Comparing Solar Financial Models for FDI in Vietnam: CAPEX vs ESCO vs OPEX

Choosing the right financial model for a solar project is a critical decision that directly affects investment performance and the competitiveness of FDI enterprises in Vietnam. Many companies miss cost-optimization opportunities because they do not fully understand the differences between three core models: CAPEX (self-funded investment), ESCO (energy partner-funded), and OPEX (system leasing).

These three models offer different benefits in terms of finance, risk, and ownership:

• CAPEX: requires upfront investment but delivers high accumulated value over the long term.

• ESCO: requires no upfront capital and often helps enterprises reduce electricity costs from the earliest billing cycles—if the clean-power price is lower than the “100% grid electricity” scenario—through a benefit-sharing mechanism.

• OPEX: provides high contractual flexibility, but the enterprise does not own the asset.

This article analyzes each model in detail, compares pros and cons, and provides a practical decision framework for CFOs, Finance Managers, and leadership teams of FDI enterprises in Vietnam.

---

1. Overview: Why the Financial Model Determines Solar Project Success

1.1. Three core factors when choosing a financial model

Selecting a financial model for a solar project is not only about “where the money comes from,” but also tied to:

• Financial strategy and balance-sheet structure

• Priority of cash flow in the mid- to long term

• ESG and Net Zero goals, and requirements from the parent company and investors

a) Impact on cash flow

Each model affects cash flow in a different way:

CAPEX

• The enterprise pays 100% of the upfront cost.

• In practice, rooftop C&I investment costs in Vietnam are often quoted in the range of VND 8.5–15 million per kWp for rooftop systems (2025 reference), depending on equipment configuration, HSE standards, factory height, and site conditions.

• These figures are for reference as of 2025 and may change based on market conditions, exchange rates, policies, and the specific technical requirements of each factory.

• This creates budget pressure in the first year, but helps reduce electricity costs in a stable way for many years thereafter.

ESCO

• The enterprise does not pay upfront CAPEX; all costs are financed by the investor/ESCO.

• The enterprise pays the ESCO based on clean-electricity output supplied, or the savings achieved versus a scenario of buying 100% grid electricity.

• If the contract clean-power price is lower than the “100% grid electricity” scenario, this model often reduces electricity costs from the earliest billing cycles and does not increase on-balance-sheet debt.

OPEX

• The enterprise pays a leasing fee monthly/quarterly/annually.

• Energy costs are easier to forecast, there is no CAPEX, but no owned asset is created.

b) Ownership and long-term value

• CAPEX: the enterprise owns the system from the commercial operation date, records it as a fixed asset on the balance sheet, and uses it over its life (typically 20–25 years).

• ESCO: the asset is often transferred to the enterprise after the contract ends (market practice typically ranges 10–20 years, commonly 15–20 years), combining zero-CAPEX benefits with long-term asset value.

• OPEX: the investor/ESCO retains ownership permanently; the enterprise only “leases the right to use” during the contract term.

c) Ability to meet ESG & Net Zero criteria

• CAPEX: makes it easier to prove 100% ownership of renewable-energy assets in ESG reporting, directly reduces Scope 2 emissions, and is often rated highly in Net Zero and green-finance programs.

• ESCO: the enterprise can still record Scope 2 emission reductions based on clean-electricity procurement and contractual terms; after asset transfer, ESG “quality” becomes close to CAPEX.

• OPEX: the enterprise can still present renewable-energy use via contracts and accompanying certificates; however, because the enterprise does not directly own the asset, ESG audit disclosure usually requires more detailed explanation than CAPEX or ESCO with asset transfer.

---

2. FDI Selection Trends in Vietnam (2024–2025)

In rooftop C&I—especially in industrial parks with concentrated FDI—ESCO is gaining attention because it:

• Requires no CAPEX allocation for energy projects

• Does not increase the scale of fixed assets or on-balance-sheet debt

• Can partially “lock in” long-term energy costs via a power purchase contract

In parallel, the legal framework for direct power purchase (DPPA) has been completed on a formal roadmap:

• Initially via Decree 80/2024/NĐ-CP on the DPPA mechanism;

• Currently, the mechanism is officially governed by Decree 57/2025/NĐ-CP, which also repeals Decree 80/2024/NĐ-CP.

This provides a clearer foundation for ESCO/IPP models to work with FDI more transparently and in a way that is easier to audit.

For self-consumption rooftop systems, enterprises should also note provisions in Decree 58/2025 and Decree 135/2024 related to exempted capacity thresholds, grid-connection conditions, and limits on exporting surplus power to the grid (for example, not exceeding 20% of installed capacity in certain cases).

• CAPEX remains the preferred choice for multinational groups with strong finances, long-term commitment to Vietnam, and a desire to directly control renewable-energy assets.

• OPEX often appears in leased-factory scenarios, short-term projects, or pilots where flexibility is prioritized.

