Nearly all commercial solar budgets we see centre on one number: Capital Expenditure (CapEx), with asset managers asking only about system costs, payback period, and ROI.
Matthew Shaw, our Joint Managing Director, believes this focus is fundamentally flawed and that clients who focus on it exclusively are creating additional costs for themselves. He’s heard the same story repeatedly: clients receive unrealistic proposals, choose the cheapest quote, and regret it years later.
In this article, Matthew explains why CapEx thinking creates problems, how competitors exploit it, and why Operational Expenditure (OpEx) is the only honest way to evaluate solar investments.
How Client Focus on CapEx Enables Number Manipulation
When clients issue tender documents requesting CapEx comparisons and payback calculations, they create conditions for manipulation.
Competitors drive down installation costs by using the cheapest panels, specifying budget inverters, and cutting corners on design. A £500,000 system becomes £400,000, and the payback looks fantastic. What clients don’t realise is that those cheap components fail faster, warranties are shorter, and they’ll be replacing equipment many years before they should.
Then, future electricity costs get inflated to 7-10% annually. Over 25 years, that makes the savings look enormous. A 2-5% average inflation is more realistic, but competitors use 7-10% because it makes payback look better.
Many proposals also don’t include operational and maintenance (O&M) costs. Clients don’t ask for them in tender documents, so competitors don’t include them. Adding £6-10 per kWp annually for maintenance (which could inflate 2% per year as labour costs rise) extends payback periods by 1-2 years. That 3-4-year payback becomes 5-7 years. Clients focused purely on CapEx miss this entirely.
Our team recently learned about a proposal for a large project in the north of England. The installer had projected 950 kWh/kWp/annum, a figure we would struggle to achieve even on the south coast with optimal south-facing orientation. The proposal included zero allowance for shading, soiling, or cable losses. The client thought the 4-year payback period looked incredible. What happens in year 7 when the system only generates 800 kWh/kWp/annum and they’ve spent an additional £50,000 on maintenance they didn’t budget for?
Why OpEx Thinking Changes Everything
OpEx measures the true cost of owning and running a solar system over its entire operational life. Instead of just looking at upfront costs, it accounts for installation using realistic CapEx figures (not value-engineered to look cheaper), annual maintenance costs that inflate as labour costs rise, realistic yield projections that account for shading, soiling and cable losses, and realistic electricity inflation at 3% average rather than 7-10% fantasy projections.
When clients look at lifetime costs instead of just upfront price, the whole equation shifts. Suddenly, cheap components don’t make sense. You need panels with proper 30-year warranties, inverters from suppliers who’ll provide ongoing support, design work that factors in how systems perform in the real world, and maintenance that stops problems before they start.
Lynx Sustainable Solutions design accurately as we prefer to be honest, set the right expectations and deliver to the highest standard. If we project 800 kWh/kWp/annum and the system delivers 830, everyone is happy. Forecasting based on unrealistic numbers leads to client disappointment and distrust of our industry. It’s time that changed.
When we quote OpEx, we’re telling clients what the system will cost over 25 years. We’ve built in quality, realistic projections, and proper maintenance. We might not be the cheapest quote, but in 10 years, when our systems are still performing as promised whilst cheaper systems are failing, clients will understand why OpEx thinking matters. It’s about being strategic with portfolios rather than kicking potential issues into the long grass for short-term ROI gains.
What This Means in Practice
Our payback periods might be 5-7 years instead of competitors’ 4 years, but in year 10, when the system performs exactly as we projected with a consistent and preplanned O&M schedule, the value of realistic forecasting becomes clear. The installation also delivers carbon benefits from the moment it becomes operational, contributing to your decarbonisation strategy from day one.
Here’s a simplified example of what a 1MW commercial solar installation could deliver:
Year 1
- Complex Installation: £796,000 realistic CapEx using quality components.
- O&M cost: £10,000.
- Generation: 923,166 kWh/annum (conservative projection accounting for losses and shading).
- Total Year 1 cost saving: £123,857 (including O&M cost).
- Carbon reduction: 177 tonnes CO₂/annum.
Year 10
- O&M cost: £11,953 (inflated 2% annually for rising labour costs)
- Generation: 860,391 kWh/annum, consistent performance due to quality components
Year 20
- O&M cost: £14,570 (inflated 2% annually for rising labour costs)
- Generation: 805,001 kWh/annum
- Total energy cost savings: £3,079,237
- Total carbon saved: 4,808 tonnes CO₂
This is a rough estimate to give you an idea of what the lifespan of an installation could achieve. For a robust proposal specific to your site, get in touch.
The Questions Asset Managers Should Ask
The most diligent asset managers we work with always ask three fundamental questions. If your installation partner isn’t giving you a comprehensive picture, challenge them with:
- What are your O&M costs?
- How have you calculated yield losses?
- What’s your electricity inflation assumption?
If providers can’t answer those three questions with specifics, they’re not being honest about what the system will cost. This scrutiny protects your investment by forcing contractors to justify their assumptions before your board commits capital.
CapEx might be the industry-standard metric, but it’s the wrong one.
Planning a commercial solar investment? Contact the LSS team to discuss realistic OpEx modelling for your project.