Solar Power Purchase Agreement and Solar Outright Purchase – Which is better?

Once you decide to go solar, the major dilemma for most people is how to go about it. Which of the two choices – Solar Power Purchase Agreement or Solar Outright Purchase – is better? We get asked this – a lot! Like most things, the merit of the choice is contingent upon your individual circumstances. Thus, a more appropriate question would be – Which one is more suitable for my personal/commercial needs? To make things easier for you, we are giving a quick outline of the major differences between the two.

Solar Power Homes

Comparison between Solar Power Purchase Agreement and Solar Outright Purchase

1.    Initial Investment

This is, perhaps, the most crucial of all factors involved. You see, a typical rooftop solar photovoltaic system of, say 90 KW, would cost you about ₹50 lakhs*. Now, all of this money need not come from your own wallet as there are government incentives and bank loans that can be easily procured to help you in the same. Still, you got to admit – that’s a pretty big investment to make!

Whereas signing Solar Power Purchase Agreement with Minus CO2 lets you go solar with little or no upfront payment. Under this, the solar company owns the system and levies charges, which are less than conventional electricity rates, for the power you consume till the lock-in period. Solar Power Purchase Agreement democratizes solar energy; it lets those who cannot afford the hefty initial investment switch to solar energy easily.

2.    Ownership

As might have been clear from the above description, outright purchase enables you to own your system. While when you sign a Solar Power Purchase Agreement with us, Minus CO2 owns the system till the lock-in period is valid, after which the ownership is automatically transferred to you. A bit of research will prove to you that this is not how most Solar PPAs work; consumers are not usually transferred ownership after the lock-in period, but have to purchase it if they wish to continue its usage.

3.    Electricity Bills

This is another major difference. The outright purchase enables your electricity bill to go down by 80%, while your electricity bill under Solar PPA can go only down by 30%. The reason is simple – under Solar PPA, since it’s the solar company that invests in the system, they will charge you for the electricity you consume. Although it is to be noted that the rates are significantly lower than conventional electricity charges, say, while Solar power will cost ₹7 per unit, conventional power costs, at least in Maharashtra,₹12 per unit. Thus till the time the lock-in period is valid, you will be paying electricity bills, though at a much-reduced rate.

It is also to be noted that since 20% of your power consumption is expected to be fulfilled by the conventional grid; even outright purchase would have you pay an electricity bill – just about 1/5th of the original one.

4.    Maintenance

Here’s the good news for those who go solar by Solar PPA. Since Minus CO2 owns your system, you don’t have to worry about its maintenance and wear and tear- it’s up to the company to take care of it. This is an advantage those who purchase the system would be deprived of.

5.    Government Incentives

Currently, Government offers about 30% subsidy in the benchmark cost for solar panels installed in enterprises/institutions in the residential, social or educational sector. Also, those in the commercial sector enjoy a 40% accelerated depreciation in tax claims. Needless to say, you get to enjoy these only if you purchase the system. Otherwise, the solar company will get to reap its benefits.

Still Confused? To make an informed decision about which is the right choice for you, talk to us at +91 90226 50560 | 022 4976 6944.