BESS Financing Models in India: CAPEX, OPEX and BESS as a Service

The increase in renewable energy capacity in India has contributed to the need for trustworthy energy storage. Solar and wind power production depends on weather and time of day, so surplus electricity must be stored and made available when demand is higher. Battery Energy Storage Systems (BESSs) help meet this requirement by storing power for later use, while also helping stabilise the grid and create more opportunities for renewable energy integration.

However, while choosing a BESS system only requires the selection of a suitable battery technology, it does not end there because companies, renewable energy developers, and utilities also need to decide on the way the BESS equipment is financed, how the operational costs would be managed, and how performance risks would be divided. Familiarity with different BESS financing models is helpful in making an informed decision about how to handle BESS usage and expenses.

The three common types of financing models include the capital expenditure (CAPEX) model, the operating expenditure (OPEX) model, and the BESS as a Service model. Each of these types is governed by different considerations related to ownership and investments.

1. CAPEX Model: Investing in Your Own BESS
In the case of the CAPEX financing model, the organization buys the BESS system with its own funds or with some external financing assistance. The organization usually owns the hardware and is accountable for using it, maintaining it, and ultimately replacing it in accordance with the contract signed.

Benefits of the CAPEX Model:
Ownership: The organization enjoys full authority over the usage of the BESS system as long as all the relevant standards and regulations are followed.
Long-term benefits: As the owner of the BESS system, the organization may save money on energy costs and earn revenue.
Level of control: The execution cycle and energy outputs can be adjusted in accordance with commercial needs.

Things to keep in mind: The capital expenditure could be quite large. The expenditure includes battery systems, electricity control devices, level control devices so on and so forth, as well.

In the case of companies possessing necessary finances and well-defined energy needs, CAPEX could be the right answer. Companies using CAPEX finance should compare the loan conditions, interest rates, periods of repayment, as well as savings.

2. OPEX Model: Paying for Storage Over Time
The OPEX model helps to eliminate or reduce the necessity to pay the full amount for the entire system in advance. Depending on the agreement, the third-party supplier can finance the entire BESS, and the customer only pays periodically for its services.

In this case, OPEX means necessary expenditures in order to use renewable energy rather than spending money on purchasing equipment right away. However, not every case of OPEX means losing ownership and maintenance responsibilities; it all depends on the agreement.

Key benefits:

• Lower expenses at the beginning.
• Easier payment scheme defined in the contract.
• Availability of technician assistance.

What to keep in mind: The company should assess all the commission fees, the duration of the agreement, the costs of services, and the agreement conditions.

3. BESS as a Service: Storage Without Direct Ownership
BESS As a Service involves a greater service-oriented model. In this concept, a specialized provider finances, installs, operates, and maintains the system, and the customer pays for a specific service like storage capacity or energy management.

This option suits many commercial and industrial facilities wishing to improve their energy resilience or control their electricity consumption without gaining battery knowledge.

The contracts have to define clearly the system availability, response times, guarantees of performance, maintenance duties, and battery replacement responsibility of the respective parties. The customers have to ensure how charging energy is billed, as well as check for financial advantages.

CAPEX: A bigger initial investment, direct ownership with a larger responsibility for asset management.
OPEX: Recurring payments, usually with reduced initial investment and responsibilities bound to the service or leasing contract.
BESS as a Service: Service-oriented consumption of battery energy, which is usually managed by a third party in accordance with a contract.

The selection of the option depends on the size of the project, financing expenses, expected usage and tariffs applied, as well as the ability of the company to control technical risks.
 

India has introduced the VGF programs to support the BESS projects and make them more financially feasible. The BESS Implementation and Monitoring System of Central Electricity Authority describes the role of the Government's support for various projects. However, assistance will only be given as per applicable guidelines, and it must not be regarded as available for every project.

Prior to finalization of BESS financing, project developers must check the notifications, tenders, and applicable laws of the state. Financial models also need to take into account the level of degradation of batteries, cost of financing, costs of replacement of batteries,s and the expected revenue or savings from the project.

Technology plays an equally important role in evaluating the economic viability of the storage systems since one has to compare parameters like energy available, power generated, number of cycles, safety features, warranty, integration of the system, and after-sales servicing.

Waaree Technologies plans to install energy storage systems through LIGER and LION as well as other battery series products. Companies looking for lithium-ion manufacturers need to check the specifications of the intended product and verify its usage for the project.

Selecting the right BESS financing model in India requires balancing upfront investment, long-term operating costs, ownership risks, and operational efficiency. The CAPEX model offers greater control over the asset and technology choices, while OPEX and Battery Energy Storage Systems as a Service can reduce initial capital requirements, depending on the agreement. Before making a decision, businesses should evaluate total lifecycle costs, battery degradation, maintenance responsibilities, financing terms and potential energy savings. A well-informed choice can help organisations improve financial planning, manage operational risks and maximise the long-term value of their battery energy storage investment.