Commercial Solar Financing Options in India: A Complete Breakdown

Financing, not technology, is usually the deciding factor in whether a commercial solar project moves forward. Indian businesses evaluating rooftop or ground-mounted C&I solar generally choose between three ownership structures, each with different capital, risk, and balance-sheet implications.

CAPEX (self-owned)

Under the CAPEX model, the business funds the system upfront — either with cash reserves or a term loan — and owns the asset outright.

Advantages:

• Highest long-term savings since there's no developer margin on generation.
• Full access to depreciation benefits (accelerated depreciation under the Income Tax Act).
• No long-term contractual lock-in with a third-party developer.

Trade-offs:

• Requires upfront capital or loan collateral.
• O&M responsibility sits with the asset owner unless contracted separately.

RESCO / OPEX (third-party owned)

In the RESCO model, a developer owns, installs, and operates the system on the client's rooftop, selling power back via a Power Purchase Agreement (PPA) at a fixed or escalating tariff — usually below the prevailing grid rate.

Advantages:

• Zero or minimal upfront capital.
• Developer assumes performance and O&M risk.
• Predictable per-unit tariff for the PPA term (typically 10–25 years).

Trade-offs:

• Lower total savings compared to CAPEX over the system's lifetime.
• Tariff escalation clauses need careful review.
• Roof access is committed for the PPA duration.

Lease financing

A hybrid structure where a financing partner funds the asset and the business pays a fixed lease rental, eventually owning the system at the end of the lease term.

Advantages:

• Lower upfront cost than CAPEX with eventual ownership.
• Often easier to structure than a long-term PPA.

Trade-offs:

• Effective cost of capital can be higher than a conventional term loan.

How to choose

| Factor | CAPEX | RESCO/OPEX | Lease | |---|---|---|---| | Upfront capital | High | None/Low | Low | | Long-term savings | Highest | Moderate | Moderate | | Performance risk | Owner | Developer | Shared | | Balance sheet impact | Asset + loan | Off-balance-sheet | Asset + liability |

Larger enterprises with available capital and a long investment horizon tend to prefer CAPEX for maximum returns. Mid-size businesses prioritizing cash flow often lean toward RESCO. Our Financing Directory lists banks, NBFCs, and solar-specific financing partners active in each segment.

The takeaway

There is no universally "best" financing model — it depends on your cost of capital, balance sheet preference, and appetite for managing O&M directly. Run the numbers on all three before signing with an EPC or developer.