Solar CAPEX vs OPEX: Which Model Fits Your Business?

Every business that evaluates rooftop solar in India meets the same fork: buy the system (CAPEX) or buy its power from a developer (OPEX under a RESCO or PPA contract). Neither model is better in the abstract. The answer depends on the roof, the cash, the tax position and the contract. This guide gives a decision matrix and a worked model with every formula shown, so you can replace the assumed inputs with your own quote and bill.

CAPEX and OPEX side by side

A worked 100 kW model

This is arithmetic on stated assumptions. It is not a quotation, a tariff order or a prediction.

Assumptions (all illustrative): 100 kW rooftop on an owned building; specific yield of 1,578 kWh per kWp per year (the Bengaluru reference in our irradiance guide), so generation G = 100 x 1,578 = 1,57,800 kWh in year one; grid tariff offset T = ₹8 per kWh, flat; all generation used on site; system cost ₹55,00,000; O&M 1 percent of cost a year (₹55,000); inverter replacement in year 12 at 6 percent of cost (₹3,30,000); degradation 0.5 percent a year; discount rate 10 percent. The tariff, cost, O&M and replacement figures are placeholders for your own numbers.

Formulas.

• Year-n net saving = G x (1 - 0.005)^(n-1) x T - O&M - replacement in year 12
• Simple payback = years until cumulative net saving equals the cost
• IRR = the discount rate at which the present value of the 25 years of net savings equals the cost

CAPEX results. Year-one saving = 1,57,800 x 8 = ₹12,62,400; less O&M ₹55,000 gives ₹12,07,400. Payback = 4.6 years (with degradation). IRR over 25 years = 21.1 percent (pre-tax). NPV at 10 percent = about ₹49.4 lakh.

Sensitivity: IRR and payback by cost and tariff (same other assumptions):

The same site returns an IRR anywhere from 12.2 to 33.5 percent depending on two inputs. That spread, not any single figure, is the reason to get the tariff slab and the written quote right before choosing a model.

Optional tax benefit. If your accountant confirms a first-year depreciation rate d and your tax rate is t, the first-year tax saving is cost x d x t. As an illustration only, d = 40 percent and t = 25 percent give 55,00,000 x 0.40 x 0.25 = ₹5,50,000. Adding that to year one lifts IRR to 23.1 percent and shortens payback to 4.1 years. Set it to zero if you cannot use it. Whether the rate applies to your asset, regime and year is a tax question; see the depreciation checklist.

The OPEX side: what the PPA does over time

Assumptions: PPA tariff P = ₹5.50 per kWh in year one, escalating 3 percent a year; same generation and degradation as above; no upfront cost.

Formula. Year-n saving = G x (1 - 0.005)^(n-1) x [grid tariff in year n - 5.50 x 1.03^(n-1)]

Year one: 1,57,800 x (8 - 5.50) = ₹3,94,500, which is 31 percent of the ₹12,62,400 grid bill for those units. What happens next depends on the grid tariff path:

With a flat grid tariff the PPA tariff passes ₹8 in year 14 (5.50 x 1.03^13 = ₹8.08), and the saving turns negative. The same CAPEX case at a 3 percent rising tariff has an IRR of 24.3 percent and an NPV of about ₹78.3 lakh, against ₹49.4 lakh when flat. The comparison therefore turns on two numbers you can check: the PPA escalation clause and a defensible view of your grid tariff.

The four-question decision matrix

Work through these in order.

1. Do you own the roof for longer than the payback, with a margin? If you rent or hold a short lease, CAPEX can leave you with a stranded asset. Compare your remaining tenure with the payback from your own model, for example the 4.6 years above; a lease that ends before that point favours OPEX with a term aligned to the lease.
2. Can you fund the system at a cost below the project return? Compare your cost of capital with the IRR from the sensitivity table. If debt costs more than the IRR, or capital is needed for the core business, OPEX preserves it.
3. Can you use the tax benefit and do you have taxable profit? A loss-making entity or a trust may not be able to use depreciation, which narrows the gap between the models. Confirm with your accountant.
4. Does your policy allow a capital asset? Lender covenants, board policy or a preference for off-balance-sheet treatment can point to OPEX.

Financing a CAPEX purchase

Ask lenders for current rates and terms, including IREDA and your own bank, and ask whether any guarantee-cover scheme applies to your borrower category. See the solar loan guide for how to compare offers.

Checks before signing a PPA

• Escalation. A fixed escalator compounds: 1.03^19 = 1.75, so a ₹5.50 tariff is about ₹9.64 in year 20. Compare it with a realistic grid path.
• Exit and buyout. Ask for the buyout price formula and the penalty for early termination or relocation.
• Term and renewal. Align the term with your tenure and the roof’s condition.
• Performance and maintenance. Confirm who guarantees generation and who replaces the inverter.
• Minimum project size. RESCOs set minimum sizes that differ; ask for the current one.
• Billing basis. Confirm that the PPA is metered on units delivered and how shortfalls are handled.

The RESCO model guide and the zero-cost solar guide give a due-diligence checklist.

Evaluating bids for a CAPEX project

If you choose CAPEX, the EPC bid evaluation guide covers the criteria. Ask for: current module and cell scheme requirements and the exact inverter documents verified separately (MNRE’s ALMM lists cover modules and cells, not inverters); a performance ratio guarantee modelled for your site with shortfall compensation; payments tied to delivery, installation and commissioning milestones; a written O&M contract; and GST shown line by line, with 5 percent applying to specified solar devices since 22 September 2025 (see the GST guide). For the IRR arithmetic with more detail, read solar IRR and payback for C&I and the NPV and IRR entries.

Where Qbits fits

For a CAPEX buyer the inverter sits at the centre of generation, and its replacement cost and downtime belong in the model, as the year-12 line above shows. Qbits’ published catalogue lists several three-phase on-grid families for commercial use. Harmonic limits, warranty terms, monitoring interfaces and project outcomes vary by model, so no single figure applies across them. Match the exact model, datasheet revision and documents to your electrical design and lender requirements, and request test reports, grid-interface documents, the written warranty and the service process. Qbits pricing is quote-based through dealers.

• C&I solar solution
• On-grid inverters
• Download datasheets

Contact Qbits with the exact model, site inputs and documents relevant to your project, and confirm the responsible party, deliverable and commercial terms in writing.