Business Models
The main business models for solar power plants are
CAPEX (capital expenditure) and
OPEX/RESCO (revenue share/operating expenditure), along with variations like community solar and project-based models for utility-scale plants.
In CAPEX, the customer pays upfront for the system and reaps the full benefits. In OPEX/RESCO, a third party owns and operates the plant, with the customer paying for the electricity generated, often with lower upfront costs.
CAPEX Model
The customer pays the full capital cost to purchase and install the solar system on their property.
Major solar photovoltaic (PV) power plant business models are the CAPEX model and the RESCO (or OPEX/SaaS) model. In the CAPEX model, the customer pays upfront and owns the system, allowing for tax benefits like accelerated depreciation.
In the RESCO model, a third-party company owns, operates, and maintains the system, and the customer pays for the energy consumed at a fixed rate. Another emerging model is community solar, where shared generated energy serves a whole community.
CAPEX (Capital Expenditure) Model
How it works
The customer purchases the solar system outright, covering the full capital cost upfront or through financing.
Ownership
The customer owns the system and is responsible for its operation and maintenance, or they can hire an EPC (Engineering, Procurement, and Construction) company to manage it.
Benefits
The customer owns the asset, can claim tax benefits like accelerated depreciation, and has lower long-term power costs.
Best For
Those with available capital who want to fully own and benefit from the system.
OPEX/RESCO (Operating Expenditure/Revenue Share) Model
A Renewable Energy Service Company (RESCO) owns, operates, and maintains the solar system on the customer’s property.
How it works
A third-party developer finances, installs, and owns the solar plant. The customer pays for the electricity consumed, typically through a Power Purchase Agreement (PPA) or lease agreement.
Ownership
The third party owns and maintains the system.
Benefits
Lower or no upfront investment is needed.
Best for
Customers who want to save on electricity costs without the upfront capital investment.
Other business models
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Project-based model:
This is common for large-scale projects where a developer builds a plant after winning a bid and sells the energy through a PPA with an offtaker like a utility company (DISCOM) or a large corporation.
-
Community solar:
This model allows multiple people to subscribe to a share of a larger solar farm, receiving credits on their utility bills for the energy their share produces.
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Deferred Payment Agreement :
A variation where the developer covers the capital expenditure, and the customer pays for the system over time through monthly instalments
Development of Solar Parks and Ultra Mega Solar Power Projects
Objective
Solar power projects can be set up anywhere in the country, however the solar power projects developed in scattered manner leads to higher project cost per MW and higher transmission losses. Individual projects of smaller capacity incur significant expenses in site development, drawing separate transmission lines to nearest substation, procuring water and in creation of other necessary infrastructure. It also takes longer time for project developers to acquire land, get all types of clearances and permissions etc. which ultimately delays the project. To overcome these challenges, the scheme for “Development of Solar Parks and Ultra-Mega Solar Power Projects” was rolled out in December, 2014 with an objective to facilitate the solar project developers to set up projects expeditiously.
Period
Up to 2025-26
Salient Features
- A solar park is large chunk of land developed with common infrastructure facilities like transmission infrastructure, road, water, drainage, communication network etc. with all statutory clearances. Thus, the solar project developers can set up solar projects hassle-free.
- The scheme was rolled out by Ministry of New & Renewable Energy on 12-12-2014. Under the scheme, it was proposed to set up at least 25 Solar Parks and Ultra Mega Solar Power Projects targeting 20,000 MW of solar power installed capacity within a span of 5 years starting from 2014-15.
- The capacity of the Scheme was enhanced from 20,000 MW to 40,000 MW on 21-03-2017. These parks are proposed to be set up by 2025-26.
- The scheme envisages supporting the States/UTs in setting up solar parks at various locations in the country with a view to create required infrastructure for setting up of solar power projects. The solar parks provide suitable developed land with all clearances, transmission system, water access, road connectivity, communication network, etc. The scheme facilitates and speed up installation of grid connected solar power projects for electricity generation on a large scale.
- All the States and Union Territories are eligible for getting benefit under the scheme.
- The capacity of the solar parks shall be 500 MW and above. However, smaller parks are also considered where contiguous land may be difficult to acquire in view of difficult terrain and where there is acute shortage of non-agricultural land.
- The Solar Parks are developed in collaboration with the State Governments and their agencies, CPSUs, and private entrepreneurs. The implementing agency is termed as Solar Power Park Developer (SPPD). There are 8 modes for selection of SPPDs.
CFA Pattern:
- Under the scheme, the Ministry provides Central Financial Assistance (CFA) of up to Rs. 25 lakh per solar park for preparation of Detailed Project Report (DPR). Beside this, CFA of up to Rs. 20.00 lakh per MW or 30% of the project cost, including Grid-connectivity cost, whichever is lower, is also provided on achieving the milestones prescribed in the scheme.
- The various modes for selection of SPPD and eligibility of CFA under various modes are given as under:
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