What Financing Model of On-Site Solar Should my Business Opt for – The Capex Vs Opex Debate
WHAT IS AN ON-SITE SOLAR SYSTEM AND HOW CAN A COMPANY FINANCE THE SAME?
As the name suggests, on-site Solar is a method that involves harnessing of solar energy from infrastructure built at the client’s site. This can be rooftop PV, ground-mounted solar, floating solar or a carport system – depending on the nature of space available. The most common methods of financing on-site solar is either CAPEX or OPEX, depending on whether the client wishes to own the asset or not.
THE CAPEX OR CAPITAL EXPENDITURE MODEL
The CAPEX or Capital Expenditure model is when the client retains the ownership of the asset as it involves payment of the total cost of the PV system upfront. While the customer is responsible for covering all expenses related to equipment procurement, design, installation, and commissioning – he also benefits from being able to avail the benefits of accelerated depreciation. The scope for operating and regular service of the asset can remain with the client or be outsourced to the developer against an O&M (Operations & Maintenance) contract.
WHEN SHOULD BUSINESSES CHOOSE THE CAPEX MODEL?
- Ample roof or ground space at the business facility
- The company seeks to own the asset – preferring a higher value of assets on their balance sheet
- The client remains insulated from change in policy or escalation in tariffs
THE OPEX OR OPERATING EXPENDITURE MODEL
The OPEX or operating expenses model, (also known as RESCO) is a system in which the solar project developer retains ownership of the asset, and the client only pays per unit electricity consumed from it, on a monthly basis. There is no upfront chunk of capital investment; instead the client and developer enter into a long-term Power Purchase Agreement or PPA that outlines the tariff norms for a period of 20-25 years. The developer owns the asset for the lifetime of the solar plant and is responsible for timely maintenance to ensure maximised electricity generation.
WHEN SHOULD BUSINESSES CHOOSE THE OPEX MODEL?
- The company is not keen on making an upfront capital investment or owning the PV assets on its’ books
- The company wants the PV asset to function in auto-pilot mode, with no involvement in maintenance and service of the solar system
- Ideal for businesses with low-risk profiles
- Companies that prefer lower monthly payments, instead of a big chunk of capital outlay
FOURTH PARTNER ENERGY’s ON-SITE SOLAR SOLUTIONS WITH INNOVATIVE FINANCING OPTIONS
Irrespective of the model of financing, opting for renewable energy to power your business is one step towards bettering the planet. Companies today, have a responsibility towards sustainable best practices and are increasingly choosing to green their footprint.
FPEL is committed to helping corporates across India and SouthEast Asia accelerate their green energy goals by offering low-cost, low-carbon energy solutions that are customised to meet their unique energy requirement.
We are India’s leader in on-site solar solutions, with projects in over 26 States for the biggest corporate clients including Hyundai, Schneider, Skoda, DMart, Unilever, TCS, ICICI Bank, Akzo Nobel, UltraTech cement amongst others.
To fast-track your companies’ Net Zero goals, reach out to firstname.lastname@example.org or chat with our real-time renewables consultant at www.fourthpartner.co