long-term Goal of Your Business
Capex and opex models allow industrial and commercial businesses to save on utility bills. However, to avoid making an upfront investment, you can choose the opex model. Although the CAPEX model may require a significant capital investment, you can still enjoy the system’s benefits over its lifetime once the payback period has ended. The Opex model has its advantages, such as operation and maintenance. You can still do what you love, which is running your business.
An opex model is an excellent option for businesses that rental property. If you don’t have a business continuity plan or funds, it can help reduce your energy costs. It is still profitable due to the substantial savings solar provides.
Are you interested in being a part of India’s future solar? To learn more about the various models that you can use to harness solar energy and other government schemes that you might be eligible for, contact Amplus Solar. We are a top-rated, ISO-certified Indian solar energy company. We provide customized off-grid and on-grid solar systems to meet the needs of businesses, industries, as well as commercial customers. We provide complete clean energy solutions from battery storage to energy monitoring equipment and maintenance services.