CAPEX Solar Model
In the CAPEX or Capital Expenditure model, the consumer pays for the equipment, installation, operation, and maintenance of the solar energy system. In short, the consumer bears the capital expenditure of the solar installation.
While cost-intensive, the CAPEX model gives the consumer complete rights to their solar asset. This right comes with tax and depreciation benefits along with the ability to send the excess energy back into the grid and be compensated for it.
Consumers also have the option of availing a solar loan, which slashes the financial burden of investing in solar without compromising on the benefits.
The CAPEX model is for those who have the required capital to make the full investment in solar. With energy savings, consumers can recover this initial investment within 5-6 years.
While cost-intensive, the CAPEX model gives the consumer complete rights to their solar asset. This right comes with tax and depreciation benefits along with the ability to send the excess energy back into the grid and be compensated for it.
Consumers also have the option of availing a solar loan, which slashes the financial burden of investing in solar without compromising on the benefits.
The CAPEX model is for those who have the required capital to make the full investment in solar. With energy savings, consumers can recover this initial investment within 5-6 years.
Advantages of CAPEX
- Complete ownership of the system, thus access to tax benefits, government subsidies, and rebates
- Faster return on investment
- Full protection against rising electricity tariffs for at least 25 years.
Disadvantages of CAPEX
- High initial investment
- Since the consumer has complete rights to the plant, they also have to bear the risks and uncertainties involved
Comparing CAPEX and OPEX Solar Model
| Category | CAPEX | OPEX |
|---|---|---|
|
Investment |
Consumer makes 100% Investment |
Consumer only pays for the electricity |
|
Ownership Rights |
Consumer has full ownership |
Third Party Developer has the rights |
|
Electricity Tariff |
Reduced tariff |
Tariff decided by Developer |
|
Operation and Maintenance |
Consumer is responsible for O&M |
Developer is responsible for O&M |
|
Payback period |
Shorter Payback period |
Longer payback period |
|
Tax benefits and Govt. Rebates |
Consumers avails the benefits |
Developer avails the benefits |
How to Choose the Right Model?
Consider the following factors before the big decision:
- Your Budget and Financial Resources:Your biggest consideration when deciding between OPEX and CAPEX models should be financing. If you are prepared to make the capital investment for solar installation, then the CAPEX model is right for you. This investment can also be in the form of EMI payments or a solar loan.
But, if the aim is to decarbonize without investing money into solar, and you have the roof space to set up a solar plant, then the OPEX model is best. - Risk and responsibility appetite: Large-sized solar plants, installed by businesses, often pose a performance risk as solar generation can be affected by multiple factors such as location, panel orientation, weather conditions, product quality, etc.
Moreover, they also require regular maintenance. If you are prepared to shoulder this risk and responsibility then the CAPEX model is right for you. If not, then it’s better to let a third-party developer do the same. - Ownership Rights: Owning the rights to the solar asset comes with certain benefits. For example, commercial and industrial solar installations can avail up to 40% accelerated depreciation on their solar plant.
CAPEX installations allow you to avail such benefits while the OPEX model does not.