If you are seeking to know more about what are the different types of solar financing options that might be available to you, then read on! Through this blog, we have tried to answer some of the frequently asked questions on solar financing options, so that you are better positioned to make informed decisions.
What are solar finance options?
Let’s imagine a scenario that you are considering buying a solar power system. You will generally find two options/ methods of making the purchase – CAPEX and OPEX. In the CAPEX model, you choose to invest the amount in buying the solar system. You can either choose to pay-in-full upfront payment or pay in equal intervals by availing financing from a bank or financier. This is the most widely chosen option for solar system purchase as this is quick. On the other hand, under the OPEX model, an investor invests, builds and maintains the solar plant on your site. You pay for the power generated by the system under a long-term power purchase agreement (PPA) at an agreed tariff for a fixed tenure. This model is also often referred to as PPA or RESCO model.
Find the Best Solar Financing Option For You!
A comprehensive and thorough understanding of your solar financing options is critical. As it is difficult to understand, to guide you we have given a detailed explanation of both CAPEX and OPEX options below
In case you wish to go for a CAPEX model, you still can fund your purchase through these 2 options.
Solar loans: This is easy to avail option, where you can own your solar power system without worrying about the huge upfront cost associated with it. Moreover, since you are paying off your loan through regular Easy Monthly Installments (EMI), you need not worry about this hitting hard on your monthly budget too. What’s more, Freyr Energy is now providing solar loans for both home and business owners, with the following added benefits:
- No collateral needed
- Very less process time and hassle-free loan availing process
- You can avail tax benefits and Government subsidies
- You can own your solar power system
Leasing: In solar leasing, a developer usually pays for the equipment. You have to pay a monthly rental towards using this solar power system. Leasing is usually done only for bigger solar power systems (50kW and above). The benefits of this option are:
- There is little to no down payment
- The payment will be made at equal intervals as per a pre-agreed contract
However, the main drawback of leasing is that in this case, the ownership of the solar power system lies with the lessor or developer until the tenure of the lease. This means that you may not be able to claim any tax benefits associated with the plant. In usual cases, the maximum tenure of lease is 5 years. Also, the process of getting the lease can take long.
If you choose to go by the OPEX model, you will need to sign a Pre Purchase Agreement (PPA) with the solar system provider. However, PPA is done for bigger systems (100 kW and above) and the tenure of the PPA is usually 10-25 years. . Some features of the OPEX route are:
- You only pay for the units of electricity consumed. The price is a pre-agreed rate generally lower than the tariff rate.
- Solar system provider generally takes care of any installation or maintenance cost.
- You won’t have any upfront costs to bear.
The main drawback in an OPEX model is that you will not be able to own the solar power system and thus can’t claim any tax benefits.
We at Freyr Energy understand that despite getting to know all these facts, choosing a suitable financing option for your specific needs can be a very daunting task for you. Since this decision is based on various factors like the solar system capacity required for your home or business, electricity consumption etc. it becomes all the more crucial to seek expert advice from solar service providers like us. Our team can help you evaluate the best financing option based on your system requirements and budget. Let’s choose to go Solar with Freyr!