What is OPEX Model of Solar Power?

There are two related words viz. CAPEX and OPEX. CAPEX refers to Capital Expenditure while OPEX refers to Operational Expenditure. For a business, expenditure incurred in physical goods or assets {such as factory, machines} is CAPEX while expenditure needed to run its business refers to OPEX.

These two terms are also used for two different models of solar PV installations. As a consumer, we can choose either CAPEX or OPEX model. When we choose CAPEX model, we pay for installation cost and own the installation and are responsible for its maintenance. The energy produced is for our own use. However, this model is very costly and a deterrent for many households and businesses. On the other hand, in OPEX model, the solar PV installed at our premises is NOT owned by us but by a third-party, which is also responsible for its maintenance. However we need to enter into an agreement with that party to purchase and consume all the power generated by PV for a long term period (15-20 years). Thus, under OPEX, a third party will install PV at our home and maintain it, we have to buy energy produced by it.

This OPEX model is famous in many countries including US where half of rooftop solar PV installations are owned by OPEX developers. It is successful model internationally and remains so in India also as the consumer has not to incur upfront capital costs.

Issues and Challenges:

This model is getting highly popular in India and many OPEX developers in the country are flourishing. However, there are some issues which need to be addressed. Biggest issue are of “contract enforceability” and “customer default”.   The contracts made are usually for longer period and have a risk of default from consumer’s end and also possibility of litigations. Thus, there is a need of proper regulatory framework in the country.