Industry Overview
The renewable energy industry in India is the fourth most promising in the world. As of 2020, India ranked fourth in wind power, fifth in solar power, and fourth in installed capacity of renewable energy. Installed renewable power generation capacity increased at a compound annual growth rate of 15.92% between FY16 and FY22. With greater government assistance and stronger economic conditions, the sector has become attractive to investors. Renewable energy is anticipated to play a significant role in India’s efforts to meet its energy demand, which is predicted to reach 15,820 TWh by 2040.
Market Size
As of April 2022, India’s installed renewable energy capacity (including hydro) was 158.12 GW, or 39.43% of the country’s total installed power capacity. The country aims to install 450 Gigawatts (GW) of renewable energy capacity by 2030, of which 280 GW (almost 60%) will be solar.
In the first eight months of FY22, 8.2 GW of renewable energy capacity was added, compared to 3.4 GW in the first eight months of FY21.
Government Initiatives
The Government of India has taken the following steps to develop India’s renewable energy sector:
- The Union Budget 2022-23 allocated Rs. 1,000 crores ($132 million) to the Solar Energy Corporation of India (SECI), which is responsible for the development of the whole renewable energy sector.
- The government earmarked Rs. 19,500 crores (US$ 2.57 billion) in the budget for a PLI scheme to promote the production of high-efficiency solar modules.
- Nepal and India agreed in February 2022 to organise a Joint Hydro Development Committee to investigate the viability of hydropower projects.
- Prime Minister Narendra Modi pledged at the Cop-26 Summit in Glasgow, Scotland, in November 2021 to boost India’s renewable energy generation capacity to 500 GW and meet 50 per cent of India’s energy needs through renewable sources by 2030.
- In October 2021, the Ministry of Power released a new set of regulations intended to alleviate financial strain on stakeholders and ensure prompt cost recovery in energy generation.
- The Indian government suggested new laws for the purchase and usage of green energy in August of 2021. The most recent regulations are part of a government initiative to encourage large-scale energy consumers, such as industries, to utilise renewable energy sources for routine operations.
- The Ministry of New and Renewable Energy launched Rooftop Solar Programme Phase II in July 2021, with the goal of installing 4,000 MW of RTS capacity in the residential sector by 2022 with a subsidy, in order to promote rooftop solar (RTS) throughout the country, particularly in rural regions.
- In July 2021, the Ministry of New and Renewable Energy (MNRE) authorised NTPC Renewable Energy Ltd., a wholly-owned subsidiary of NTPC, to construct a 4,750 MW renewable energy park in Khavada, Gujarat. The largest solar park in India will be constructed by the country’s major electricity company.
- The Indian government has announced plans to develop a National Mission on advanced ultra-supercritical technologies for greener coal utilisation costing USD 238 million.
- Indian Railways is increasing its efforts to reduce emissions by 33 per cent by the year 2030 through continuous energy-efficient measures and maximum usage of clean fuel.
- From 2018 to 2021, the government has spent $4.63 billion on hydroelectric projects to provide power to Jammu and Kashmir’s villages.
Why Green Energy?
Before we can comprehend the necessity for green energy, we must first comprehend its antithesis. Fossil fuels are derived from organic stuff in the earth’s crust that has decomposed. This organic stuff is rich in carbon and hydrogen, and its combustion produces energy. Coal, oil, and natural gas make up fossil fuels. Due to their quantity, efficiency, and somewhat cleaner combustion, they are the most prevalent fossil fuels. However, there is a cost associated with these advantages. Despite the fact that natural gas is the cleanest fossil fuel, when it is consumed at the current pace, the cumulative emission of pollutants negates this advantage. Coal and oil already have the “dirty” label, meaning they are the fossil fuels that emit the most toxins.
Fossil fuels are also nonrenewable, meaning that although they occur naturally in the Earth’s crust, the pace at which they are supplied is lower than the rate at which they are consumed. To act as a solution on these two troublesome fronts, green energy was developed or, more accurately, popularised in order to divert the world’s energy demand away from existing sources. Green energy encompasses all energy sources with negligible to negligible emissions and renewable resources. Solar, wind, hydropower, and geothermal are the most prevalent green energy sources.
