Typically there are two business models prevailing in the market which includes installing your own solar PV system and in other business model a THIRD PARTY developer owns , operate and maintains the roof top solar PV system and the home owner/ consumer pays for the electricity which it purchases from the roof top system installer. The third party owned roof top system sometimes allows consumer to receive electricity at a lower price than grid electricity. However, it doesn’t allows home owners to avail certain financial benefits such as tax benefits and capital subsidy associated with the installation of the roof top systems. A typical 5 KW roof top system costs about 5 lakh rupees however, the government provides a 30% capital subsidy and accelerated appreciation benefits which makes the investment cheaper and the electricity is available to the consumer at a price of about 5 -6 per unit. However, if the same system is installed by a third party on build, own and operate basis a PPA is signed between the roof top leasing agency and the home owner. Although the financial and capital subsidies are enjoyed by the roof top system installer the cost of electricity is typically about Rs. 7 per unit which is sometimes at par or little higher than the grid electricity .
There are various intermediate arrangements through which third party installs the solar PV system, operates it for a few years and finally transfers the assets to the home owners at an agreed price. It reduces the upfront cost to the home owners and at the same time provides cheaper electricity at a price lower than the grid electricity. Hence, it is important to explore different options and have an expert advice before signing a Solar PPA with any third party as there are various hidden costs associated with these PPA’s.