India’s growing power needs, and the globe’s growing concern for climate change has provided an impetus for India to pursue Renewable Energy and in particular Solar Power at a breathtaking pace.
The CAPEX model is one of the standard business models for Solar Deployment. Under this model, the user purchases and owns the rooftop solar system. Hence, they need to pay for the entire capital expenditure of the project, i.e. the entire installation cost of the system. This model allows residential, industrial and commercial customers to own the system and claim tax and depreciation benefits.
But then again, the solar CAPEX is not devoid of shortcomings. In this article, we dissect this solar solution with SWOT analysis. Here is a brief into its Strengths, Weaknesses, Opportunities & Threats.
- One of the major benefits of this model is that the owner of the plant can claim accelerated depreciation benefits of the system. Accelerated Depreciation in solar plants are as high as 40% for existing assets, and 60% for new assets and they help in greatly reducing the payback period of solar power plants.
- CAPEX plants also ensure that the savings that the user can generate out of solar are maximum. Considering that the operational cost of generation is minimum, the owner gets practically free electricity from the solar power plant.
- The CAPEX investment of solar has a return ranging from 25%-40% without Accelerated Depreciation and 35%-90%+ with Accelerated Depreciation. The average payback is between 2.5-5 years.
- In CAPEX Solar Plants, there are no restrictions in shutting down of the plant or relocation. Both can be done by the owner as per their choice.
- Land/Rooftop will not be leased out to the solar power developer, and hence any modifications to the facility remain under the control of the owner.
- Asset Owners of CAPEX power plants also become the owners of all renewable energy certificates that are generated due to the production of clean energy.
- The risks associated with the plant are all taken by the asset owner. Hence, if you are opting for the CAPEX model, you need to be very careful about the components being used (especially the solar panels and the solar inverters) in the plant and the workmanship.
- Many asset owners find operations and maintenance of the CAPEX solar plant to be a challenging factor. Considering that most users are not well versed in the O&M practices, it adds an added pressure on them.
- Constant monitoring of the plant is needed to ensure its long term success. Hence, the asset owner must constantly monitor the solar power plants.
- As solar energy is one amongst the clean & renewable sources of energy, which reduces our carbon footprint, it is our contribution to a more sustainable future and a small step to save the environment.
- Through this model, the end consumer can own the solar power plants, and therefore have the ability to control their power costs in the future.
- The industry’s green rating amongst other competitors rises when they opt for a solar PV system which also boosts their goodwill.
- India is endowed with huge solar energy potential, with most states having an abundant availability of sunlight which ensures higher production of energy per unit of installed capacity. Distinct states support in terms of subsidies, and these attributes aid the customer further.
- Solar power systems are durable and have no moving parts, thus the chances of service interruption are reduced. If simple procedures are set in-house, then O&M can be handled easily.
- Concern about the quality of the system is natural as any shortfall in the production can result in the owner’s loss.
- If the installation process is not adequately taken care of, then the system can easily result in power loss or low shelf life.
- Environmental conditions play an influential role in the depreciation of the system as regions with heavy pollution have very low generation.
Overall, we highly recommend CAPEX systems, if you are looking for a maximum possible reduction in your power bills through solar power. The risks associated with CAPEX can be easily mitigated if the consumer follows the best practices when finalizing the system. We highly recommend using a specialized service to decide your solar plant installer as this will ensure that you get a trusted partner who helps you in your entire solar journey and helps you mitigate any risks associated with it.