CAPEX Model (Solar)

Key Takeaways

• CAPEX = customer buys + owns solar plant.
• India: accelerated depreciation (40% year 1).
• Subsidies (Rooftop Solar Programme Phase II) apply only to CAPEX residential.
• Payback 4-8 years; subsequent 20 years near-free.
• Better lifecycle economics than OPEX for long-term owners.

How the CAPEX Economics Play Out

Under CAPEX, the customer writes one upfront check for the plant and everything downstream, the payback period, the tax position, the O&M budget, becomes their responsibility rather than a developer’s.

That upfront outlay is exactly what accelerated depreciation is designed to offset: a business claiming 40% depreciation in year one recovers a meaningful share of the system cost through reduced tax liability well before the plant has paid for itself in electricity savings alone.

For residential rooftop buyers, the CFA subsidy under the Rooftop Solar Programme Phase II works the same way in spirit, it only reduces the check the CAPEX owner writes, since there’s no equivalent subsidy path for a customer who never takes ownership under OPEX.

A simplified illustration: a residential system priced before subsidy has its cost reduced by the Phase II CFA slab, then the owner’s income tax outcome is separately affected by depreciation if it’s a C&I asset rather than a home rooftop (residential rooftop typically doesn’t carry business depreciation). From there, the customer pays nothing per unit for the electricity the plant produces, only the day-one capital and ongoing O&M, so the “cost per unit” effectively falls each year the plant keeps generating past its payback point. That’s the trade the CAPEX buyer is making: more risk and responsibility today in exchange for a lower total cost of ownership across the 20+ year asset life, compared with paying a per-kWh tariff indefinitely under OPEX.

Related Reading

Choosing between CAPEX and the alternatives is rarely a one-line decision, it depends on capital availability, risk appetite, and how the balance sheet needs to look.

The CAPEX vs. OPEX vs. RESCO decision framework walks through the IRR, NPV, and balance-sheet comparison a CFO would actually run before committing, and the solar PPA vs. CAPEX vs. OPEX comparison lays the three structures side by side on ownership cost and 25-year returns.

Buyers modeling the payback numbers referenced above should also see industrial solar payback variables EPCs miss, which shows how financing structure changes the 3.5-7 year range in practice, while QuickEstimate’s commercial solar ROI calculation guide is a useful reference for running that math on a specific project.

Disclosure: QuickEstimate is a Heaven Designs group company.