---

3. CAPEX Model: Enterprise Self-Investment

3.1. What is CAPEX?

CAPEX (Capital Expenditure) is a model where the enterprise funds the full cost of designing, procuring, constructing, and operating a solar system. The system is owned by the enterprise once it reaches commercial operation.

A typical implementation process includes:

• Site survey & feasibility study

• Engineering design – cost estimate – internal approvals

• EPC contractor selection and equipment procurement

• Construction – acceptance testing – grid connection

• Operation & maintenance throughout the system life

For rooftop C&I, total implementation time typically ranges from a few months, depending on system size, internal approval processes, and local regulatory requirements at the project site.

3.2. Benefits of CAPEX

100% asset ownership from day one

• The system is recorded as a fixed asset and can be depreciated under regulations, supporting tax optimization.

• Clean-energy assets can increase enterprise value when accessing loans or green-finance programs.

High long-term financial value

• After payback, the remaining electricity savings over the system’s life become net benefits to the enterprise.

• With electricity prices trending upward, accumulated savings become more significant.

Maximum autonomy and control

• The enterprise controls equipment selection, technical standards, expansion plans, storage integration, and the choice or replacement of O&M providers.

Strong ESG

• Direct ownership makes it easier to prove Scope 2 emission reductions in ESG reports and Net Zero programs.

3.3. Limitations of CAPEX

Upfront investment pressure

• With reference costs around VND 8.5–15 million/kWp for rooftop C&I, a multi-MWp system may require investment from tens to hundreds of billions of VND, depending on configuration.

• This CAPEX competes with other priorities such as production lines, warehousing, and factory expansion.

Complex internal approval process

• Often requires approval from the CFO, CEO/General Director, and the parent company—along with financial dossiers, risk analysis, and detailed cash-flow modeling.

Enterprise bears technical and operational risks

• If production underperforms, electricity prices change, or policies adjust, the enterprise is impacted first.

• Internal O&M capability or a reliable partner is needed.

3.4. When should you choose CAPEX?

CAPEX is suitable when:

• The enterprise plans to operate long term (15–20 years or more) in Vietnam

• There is access to long-term capital at reasonable cost, or CAPEX budget has been allocated for energy

• The goal is to maximize long-term value and accept a payback period in the first few years

• ESG strategy requires direct ownership of renewable assets

• The enterprise wants maximum control over technical design, operations, and future expansion

---

4. ESCO Model: Zero CAPEX, Benefit-Sharing With an Energy Partner

4.1. What is ESCO?

ESCO (Energy Service Company) is a partnership model where:

• The energy partner/investor funds 100% of the system investment

• The enterprise does not pay upfront capital

• The enterprise pays the ESCO based on clean-electricity output supplied or the savings versus a “100% grid electricity” scenario over a long term (market practice typically 10–20 years, most commonly 15–20 years)

• After the contract ends, the system is often transferred to the enterprise—if this structure is agreed upfront

4.2. Operating mechanism (summary)

• Negotiate a long-term contract (PPA/DPPA or an internal power-purchase arrangement)

• Survey – design – obtain required approvals (including DPPA-related procedures if applicable)

• ESCO funds construction, testing, and operations

• The enterprise pays per the agreed mechanism (kWh price, savings share, etc.)

• Transfer the system to the enterprise after the contract term (for ESCO structures with transfer)

4.3. Benefits of ESCO

Zero CAPEX for the enterprise

• No upfront investment budget is required, preserving cash flow for core operations like production expansion and production-line investment.

Immediate cash-flow improvement (when clean power is cheaper than grid electricity)

• If the contract clean-power price is lower than the “100% grid electricity” scenario, the enterprise reduces electricity cost without recording additional debt or large assets on the balance sheet.

Transfer of technical and operational risk

• The ESCO is responsible for design, construction, expected output, O&M, and equipment replacement.

• The enterprise “buys an energy service,” with most technical risk allocated to the partner.

Better energy-cost predictability

• A long-term contract with a clear pricing mechanism helps the CFO plan stable energy costs.

Full-service delivery

• The ESCO covers design, permitting, construction, and 24/7 O&M. The enterprise manages a single point of contact.

4.4. Limitations of ESCO

Long-term commitment (10–20 years, commonly 15–20 years)

• Contracts can be difficult to amend or terminate mid-term, especially for groups with strict legal processes.

Total long-term benefit is often lower than CAPEX

• A portion of multi-year savings is shared with the ESCO in early years to recover investment and compensate risk.

Less O&M flexibility

• During the contract, the enterprise typically cannot freely change the O&M provider.

Dependence on DPPA legal framework and procedures (if applicable)

• DPPA projects require preparation and approval processes that can extend the pre-construction phase.

