Every business aims to reduce expenses and increase profitability. One major cost component for industries and commercial establishments is electricity. To cut costs and ensure sustainability, businesses are shifting to solar power. The Captive Open Access – CAPEX Model in solar power provides a financially viable solution that allows companies to generate their own electricity and reduce reliance on conventional grid power.
What is the Captive Open Access Model?
The Captive Open Access model enables businesses to set up their own solar power plant, either on-site (rooftop solar) or off-site (ground-mounted solar farm), exclusively for their consumption. This allows companies to generate electricity independently rather than purchasing it at fluctuating rates from distribution companies (DISCOMs).
To qualify as a captive consumer, the company must own at least 26% of the solar power plant and consume at least 51% of the electricity generated. This ensures compliance with regulatory guidelines while providing businesses with energy cost savings and greater energy security.
Why is Captive Open Access a CAPEX Model?
The CAPEX (Capital Expenditure) model involves upfront investment by the business to set up the solar power plant. It is called a CAPEX model because:
Direct Ownership & Investment: The business funds and owns the solar plant, making it a self-financed model rather than relying on third-party developers.
Long-Term Cost Benefits: Since the business owns the plant, it avoids purchasing electricity at rising tariffs and instead benefits from fixed and lower power costs.
Asset Ownership & Control: Unlike the OPEX model, where a developer owns the plant and sells power via a Power Purchase Agreement (PPA), the CAPEX model gives businesses full control over operations and maintenance.
Financial Advantages:
Eligible for accelerated depreciation, which lowers taxable income and increases savings.
Exemption or reduction in open access charges in certain states.
Avoidance of cross-subsidy surcharges, further lowering operational expenses.
How the Captive Open Access Model Works
Hereβs a step-by-step flow of how Captive Open Access – CAPEX Model functions:
π Company Invests in Solar Plant β π Company Owns at Least 26% β βοΈ Solar Plant Generates Electricity β β‘ Electricity is Transmitted via Grid or Used On-Site β π Company Consumes at Least 51% of Power β π° Energy Cost Savings & Reduced Grid Dependence
Key Benefits of Captive Open Access – CAPEX Model
1. Cost Savings & Lower Tariffs
Businesses can cut electricity costs by 20-40% compared to grid power. With fixed solar generation costs, companies can secure stable, long-term energy savings.
2. Protection from Tariff Hikes
Electricity tariffs from DISCOMs are subject to frequent hikes due to changes in fuel costs and government policies. By generating its own power, a business can lock in its energy costs for 25+ years.
3. Green Energy & Sustainability Compliance
Many companies aim to meet Renewable Purchase Obligations (RPOs) and sustainability goals. Captive solar power helps reduce carbon footprints and enhances corporate ESG (Environmental, Social, and Governance) commitments.
4. Government Incentives & Tax Benefits
- Accelerated Depreciation: Allows businesses to recover investments faster through tax deductions.
- Exemption from Open Access Surcharges: Some states provide waivers on transmission and wheeling charges for captive power consumers.
- Reduced Dependence on DISCOMs: Ensures better energy reliability and independence from grid fluctuations.
5. Reliable & Uninterrupted Power Supply
Having a dedicated solar power plant minimizes risks associated with power outages, ensuring uninterrupted operations for industries with high energy demand.
Who Should Opt for Captive Open Access – CAPEX Model?
This model is most suitable for businesses with high energy consumption, such as:
- Manufacturing Industries β Cement, Steel, Textiles, Automotive, Agro-Processing.
- IT Parks & Data Centers β High power requirement for uninterrupted operations.
- Hospitals & Healthcare Facilities β Consistent and cost-effective power source.
- Large Commercial Enterprises β Shopping Malls, Hotels, Corporate Offices aiming for cost efficiency.
Challenges & Considerations
While the Captive Open Access – CAPEX Model offers significant advantages, businesses should consider:
- Initial Capital Investment: The upfront cost of setting up a solar power plant may require financing or capital allocation.
- Land Acquisition: For off-site solar farms, businesses need to acquire land and obtain regulatory approvals.
- Regulatory Compliance: The company must meet the 26% ownership and 51% consumption criteria to maintain captive status.
Conclusion
The Captive Open Access – CAPEX Model is a financially smart and sustainable choice for businesses looking to optimize energy costs and achieve energy independence. With full ownership and long-term financial benefits, it offers cost savings, stability, and sustainability, making it a strategic investment for industries and commercial entities.