Commercial Solar Financing in India: CAPEX, OPEX & RESCO Models

Businesses in India have three primary models for financing solar installations: CAPEX (buy and own, 2–4 year payback with 40% depreciation benefit), OPEX/RESCO (zero investment, pay per unit at ₹3–₹5/unit vs ₹8–₹14/unit grid tariff), and project finance (term loans at 8–10% for large installations). The right model depends on your balance sheet preference, tax position, and willingness to manage the asset.

In the CAPEX model, the business purchases and owns the solar system outright or through a term loan.

How it works:

• Business invests ₹40,000–₹55,000 per kW (installed cost for C&I systems)
• System is owned by the business and appears on the balance sheet as a fixed asset
• All electricity generated offsets grid purchase — saving ₹8–₹14/unit
• Accelerated depreciation: Claim 40% depreciation in year one under Income Tax Act, reducing tax liability significantly

ROI example (100kW system):

• Cost: ₹45,00,000
• Year 1 depreciation benefit (40% at 25% tax rate): ₹4,50,000
• Annual electricity saving: ₹12,00,000+ (at ₹9/unit)
• Effective payback: 2.5–3.5 years (factoring depreciation)
• 20-year NPV: ₹1.5–₹2 crore net benefit

The OPEX (Operating Expenditure) or RESCO (Renewable Energy Service Company) model is the most popular choice for commercial solar in India. A solar developer installs, owns, and maintains the system on your premises.

How it works:

1. Solar developer surveys your roof/land and proposes system size (typically 50kW–5MW)
2. Developer finances, installs, and owns the system at zero cost to you
3. You sign a PPA (Power Purchase Agreement) for 15–25 years
4. You buy generated electricity at ₹3.50–₹5.50/unit (vs ₹8–₹14 grid tariff)
5. Developer handles all maintenance, monitoring, and insurance
6. Annual tariff escalation of 1–3% is built into the PPA

Best for: Companies that want to reduce electricity costs without capital expenditure, prefer opex over capex on their books, or do not have sufficient tax liability to benefit from accelerated depreciation.

For large C&I installations (500kW+), project finance structures provide optimal capital efficiency:

• Debt-equity ratio: Typically 70:30 or 80:20 for solar projects
• Debt sources: Commercial banks (SBI, PNB, IREDA), green bonds, infrastructure finance companies
• Interest rates: 8–10% for established businesses with good credit
• Tenure: 10–15 years (matching the project cash flow profile)
• Security: Assignment of project receivables, charge on solar equipment

IREDA (Indian Renewable Energy Development Agency) is the specialised government agency for renewable energy project finance. They offer competitive rates and understand solar project economics.

→ Green bonds for solar projects

Businesses enjoy significant tax advantages from solar investment:

• Accelerated depreciation (40%) — Claim 40% of system cost as depreciation in year one. On a ₹50 lakh system, this saves ₹5 lakh in taxes (at 25% rate) immediately.
• Remaining depreciation — Balance 60% depreciated at normal rates (15% WDV) over subsequent years
• GST input credit — Businesses registered for GST can claim input tax credit on the solar system purchase (13.8%)
• Carbon credits — Commercial solar installations may qualify for carbon credits under India's voluntary carbon market

The combination of accelerated depreciation and electricity savings can reduce the effective payback to under 2 years for highly profitable businesses.

For commercial solar, the developer's credibility matters as much as the technology:

• Track record — Look for developers with 50+ MW of operational C&I installations
• Financial backing — RESCO developers must have strong balance sheets to honour 25-year PPAs
• O&M capability — In-house maintenance teams ensure uptime commitments are met
• Performance guarantees — Insist on contractual generation guarantees with penalty clauses
• Insurance — Comprehensive insurance for the solar asset against natural disasters and equipment failure

Solar Vipani connects businesses with verified C&I solar developers who meet all these criteria.

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