4.5. When should you choose ESCO?

ESCO is suitable when:

• The enterprise does not want or cannot use CAPEX for energy projects

• Rapid renewable-energy deployment is needed to meet ESG requirements, but investment budget is limited

• The enterprise wants to minimize technical risk and focus resources on core manufacturing/business operations

• The enterprise can accept a long-term commitment with a reputable energy partner

5. OPEX Model: System Leasing

5.1. What is OPEX? How is it different from ESCO?

OPEX (Operating Expenditure Lease Model) is a model where:

• The enterprise leases the solar system and pays a recurring fee

• The investor/ESCO owns the system throughout its life and typically does not have a mandatory transfer clause

• The enterprise records the payments as operating expense (OPEX) and does not record the system as an owned asset

Quick comparison:

• ESCO (with transfer): longer contract, payments based on output or savings, often includes an asset-transfer clause.

• OPEX (pure lease): contract term and clauses can be designed more flexibly than traditional ESCO, but there is no eventual ownership.

5.2. When should you choose OPEX?

OPEX is suitable when:

• The enterprise wants to run a pilot before committing to a large project

• The facility/factory is leased short term or long-term presence at the site is uncertain

• The business model is volatile and needs maximum flexibility, avoiding long-term financial and legal commitments

• The enterprise wants the ability to adjust or terminate more easily than a standard ESCO contract

Conversely, if:

• Operations are stable for 10–15+ years

• The enterprise has strong ESG targets and needs to own renewable assets

• Maximizing long-term financial benefit is a priority

→ Then CAPEX or ESCO is often more suitable than OPEX.

---

6. Consolidated Comparison: CAPEX – ESCO – OPEX

---

7. A Practical Decision Path

Enterprises can use the following question chain:

1. Is the factory presence in Vietnam ≥ 15 years?

• If no (below ~10 years) → prioritize OPEX

• If yes → go to Question 2

2. Is there available CAPEX budget or long-term financing at reasonable cost?

• If no → ESCO is the natural choice

• If yes → go to Question 3

3. What is the priority: long-term value vs short-term cash flow?

• Prioritize long-term value, accept payback over the first few years → lean toward CAPEX

• Prioritize cash flow and reduce CAPEX pressure → lean toward ESCO

4. Is the enterprise willing to accept a 10–20-year contract commitment with a third party?

• If yes → ESCO fits the zero-CAPEX goal

• If no → revisit CAPEX (if funding exists) or a more flexible OPEX structure

---

8. Legal, ESG, and Accounting Considerations

8.1. DPPA and rooftop solar

For projects using ESCO/IPP structures and the DPPA mechanism, enterprises should:

• Understand requirements under Decree 57/2025/NĐ-CP (and related documents)

• Prepare technical and legal dossiers and coordinate with the Vietnam Electricity (EVN) grid Vietnam Electricity (EVN) / Genco during the approval process

For self-consumption rooftop systems, enterprises should follow Decree 58/2025 and Decree 135/2024 on exempted capacity thresholds, grid-connection conditions, and limits on exporting surplus electricity to the grid (within the legal scope—for example, not exceeding 20% of installed capacity in certain cases).

8.2. ESG reporting

• CAPEX: easy to evidence Scope 2 reductions because the enterprise owns and operates the system.

• ESCO: Scope 2 reductions can be recorded if:

  • The contract clearly states the clean-electricity procurement mechanism, and

  • Output data is transparent and auditable.

• OPEX: renewable-energy use can still be disclosed, but the method should be aligned with ESG and audit teams to ensure consistency with the applicable standards.

8.3. Tax and accounting

• CAPEX: creates a fixed asset, depreciated over multiple years, which helps allocate costs and optimize tax over time.

• ESCO/OPEX: payments to the partner are typically recorded as operating expense and directly deducted from taxable profit each year.

The specific classification (fixed asset vs operating expense) depends on contract structure and the accounting standards applied (VAS/IFRS). Enterprises should consult accounting and audit teams before making the final decision.

---

9. Conclusion: Align the Financial Model With Your Growth Strategy

No single model is “best for every enterprise.” The right choice depends on:

• Presence duration and expansion strategy in Vietnam

• Ability and priority to deploy investment capital

• Appetite for technical, legal, and financial risk

• ESG and Net Zero goals, and requirements from the parent company/investors

• CAPEX: best for large groups with strong finances seeking maximum long-term value and direct control of the asset.

• ESCO: fits most growing FDI enterprises prioritizing cash preservation, risk transfer, and ESG targets.

• OPEX: best for pilots, leased facilities, short-term operations, or scenarios requiring maximum flexibility.

To make an optimal decision, enterprises should:

• Build separate financial scenarios for each model using internal data (generation, electricity tariffs, expansion plans).

• Consult experienced energy advisors and legal/accounting professionals in renewables and FDI.

• Ensure the CAPEX/ESCO/OPEX decision aligns with the enterprise’s 10–20-year Vietnam strategy—not only short-term benefits.

Note: This article provides general information and is not legal, accounting, or investment advice. Enterprises should use internal data and consult experts (energy advisors, legal, accounting, audit, etc.) before signing any CAPEX/ESCO/OPEX contract.