The growing environmental concerns, government backing for businesses in the renewable sector and investment opportunities in India’s renewable energy sector have turned it into an appealing opportunity for entrepreneurs. Leading renewable energy companies in this field are actively involved, expanding their assets and capabilities to help India achieve its ambitious goal of reaching 500 GW installed capacity by 2030. In the Union Budget 2023-2024, the Ministry of New and Renewable Energy’s budget has seen a remarkable increase of approximately 48%, amounting to Rs. 10,222 crores from the previous year’s revised estimate of Rs. 7,033 crores. This surge in support makes it naturally tempting for investors to seize the opportunity and benefit from the attractive returns offered by India’s top renewable energy stocks.
As fossil fuels become depleted and their production costs rise, along with increasing environmental concerns, the future calls for a shift to “green energy.” Consequently, renewable energy is expected to become the predominant energy source in the future.
Renewable energy is a relatively new sector that requires significant effort, time, research and development, experimentation, and massive investments to mature and become profitable. Clean energy is currently in its early stages, with renewable energy companies heavily investing in R&D and testing new technologies to accelerate the transition to non-conventional energy sources and enhance efficiency. While these companies may not have robust financials at present, as progress is made and efficiencies improve, their financial positions will strengthen over time. Thus, a long-term investment horizon is advisable for those investing in the clean energy sector.
Although the industry’s development has been gradual so far, the urgent need to address climate change requires the green energy sector to advance more rapidly.
The global investment in the low-carbon energy transition reached $1.1 trillion in 2022, showing a significant increase of 30% compared to the previous year. This surge was driven by a 17% rise in investments in renewable energy and a remarkable increase of over 54% in investments in electrified transport. However, to effectively drive the worldwide effort to achieve zero total carbon emissions, a much more significant investment of over $2 trillion will be required by 2025 and approximately $4.1 billion by 2030.Renewable energy continues to be the most prominent sector in terms of investment, setting a record of $495 billion committed in 2022, representing a 17% growth from the previous year. Encouraging more foreign investments in this industry would further support its development and attract additional domestic investments.
In the Union Budget for the fiscal year 2023-2024, the government allocated Rs. 19,700 crores to the recently introduced National Green Hydrogen Mission. The mission aims to facilitate the country’s shift towards a low carbon-intensive economy and reduce reliance on fossil fuel imports. Aligned with the budget announcement, the Ministry of Power has devised a Scheme for Viability Gap Funding to establish Battery Energy Storage Systems with a total capacity of 4,000 MWh.
India initiated the Mission Innovation CleanTech Exchange the previous year to expedite advancements in clean energy. This global initiative aims to accelerate efforts and investments in research and development and campaigns to make clean energy affordable, accessible, and appealing to everyone within the next decade.
The government has taken further measures to support climate and environmental projects, including allowing 100% Foreign Direct Investment (FDI) through the automatic route. Additionally, it has entered into power purchase agreements to promote renewable energy initiatives.
While the government plays its role, companies also heavily invest in the sector to accelerate progress and help India achieve its net-zero emissions target by 2070.
Prominent companies such as Reliance Industries, Adani Group, Tata Group, and JSW are capitalizing on the current situation, viewing it as both a crisis and an opportunity. These companies are planning to invest over Rs. 4 lakh crores in the green energy sector over the next 5-10 years.
An advisable approach would be to carefully choose robust renewable energy companies at appealing market valuations. As various companies from different industries are vying to enter this burgeoning sector, conducting thorough research before investing in any of them becomes crucial.
Despite India currently trailing behind in green energy adoption, significant players such as Tata and Reliance have set ambitious targets and plan to make substantial investments. Considering this trend, the industry’s transformation is imminent. By investing in the right stocks at favourable valuations, one can seize this enormous opportunity for a prolonged period.
Solar and wind energy, while renewable, are not consistently available. To address this issue, storage solutions like batteries are essential to bridge the gaps in energy supply. Batteries serve various purposes, from powering small devices like phones to providing energy for homes and businesses. As renewable energy sources like solar and wind become increasingly prevalent in power systems worldwide, battery energy storage systems (BESS) are emerging as a crucial solution to effectively integrate these renewables. This specialized field can potentially revolutionize the energy sector for many companies, becoming a game-changer in the process. Given the escalating impact of climate change, batteries play a vital role in facilitating the transition to a world powered by renewable energy. Companies are actively seeking to capitalize on this opportunity.
