CAPEX vs OPEX solar: which model suits your factory?

A factory deciding to go solar faces a basic choice: buy the system and own it (CAPEX), or let a developer install and own it while the factory buys the power (OPEX, also called RESCO or rooftop PPA). Both deliver solar power to the facility. They differ in who pays upfront, who bears risk, and how the savings flow.

The CAPEX model

The factory pays for the system — design, equipment, installation — usually through an EPC contractor. The factory owns the system and all the power it generates.

Features:

• Upfront capital investment
• Savings from reduced grid purchases accrue fully to the factory
• Factory is responsible for O&M, directly or through a contract
• Possible tax benefits, such as depreciation, depending on the factory's tax position and current rules
• Full control over the system

The OPEX model

A developer designs, finances, installs, owns and maintains the system on the factory's roof or land. The factory buys the generated power under a PPA, at an agreed tariff typically below its grid tariff. See what is a PPA.

Features:

• No upfront investment by the factory
• Savings come from the difference between the PPA tariff and grid tariff
• Developer handles O&M and bears performance risk, within contract terms
• Long-term contract commitment
• Less control over the system

Comparing the models

Which suits whom?

CAPEX tends to suit

• Factories with available capital or access to financing
• Organisations able to use tax benefits
• Facilities with long-term tenure of their premises
• Owners wanting full control and maximum savings
• Organisations with, or willing to contract, O&M capability

OPEX tends to suit

• Factories preferring to preserve capital for core business
• Organisations without the appetite to manage solar O&M
• Facilities wanting predictable tariffs without performance risk
• Owners comfortable with a long-term contract

Financial comparison

A fair comparison looks at:

1. CAPEX: system cost, financing cost (if borrowed), O&M cost, tax effects, and savings from generation over the system life
2. OPEX: PPA tariff over the term, compared with expected grid tariffs
3. Discounted value of each over the same period

Results depend heavily on assumptions — especially future grid tariffs, system performance and financing cost. Test several scenarios.

Non-financial factors

Premises

If you lease your factory building, you'll need the landlord's consent for either model. With OPEX, the developer will want security of access for the full PPA term.

Roof condition

Both models need a structurally sound roof with enough remaining life. See rooftop solar structural checks.

Business changes

If you might expand, relocate or sell the facility, OPEX contract terms on transfer and exit become important.

Sustainability reporting

Both models deliver renewable power on site. Check how each supports your reporting. See renewable power and sustainability reporting.

OPEX contract points

• Tariff and escalation
• Term and end-of-term options (transfer, extension, removal)
• Generation guarantees and shortfall compensation
• Access rights to the roof
• Responsibility for roof damage or leaks
• What happens if the factory relocates or is sold
• Early buy-out options

CAPEX contract points

• EPC scope, quality standards and performance guarantees
• Equipment warranties
• Defect liability period
• O&M scope and KPIs. See structuring O&M contracts.

Regulatory context

Rooftop systems connect under net metering, gross metering or other arrangements depending on current state regulations and the consumer's category. These affect the value of generation under both models. See net metering vs gross metering.

Common mistakes

• Comparing CAPEX payback with OPEX tariff without a lifetime view
• Ignoring O&M costs in CAPEX
• Signing OPEX without clear end-of-term and exit terms
• Overlooking landlord consent
• Assuming grid tariffs will rise at a fixed rate

A middle path: financed CAPEX

Some factories take a middle route: they own the system but finance it with a loan, so that loan repayments are partly offset by the savings from day one. This keeps ownership benefits while reducing the upfront cash outlay. Whether it works depends on loan terms, the factory's credit position and how the savings compare with repayments. Model it alongside pure CAPEX and OPEX.

How we help

Through our C&I solar work with industrial consumers, we help compare CAPEX and OPEX on a like-for-like basis, review site suitability and coordinate EPC partners or developers. Tax and legal advice comes from qualified professionals.