CAPEX vs OPEX Solar: Which Solar Model Is Better for Businesses?

One of the major parts of your business's monthly expenses comes from electricity bills. That’s why most businesses are switching to a solar system so they can reduce that cost. If you are also one of the business owners planning to install commercial solar panels for your business setup, then you should be ready with some research or planning. Especially, understand how you want to pay for the installation. 

There are two common options including CAPEX and OPEX. Each model helps businesses save money on electricity bills. You can choose the right choice based on your budget, long term plans, and the responsibility you want to take for the system. Let’s understand everything in detail through this guide and cover everything related to the CAPEX solar model and the OPEX solar model.

What Is CAPEX?

CAPEX stands for Capital Expenditure. This means money spent on buying or installing assets that a business will use for several years.

In simple words, a business pays for its solar installation and owns the system. The business will be responsible for maintenance, either through its own team or a service provider.

It is a great option for businesses that want to own their solar system and save on electricity costs over the long term.

What Is OPEX in Solar?

OPEX stands for Operating Expenditure. This means the regular expenses involved in running a business.

The solar OPEX model allows businesses to use solar electricity without paying the full installation cost upfront. A third party usually invests in, installs, and maintains the system. In OPEX, the business pays for electricity generated at an agreed rate.

However, the payment terms are completely based on the agreement. Some arrangements may include deposits or other charges.

What is the difference between CAPEX and OPEX in Solar?

The major factors that make a difference are “who pays for the installation” and “who owns the system”. So let’s check other factors that differentiate CAPEX and OPEX-

How Does the CAPEX Solar Model Work?

The CAPEX model is simple: a business invests in a solar system and uses the electricity it generates. Here is how it works-

Check Electricity Usage

Review your electricity bill and daily power requirements.

Estimate the Cost

Get a quote for the solar panels, inverter, installation and other equipment.

Arrange the funds

Pay using business funds or suitable financing.

Install the system

Get the solar system installed and tested

Use solar electricity

Reduce the amount of electricity purchased from the grid.

Maintain the system

Arrange regular cleaning, inspections and repairs when required.

IMPORTANT: The initial cost can be high, and the business must plan for maintenance and equipment related expenses.

How Does the OPEX Solar Model Work?

In the OPEX model, the solar provider needs to invest in the system, while the business pays for the electricity it receives. Here is how it works-

Site Assessment

The solar provider first checks your roof, electricity usage, and installation requirements.

Agreement

Now both the parties agree on the electricity rate, contract period and responsibilities.

Installation

The provider will arrange the equipment and installation setup.

Electricity Supply

The business uses solar electricity and pays according to the agreement.

Maintenance

Lastly, the provider will look after the system as agreed in the contract.

IMPORTANT: The business should always check several crucial factors, including the electricity rate, contract period, payment conditions, and rules for ending the agreement early.

Advantages and Disadvantages of CAPEX Solar

Here are the quick pros and cons of CAPEX solar that will help businesses to decide if they should go for it-

Pros of CAPEX

Long Term Savings

CAPEX allows businesses to benefit from lower electricity costs, and maintenance and other expenses remain once the initial investment is recovered.

System ownership

In this model, the business owns the solar equipment and has greater control over its use and maintenance.

Potential Tax

Based on the applicable rules, eligible businesses may qualify for depreciation or other tax benefits.

Cons of CAPEX

High Initial Cost

CAPEX comes with a higher initial cost, which means when buying and installing a commercial solar system, you need an investment.

Maintenance Responsibility

The business must arrange maintenance and repairs.

Returns Depend on Performance

Your savings can vary depending on electricity usage, solar generation, and project costs.

Who Should Choose CAPEX?

CAPEX would be the absolute right choice if your business has sufficient funds and plans to use the solar system for many years.

Advantages and Disadvantages of OPEX Solar

Now let's understand if OPEX suits your business well or not. Here are some pros and cons of OPEX Solar-

Pros of OPEX

Lower upfront cost

The provider usually invests in the installation, helping the business preserve its working capital.

Less maintenance work

The provider generally manages system maintenance under the agreement.

Agreed electricity rate

The contract sets out how much the business will pay for solar electricity, making costs easier to plan.

Cons of OPEX

No immediate ownership

The provider usually owns the system during the contract period.

Long-term agreement

The business may have to follow the contract for several years.

Savings depend on the agreement

The final savings depend on the solar rate, grid electricity costs, and contract conditions.

Who should prefer the OPEX Solar Model?

If your business wants to reduce electricity expenses without investing a large amount in solar equipment, then OPEX is the best option for you.

How to Select the Solar Model for Your Business?

The following are the crucial factors that matter when choosing the solar model for your business-

• Electricity Bills: First, check your monthly consumption and electricity rates to understand your potential savings.
• Available Budget: Next, set a budget or decide if your business can afford the installation or if it is fine to pay for solar electricity over time.
• Building Ownership: Another thing that matters is ownership. So if you rent your premises, then make sure the installation and contract fit your lease period before opting for any solar model.
• Maintenance: Now, understand the maintenance part, and who will handle the cleaning, repairs, and system monitoring.
• Contract Terms: Especially when opting for OPEX, check the electricity rate, contract period, extra charges, and early termination conditions.

For both models, CAPEX and OPEX, make sure to confirm the applicable grid connection and approval requirements.

How Can Moglix Solar Help Your Business?

If you are confused about which solar model would be the right option for you or want assistance on this, then finding the right partner for solar installation would help you. 

That’s where Moglix Solar helps businesses to explore commercial solar solutions based on their requirements with support across-

• Energy assessment
• Solar installation
• Calculation 
• Maintenance, etc.

Explore our commercial solar solution and know your eligibility for your available financing options, subject to applicable terms and conditions.

Sum Up

Are you curious about the CAPEX and OPEX solar solution? Well, these two terms specifically help to reduce electricity costs through solar. But each comes with its own conditions, knowing each will help you find the best solar financing option for your business. In this guide, we have covered everything in details so you will have better understanding throughout. For more such informative guide, or queries you can stay connected with Moglix Solar.