For instance, a unit of Reliance Industries announced a $50 million investment in the US-based energy storage startup, Ambri. Tata Power is collaborating with Swiss Firm Energy Vault to establish India’s first large-scale 50 MWh battery storage system, exploring an alternative to conventional gravity-based pumped hydro projects. These developments are just the beginning of what promises to be a fascinating period in this domain. Batteries can potentially be a significant player in the renewable energy theme. However, it is crucial to identify the right stock and purchase it at an appropriate price to make the most of this opportunity.
Another avenue to explore this potential is by investing in renewable energy mutual funds available in India. The underlying strategy of these funds is to invest in companies engaged in activities related to the exploration, development, production, or distribution of natural resources and those involved in alternative energy and energy technology sectors.
Some examples of such funds include:
As time progresses, more options will likely become available, presenting investors with a broader range of choices. It is crucial to make prudent selections when considering these investment opportunities.
The US and China possess a competitive advantage over India in renewable technology and electric vehicles (EVs). Therefore, it would be prudent to consider investing in the green energy sector within these markets. The US, being the world’s largest market, offers substantial opportunities for investors. Unlike the Indian stock market, which has limited options in this sector, international markets boast larger and more established companies operating in this domain.
Specific documents are required for starting a renewable energy business, depending on the type of renewable energy enterprise. However, several standard documents are generally necessary, including:
These documents are essential to establish and operate a renewable energy business effectively.
With the expansion of the sector, there is tremendous potential for technological advancements within the renewable energy industry. Projections indicate that by 2040, approximately 49% of the total electricity will be generated from renewable sources, driven by the adoption of more efficient batteries for electricity storage. This development is expected to significantly reduce solar energy costs, bringing them down by 66% compared to current levels. The green energy revolution will undoubtedly create numerous opportunities for companies to thrive.
For investors seeking to capitalize on India’s renewable growth, conducting a thorough analysis of the companies they consider investing in is essential. Evaluating financial performance, management capabilities, business strategies, and other fundamental factors will be crucial in making informed investment decisions. It is highly recommended to take expert consultation while starting a business on Renewable Energy Companies to ensure the documents and licenses that would be required for the company.
India has set ambitious targets of achieving 50% of its total energy needs from renewable energy sources and reducing carbon emissions by 45% by the year 2030. Given the extensive potential for a green energy revolution, the future outlook for the renewable energy sector appears promising.
India is experiencing a rapid expansion of renewable electricity, outpacing other major economies, and it is projected to double its new capacity additions by 2026. Additionally, the country stands as one of the leading global producers of modern bioenergy and has ambitious plans to significantly increase its implementation across various sectors of the economy.
There is a prosperous future for renewable energy. Companies and industries are transitioning towards renewable energy sources as part of their efforts to decrease emissions, decrease energy expenses, and enhance their environmental sustainability.
The nation aspires to reach Net Zero Emissions by 2070, along with achieving interim goals that encompass: reaching a renewable capacity of 500 GW by 2030, fulfilling 50% of energy needs from renewable sources, and reducing cumulative emissions by one billion tonnes by 2030.
Currently, renewable energy sources contribute to 26% of the world’s electricity generation. As per the International Energy Agency (IEA), the share is predicted to grow to 30% by 2024.
India has committed to achieving a renewable energy capacity of 500 GW by 2030. To fulfil this pledge, the country’s installed renewable energy capacity has been consistently increasing over time. As of Q4 in 2023, the capacity has risen from 94.4 GW in 2021 to 119.1 GW.
According to estimates by IEEFA and Climate Energy Finance, India is projected to achieve a renewable energy capacity of 405 gigawatts by 2030, surpassing the government’s target of generating 50% of its electricity from non-fossil fuel sources by the end of the decade.
India aims to achieve 175 GW of renewable energy capacity by 2022, comprising 100 GW from solar energy, 10 GW from bio-power, 60 GW from wind power, and 5 GW from small hydropower plants. Remarkably, investors have pledged to surpass these ambitious targets, aiming for more than 270 GW of renewable energy capacity.
Based on recent projections, solar potential is expected to exceed 750 GW, while wind potential will reach 410 GW by 2047. To meet the ambitious goal of generating 500 MW of renewable energy by 2030, the government will need a pool of entrepreneurs, a skilled workforce, and heavy investment in technology.
Green tech focuses on environmental protection and the preservation of natural resources. Clean energy pertains to employing alternative fuels and technologies that have a less negative impact on the environment compared to fossil fuels.
Read our Article: Popular Renewable Energy Projects In India