Introduction
Switching to solar energy is no longer just an environmental choice—it is a financial decision that can transform the way businesses and homeowners manage their electricity costs. Among the available financing models, the CAPEX (Capital Expenditure) model is the most traditional and widely adopted in India. Unlike the OPEX model, where the developer invests in the solar system, the CAPEX model allows the consumer to purchase and own the solar plant outright.
In this blog, we’ll explore the CAPEX model in detail, its advantages, challenges, ROI, and why it continues to be the most trusted solar adoption method in India.
What is the CAPEX Model?
The CAPEX model involves an upfront investment by the consumer—be it an industry, commercial establishment, or homeowner—for installing a solar plant. The ownership of the system lies with the consumer, who is responsible for maintenance and operations.
Once installed, the consumer generates free electricity for 25+ years after recovering the initial investment, usually within 3–5 years.
Features of the CAPEX Model
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Ownership Advantage – The system belongs entirely to you.
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Upfront Investment – Requires capital but brings long-term returns.
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Tax Benefits – Businesses can claim accelerated depreciation under income tax.
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No Long Contracts – Unlike OPEX, there’s no need for PPAs.
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Higher Savings Over Time – Once ROI is achieved, electricity is practically free.
Benefits of the CAPEX Model
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Maximum ROI – After payback, all savings are direct profit.
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Tax Advantages for Businesses – Under Section 32 of the Income Tax Act, companies can avail 40% accelerated depreciation.
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Energy Security – No dependence on fluctuating PPA tariffs or grid tariff hikes.
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Asset Creation – Solar plant is treated as an asset, adding to business valuation.
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Sustainability Benefits – Meeting ESG goals with self-owned green energy.
Challenges in CAPEX Model
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High Initial Cost – For a 100 kW system, upfront investment may exceed ₹30–₹40 lakh.
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Maintenance Responsibility – Consumer must ensure smooth operation and hire O&M services.
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Technology Risk – Upgrades in solar tech may make your system outdated over time.
Case Study Example
A residential apartment complex in Ahmedabad consumes 50,000 units/month. Installing a 200 kW rooftop solar system under CAPEX at ₹35 lakh:
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Annual generation = 2.7 lakh units
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Annual savings = ₹21.6 lakh (assuming grid tariff ₹8/unit)
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ROI achieved in ~3 years
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Lifetime savings (25 years) = ₹4–5 crore
CAPEX vs OPEX Comparison
| Aspect | CAPEX | OPEX |
|---|---|---|
| Investment | By consumer | By developer |
| Ownership | Consumer | Developer |
| Tariff | Free after ROI | Fixed tariff for contract period |
| Maintenance | Consumer responsibility | Developer responsibility |
| ROI | 3–5 years | Savings from Day 1 but no asset |
Why CAPEX is Preferred in India
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Many Indian businesses have access to bank loans and subsidies that make CAPEX more attractive.
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Homeowners prefer CAPEX because residential solar adoption is usually a one-time decision.
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The ability to claim government incentives and own the system outright adds long-term value.
Conclusion
The CAPEX model remains the go-to option for industries and homeowners who have the capital to invest upfront and seek maximum savings in the long run. While it requires responsibility for maintenance, the benefits of asset ownership, ROI, and long-term cost reductions make it one of the most reliable financing models in India.
At Solyug Energy, we guide clients in assessing CAPEX feasibility, calculating ROI, and ensuring seamless installation with high-performance equipment.