Solar has evolved a lot in the past few years with more and more organizations switching to solar for numerous benefits whether its cost, space utilization or even enhancing the aesthetics of their building.
In this article, let’s explore the two most commonly followed Solar Models which are Opex and Capex.
Opex stands for Operational Expenses
Capex on the other hand stands for Capital Expenditure.
Difference between Capex & Opex
As the name states, the CAPEX model involves the customer paying for the installation of the solar plant, so the asset belongs to the customer. Even if the business has adequate space for setting up the solar power plant, or the company is able to make the upfront investment needed to own the solar power plant, a solar Capex model should be explored.
According to a Renewable Power Purchase Arrangement (PPA), a Renewable Energy Service Company (RESCO) will install and maintain a customer’s solar power plant at their site. The RP, which refers to a typical 10-year contract, results in monthly payments for a percentage of the customer’s power generated.
The Opex model reduces investment risk and avoids the expense of creating a Capex investment, enabling customers to pay for only the actual power produced with zero large assets. This creates a more cost-effective Opex model upfront. Even with a Power Purchase Agreement, the energy is significantly cheaper than grid power.
However, not all OPEX contractors may be able or willing to do projects smaller than those in which customers are interested. Major project installation specialists are usually interested in medium to large-size projects under this model.
The OPEX model is well-suited to small businesses with planned growth aiming to incorporate more environmentally friendly processes.
Who Should adopt a Capex Model
Any corporation that can make an upfront investment in purchasing a solar power plant can go for a Capex model.
A CAPEX investment carries huge potential in that you can develop a 30% equity IRR with well-managed CAPEX projects, and your project payback time after 5 years is typically only 1 year.
It’s a great investment.
Who Should adopt an Opex Model
OPEX is a business model that a lot of businesses favour and is a good fit for them. Shareholder and market liquidity issues also make it an excellent investment option for many companies. In these circumstances, the OPEX model is well-suited for many businesses with low-risk profiles and financial restrictions.
In the event that approvals for Capex are probable to be held up at the C-suite level, the expense of Opex may be seen as a smoother approval procedure. Moreover, an organization that is unwilling or cannot invite the maintenance and operation of the facility including dedicated personnel for the same may prefer the Opex model.
We at Novergy offer extraordinary opex solutions where we help you slash your electricity costs and improve upon your profitability.
Both seem to be a fair deal, you can make a decision on the basis of your need, your budget and your purpose, If you are someone who can take all the responsibility to look after the maintenance and everything then Capex would be a good choice for you, but if you are someone
Also, whichever model that you chose is going to be beneficial for you sooner or later, both the models will be equally powerful in terms of performance generating the energy and saving your money. And both the models have their plus and minuses depending on your plan for your business you can make the decision.
Not only the solar model and plan but It is crucial to choose the right company as well, as in both cases you might need assistance from the company.
With over 15 years of phenomenal success and delivering path-breaking projects in record time, Novergy is one integrated company offering end-to-end solutions right from design to execution.
Our Solar modules are equipped with the finest quality raw materials which deliver impeccable and superior power output.
Connect with us today and get started with your Solar Journey.