Currently, the two main financial models under which solar plants operate in India are:
- CAPEX Model
- OPEX Model
As the name suggests, the CAPEX model (Capital Expenditure) is one where the solar system is entirely owned by the end-user whereas in the OPEX (Operational Expenditure) model, the investor is the owner of the solar plant and the end-user pays for the electricity consumed. The OPEX model is also called the BOO (Build Own Operate) model.
Build Own Operate (BOO) business model allows a system provider to install a system on the customer’s premises and sell the power to the customer. In this arrangement, the system provider would bear the capital expenditure for the solar unit, provided the customer fulfils certain criteria and enters into a power purchase agreement (anywhere between 5-25 years) with the system provider. By going through this business model, the requirement of high initial capital investment can be avoided.
OPEX model has been especially attractive in the context that, it removes the constraints associated with the upfront investment cost and the hassle of maintenance for an owner, be it an individual or a business entity.
OPEX Model caters to the following segments
- For Rooftop-Solar based installations
- For Off-Site Solar generation (which comes under the Third Party Open Access Model)
- For Rooftop and Ground-Mounted Solar installations for government institutions