One of the most frequently asked questions ARIA receives from factory owners and plant managers is: should I buy the solar system outright, take a bank loan, or go RESCO? The right answer depends on your capital position, tax situation, and risk appetite. This article models all three for a 500 kW factory in Telangana.
The Baseline Scenario
We'll use a 500 kW solar project for a manufacturing unit in the TSSPDCL area with an HT tariff of ₹7.50/unit and a monthly electricity bill of approximately ₹30 lakh. The solar system will generate approximately 8.5 lakh units per year, offsetting ₹63.75 lakh in annual electricity costs. EPC cost: ₹2.1 crore (₹4.2 Cr/MW). All scenarios assume 4% per annum tariff escalation.
Model 1: EPC Outright Purchase
You pay the ₹2.1 crore EPC cost upfront from your own funds. From the next bill cycle, you begin saving approximately ₹63.75 lakh per year (growing at 4% with tariff escalation). Combined with the Year 1 accelerated depreciation benefit of approximately ₹21 lakh (40% WDV at 25% tax rate on ₹2.1 Cr), your Year 1 total financial benefit is approximately ₹84.75 lakh. Simple payback: ~2.5 years. 25-year IRR: ~26%. This is the highest-return model — but requires ₹2.1 crore in available capital.
Model 2: Bank Loan Financing (Solar-Specific)
You take an IREDA or SBI Green Loan at 9.5% p.a. over 7 years for the ₹2.1 crore EPC cost. Monthly EMI: approximately ₹3.35 lakh. Annual solar savings in Year 1: ₹63.75 lakh. Annual EMI outgo: ₹40.2 lakh. Net annual cash benefit in Year 1: ₹23.55 lakh — positive from Day 1 with no upfront capital outlay (beyond a 10–20% margin deposit). After the 7-year loan repayment, savings of ₹63.75 lakh/year (escalating) flow entirely to your P&L. 25-year IRR on equity investment (loan margin): ~30–34%. This model is excellent for businesses that want to own the asset without tying up working capital.
Model 3: RESCO / Zero-Capex PPA
ARIA Green Energy owns and operates the solar plant on your premises. You pay a PPA tariff of ₹5.25/unit (30% below your grid tariff of ₹7.50/unit). For 8.5 lakh units generated, you pay ARIA ₹44.6 lakh/year and avoid paying TSSPDCL ₹63.75 lakh/year — a net saving of ₹19.15 lakh per year from Day 1. Zero capital outlay, zero O&M responsibility. You don't own the asset and can't claim depreciation, but you save immediately with no financial risk. 15-year PPA total savings (cumulative): approximately ₹3.2 crore.
Side-by-Side Comparison
| Metric | EPC Purchase | Bank Loan | RESCO |
|---|---|---|---|
| Upfront Capex | ₹2.1 Cr | ₹21–42L (margin) | ₹0 |
| Asset Ownership | You | You (after loan) | ARIA Green Energy |
| Accelerated Depreciation | Yes (40% Y1) | Yes (40% Y1) | No |
| Year 1 Cash Benefit | ₹63.75L + ₹21L AD | ₹23.55L net | ₹19.15L |
| 25-yr IRR | ~26% | ~30–34% | N/A (no investment) |
| Best For | Cash-rich, high tax | Own asset, low capex | Zero risk, NIL capex |
Our Recommendation
For most profitable manufacturing units, the bank loan model offers the best risk-adjusted return — you own the asset, claim depreciation, generate strong IRR, and deploy minimal upfront capital. For growing businesses with constrained capital or off-balance-sheet preferences, RESCO is the right choice. For businesses with strong cash flows and high taxable income seeking maximum return, EPC outright purchase wins on absolute IRR. Talk to ARIA Green Energy — we model all three scenarios for every client before recommending a structure.
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