And where there is a need, there is an opportunity to capitalise. To capitalise on this expanding need for alternative energy, a number of new businesses and subsidiaries of existing organisations have been formed. In addition to profit, several governments are also pushing for the transition from nonrenewable to renewable energy sources because of the negative effects of fossil fuels. By 2030, the Indian government intends to raise renewable energy generation capacity to 500 GW. In 2005, the generation capacity of renewable energy was approximately 10 gigawatts (GW), which will climb to approximately 100 GW by December 2021. In 16 years, this corresponds to a staggering CAGR of 16.6%.
Key Takeaways
- Green energy is the future of the whole energy business, thus it is crucial to capitalise on this opportunity by investing in green energy stocks.
- Multiple businesses and government activities are being undertaken to advance the renewable energy sector.
- The Indian government has taken the initiative to raise renewable energy capacity to 500 GW by 2030’s end.
- The global renewable energy business is currently worth 755 billion dollars and is anticipated to experience rapid expansion in the next years.
Since last year, the price of crude oil has climbed by 61.13 per cent. For the same reason, a growing number of businesses are gradually transitioning to green energy or renewable energy. Numerous businesses have begun producing renewable energy directly from natural resources such as sunshine, air, and water. These companies have begun an initiative through which they contribute to the environmental cause; hence, the stocks of these companies might be termed green energy stocks.
With each passing year, the demand for energy increases dramatically. Global energy consumption is projected to increase by fifty per cent by 2050 as a result of the rapid development of new nations and emerging economies. However, scientists also warn us about the growing temperature in the atmosphere as a result of the increase in carbon dioxide and other greenhouse gases.
Due to rising environmental concerns, a number of nations are pursuing various efforts to replace fossil fuels with renewable energy sources. As a result, many companies are discovering innovative ways to capture and utilise renewable energy, and investors have the opportunity to profit by investing in the green energy stocks of these companies.
Fundamentals Of The Green Energy Investment
Green energy or renewable energy stocks are the shares of companies that are actively developing technology to replace fossil fuels with renewable energy resources, such as hydroelectric, wind, or solar power. Renewable energy also refers to supplemental technologies that will be crucial for the transition to green energy.
For instance, improved battery technologies can aid the transportation industry by enhancing the capabilities of electric vehicles. Smart grids, on the other hand, can reduce the overall electricity usage of developing economies and nations alike.
According to a new estimate by Bloomberg New Energy Finance, the global investment in green energy technologies will reach 755 billion dollars in 2021. In order to reduce overall carbon emissions to zero, investments in renewable energy and related technologies will need to reach over $2 billion by the end of 2025 and approximately $4.1 billion by the end of 2030.
What Are The Different Types of Green Energy Investments?
Although there are a number of ways to create a profit from green energy investing, in this article we will explore the most straightforward method, which involves identifying the companies working on green energy projects and purchasing their renewable energy stocks.
However, you should also be aware that research-focused firms might take a significant amount of time, and not all companies stocks can be sold publicly. Therefore, as a savvy investor, you should prioritise companies that are actively engaged in the practical use of renewable energies.
Let’s examine the various forms of green energy in which you can invest:
- Clean energy stocks
Under the clean energy stocks, any company associated with renewable energies is eligible for inclusion. Even alternative forms of transportation are included in clean energy stocks. When investing in renewable energy stocks, investors will simply be able to diversify their portfolios.
- Solar and Wind energy stocks
If you are searching for a purer type of green energy stocks, you can invest in solar energy and wind energy-related companies.
- Hydroelectricity
In addition to being one of the most prevalent renewable energy sources, hydroelectricity is anticipated to increase over time. Currently, it is the most prevalent form of green and clean energy, accounting for 17 per cent of the world’s electricity. Investing in companies that produce hydroelectricity is always an excellent idea.
- Investing in Shares of Green Energy
Currently, many businesses are concentrating on saving the environment by lowering the annual damage they cause. Those who invested in green energy stocks a few years ago have seen their cash appreciate exponentially.
In addition, the Indian stock exchange tracks the performance of green energy stocks using a specialised index. This index is known as the S & P Green index. This particular index tracks the liquidity and market capitalization performance of the top 25 green stock companies. In FY 2020, the S&P Green index was able to give a 29.39 per cent return on investment to its investors.
Green Energy Stocks In India: Why Should You Invest?
Indeed, green energy stocks are the future. The following are several reasons why you may consider investing in green energy stocks.
