In FY2019, OPEX model based onsite solar installations doubled in size

As of March 31, 2019, OPEX model based projects hold more than 37% share of cumulative onsite[1] solar installations in India.  Under the OPEX model, a Renewable Energy Service Company (RESCO) invests, builds and maintains a rooftop/ onsite solar plant. The end consumer pays for the power generated under a long-term power purchase agreement (PPA) at an agreed tariff for a fixed tenure.

Figure 1: OPEX model based onsite solar installation trends

Source: Bridge to India Rooftop Map

In FY 2019, growth for OPEX projects is 109% while for CAPEX projects it is 60%. Reasons for such growth in OPEX installations are:

  • Most government/ public sector onsite solar installations are based on the OPEX model only. In FY2019, this segment has grown by 54% on a YoY basis.
  • The market has evolved in the last few years and lenders, developers, as well as end consumers, are much more aware of the benefits of this model.
  • Most big C&I consumers have accelerated their plans to reduce carbon footprints and as part of their internal green mandates, they have started adopting rooftop solar.

In India, OPEX is a preferred model for a lot of companies that do not want to invest in non-core operations. It’s also convenient for them to manage these assets through a third-party player. Only a few cash-rich companies such as ITC, Pepsico, Coke, etc. are building these assets on the CAPEX model.

With rising liquidity issues and market slowdown, the OPEX model is a preferred choice for a lot of C&I consumers.

However, in the next 2-3years, the OPEX installations might not see the same growth because of market saturation of good creditworthy C&I companies. Other segments such as SMEs, MSMEs, housing societies and residential customers with lower credit ratings could be the key contributors to the future growth of this market. However, most of these market segments are still not explored by RESCO players. To enhance bankability and risk profile for these consumers, some key developers have started exploring options such as partial risk guarantee facility to lenders[2], EMI model-based financing, asset buy back in case of customer default. The viability of these new financing models will be seen in the next 2-3 years.

[1] Onsite installations include open ground spaces, roof, parking lot or any other area within the premises.

[2] Report by Deloitte and CIF: Scaling up of rooftop solar in the SME sector in India