Captive Solar v/s Third-Party Open: Access: Which One is Right for You?

When companies begin looking at open access solar, the same question almost always comes up. Why do we need to invest in equity, and is there a way to move to renewable energy without paying anything up front?

This concern is especially common among industrial and commercial users once discussions move beyond rooftop solar and into open access options. The decision feels bigger, and understandably so. To choose wisely, it is helpful to clearly understand how captive solar differs from third-party open access and how each option affects cost, risk, and long-term savings.

Many businesses speaking with a Solar Energy Company in Kanpur face this exact situation, particularly when they are planning large-scale power procurement and want clarity before committing to a long-term energy strategy.

What Captive Solar Really Means

In a captive solar structure, the power plant is built mainly to serve your own electricity needs. Under Indian electricity regulations, a project qualifies as captive when two conditions are met. The consumer owns at least 26% of the project, and consumes at least 51% of the power generated.

This ownership requires an equity investment. In most real-world cases, this works out to around 7 to 8% of the total project cost. The rest comes from debt funding arranged by the developer or financial institutions.

While this upfront investment often raises concern, it is important to understand what comes with it: long-term control, predictable costs, and regulatory advantages.

How Third-Party Open Access Works?

In a third-party open access model, the consumer does not invest equity at all. A developer builds, owns, and operates the solar plant and sells power to the consumer under a long-term agreement. From a cash flow point of view, this feels easier. There is no capital commitment. The consumer pays a tariff lower than the local utility rate and benefits from immediate savings. This model often appeals to companies with strict capital controls or overseas management teams that prefer asset-light structures.

Where the Real Difference Lies?

The biggest practical difference between captive and third-party solar is not ownership; it is how regulatory charges apply.
Industrial and commercial users pay cross-subsidy surcharge and an additional surcharge to support subsidised tariffs for residential and agricultural users. Under captive solar, these charges do not apply.
In third-party open access, these charges usually apply, though limited or temporary exemptions may exist depending on state policy.
For captive consumers, exemption from these charges creates a long-term hedge. Electricity costs become more predictable, which matters for businesses planning operations over ten or twenty years.

Banking & State-Level Benefits

Another difference often overlooked is banking. Banking allows surplus solar power generated in one period to be adjusted against consumption later. In several states, captive projects receive more favourable banking provisions than third-party projects, though this varies significantly by state policy.

Third-party projects may face restrictions depending on local regulations. This varies by state, but the advantage often sits with captive structures.

Why Equity Investment is Not the Risk it Appears to Be?

The equity required for captive solar often pays back faster than expected. In many states, businesses recover their equity within one to two years through power savings alone. After that point, the savings continue for the remaining life of the plant, typically twenty-five years, with gradual performance degradation accounted for.This is why many businesses that started with third-party models later shift to captive solar for expansion. Once confidence in the technology builds, the financial logic becomes hard to ignore.

No Investment Does Not Always Mean Better Value

Third-party models offer simplicity, but savings remain limited. The tariff includes the financing costs of the Solar Energy Company in Kanpur, maintenance expenses, and profit margin. On top of that, regulatory charges remain applicable. There is also long-term uncertainty. Cross-subsidy and additional surcharge rates change annually. This makes long-term cost planning difficult. Captive solar removes much of this uncertainty and places control back with the consumer.

How Businesses are Deciding Today?

Ten years ago, many companies avoided captive solar due to technology risk, financing hurdles, and a lack of operational experience. That situation has changed. Solar technology is proven. Monitoring systems track performance daily. Financing has become easier. Maintenance costs are predictable and widely outsourced. Because of this, many industrial and commercial consumers now prefer captive structures, even if they initially adopted third-party models.

This shift is evident in conversations with the Best Solar Energy Company in Kanpur, where clients are increasingly prioritizing long-term value over short-term convenience.

Final Thought for Decision-Makers

The decision between captive solar and third-party open access comes down to how your organisation perceives capital, risk, and planning horizon. If your key consideration is no upfront payment and immediate reduction in costs, third-party open access is still an option. If you are concentrating on controlling costs over a long period, stable regulations, and greater total savings, captive solar is the winner. Solar is no longer a trial decision. It is an infrastructure decision. The right structure ensures your energy strategy supports both financial performance and sustainability goals for years to come.

Captive Solar v/s Third-Party Open: Access: Which One is Right for You?