Currently there are two business models that are in vogue namely, self-owned (Capex model) and RESCO/third-party owned model.
Under Capex Model, consumers develop a solar rooftop plant within their premises to own, operate, and generate electricity for consumption (under net metering) or sell to the utility (under gross metering). Generally, self-owned business model is preferred for its simplicity. However, this model also has disadvantages such as high capital cost for the consumer and high technology and performance risk.
Under RESCO Model, a RESCO builds, owns, and operates SRTPV plants in the premises of a consumer to generate and sell electricity to the consumer (under net metering) or to the utility (under gross metering). Consumer and RESCO signs, on mutually agreed basis, Power Purchase Agreement and/or Roof Lease Agreement, which covers tariff of electricity, tenure of the agreement, ownership at the end of the tenure, etc.
In RESCO, consumer is not required to invest in the cost of the SPV power plant, though can enjoy the benefits of the system. RESCOs are specialized solar developers; they can handle technology and operation risks in a better way. However, RESCO model faces several challenges such as power off take risks, contractual risks, etc.
Suitability of the model depends on one’s ability to meet the costs. However, RESCO model is more suitable for commercial, institutional, and industrial consumers needing higher Capex.