The two main solar rooftop business models:
One major difference between the two business models lie in the investor; for CAPEX the capital expenditures are done by the rooftop owner and for RESCO capital expenditures are done by the third party.
Let us look further into the two business models:
Capital Expenditure (CAPEX)
- The owner of the plant is the rooftop owner
- The rooftop owner is responsible for the financing, installation and O&M
- The responsibility of the O&M primarily lies with the rooftop owner; however, there is an agreed period between the developer and the owner when the developer provides the O&M service
- The rooftop owner can export the surplus energy to the utility grid which will be adjusted in the electricity bill
Renewable Energy Service Company (RESCO)
Under the RESCO model, the developer finances, installs, operates and maintains the rooftop solar power plant. An agreement is signed between the developer and the rooftop owner to decide on the tenure until when power purchase will be done by the rooftop owner. The rooftop owners consumes the electricity generated for which they have to pay a pre-decided tariff to RESCO developer on a monthly basis for the tenure of the agreement. Although ownership lies primarily with the developer, the transfer of ownership is possible after the time period as agreed upon; similarly, the responsibility of O&M can also be transferred from the developer to owner.
Based on the consumption choice and requirement, the model is further divided into two types:
- Rooftop Leasing
- Power Purchase Agreement (PPA)
Under this arrangement, the RESCO developer leases the rooftop and pays a fixed lease/rental to the building owner over the time of the lease period for installing the solar panels of the rooftop. The RESCO developer exports the solar energy to the utility at a predetermined feed-in-tariff (FiT) approved by the regulator
Power Purchase Agreement (PPA)
Under this agreement, the developer invests in solar rooftop asset, and sells the generated power to the building owner in favour of a lower solar power tariff. The excess power could be sold by the building owner to the utility through net metering system.