- Evergreen stocks
We are all aware that global warming and climate change are two of the greatest worldwide issues. To tackle this problem, green energy was invented, in which energy is generated from solar, wind, and water resources. To save the environment, the globe has already begun to replace fossil fuel vehicles with electric or compressed natural gas (CNG) vehicles, which are sulfur-free and reduce hazardous emissions.
Numerous energy-efficient products, such as solar water heaters, wind turbines, geothermal heat pump systems, and hydropower, have been developed, and the companies that manufacture them will always be in demand.
- Constant attempts are being made by the government to preserve the ecosystem.
As green energy is the energy of the future, governments across the globe have begun investing in the green energy sector. By establishing green energy initiatives, they have been making deliberate attempts to preserve the environment. As a result, the sector’s growth prospects have expanded dramatically, and businesses are attempting to outcompete rivals through innovation. Therefore, if you buy the correct green energy stock with thorough diligence, you can anticipate long-term gains.
- The volatility of fossil fuel prices
The prices of crude oil are usually unpredictable. As the demand for crude oil decreased during the epidemic, so did the prices. Similarly, crude oil prices have lately increased due to rising demand. Crude oil is a scarce commodity. With varying demand and supply, crude prices will continue to fluctuate. The opposite is true of green energy. Renewable energy sources, such as solar, hydro, and wind, are enduring resources. Therefore, if demand increases, all companies must do is work efficiently towards establishing new initiatives to meet it. Consequently, their revenue and share price will rise.
- ESG Investing is picking up
Today’s investors are increasingly interested in sustainable investment and living. Consequently, the demand for Environmental, Social, and Governance Investing or ESG investing is on the rise. Therefore, investors, today prefer to invest in a company that is actively working to preserve the environment. The growth of ESG investing is also reflected in the rewards that ESG stocks give. ESG index has outperformed the Nifty 50 index over the past five years, with the ESG index delivering a Compound Annual Growth Rate (CAGR) of 10.80% as of October 2020 and the Nifty 50 delivering a CAGR of 8.99% during the same period.
- IBEF survey
According to a survey by IBEF, India’s renewable energy (RE) sector is predicted to flourish in 2022 due to the government’s emphasis on electric vehicles, green hydrogen, and solar equipment production. Reliance Industries, Borosil Renewables, Adani Power, Tata Power, NTPC, Adani Green Enterprises, and JSW Energy had average one-year and three-year returns of 84 and 997.2 per cent, respectively. Comparatively, the BSE Sensex returned 9.3% and 52.8% over the same time frame. All returns are calculated from absolute point to point (not annualised) as of 29 July 2022.
India is committed to increasing its RE capacity from its current 101 GW to 175 GW by the end of 2022 and to 450 GW by 2030. 280GW, or over 62%, of the 450GW, is anticipated to come from solar power. Other climate objectives include decreasing the carbon intensity of the economy by 45 per cent by 2030 and achieving net-zero status by 2070. According to a report by the Institute of Energy Economics and Financial Analysis, the shift to RE is also intended to reduce India’s reliance on coal and oil & gas imports, as the Russia-Ukraine conflict has spurred double-digit inflation in the country (IEEFA). According to a second analysis from Niti Aayog, India spends over $160 billion yearly on energy imports, a figure that is expected to quadruple in the next 15 years if no action is taken.
List of top Renewable Energy Stocks in 2022 – Basis Market Capitalization (data as of 8/09/2022)
| S.No. | Name | Market Cap (INR) |
| 1. | Adani Power | 151,963.39 Crore |
| 2. | Tata Power | 77,199.40 Crore |
| 3. | JSW Energy | 56,875.28 Crore |
| 4. | NHPC | 37,317.30 Crore |
| 5. | Torrent Power | 26,630.98 Crore |
| 6. | Satluj Jal Vidyut Nigam | 12,477.10 Crore |
| 7. | CESC Limited | 11,234.21 Crore |
| 8 | Reliance Power | 6,817.25 Crore |
| 9. | Jaiprakash Power | 5,811.73 Crore |
| 10. | Sterling and Wilson | 5,727.79 Crore |
Conclusion
People’s demands and requirements will evolve and alter as time passes. Without human requirements, the planet’s available resources will fluctuate. Businesses must adapt and expand in response to these shifts in order to remain competitive. In order to capitalise on these changes, not only will existing businesses evolve, but young entrepreneurs will also arise. As an investor, it seems prudent to be aware of these developments in order to keep an eye out for promising stocks.
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