Clean energy is the energy which is generated from natural and renewable sources, which get replenished on its own. This energy can be used for the generation of heat and electricity and is harnessed from natural resources such as solar, biomass, wind, tidal, geothermal etc.
For decades, humans have done irreversible damage to the planet using fossil fuels such as coal, petroleum products etc. for generation of electricity, fuel for their vehicles and in turn releasing greenhouse gases and other harmful gases in the atmosphere. This has lead to global warming, depletion of the ozone layer and increases the risk of making the planet uninhabitable for all forms of life unless steps are not taken to reduce the harmful impact of using fossil fuels. The solution for this is using renewable energy.
Clean Energy Market in India
The clean energy market in India is still young, under-utilised and dynamic, which also implies India has great investment potential in its renewable energy sector. Almost, $ 20 billion were invested in the Indian renewable energy sector in 2017, and for the first time, this surpassed the investment in fossil fuel-based energy. The Solar Photovoltaics or the PV capacity of India has enhanced eight times in the last few years, increased from a mere 3 GM in 2014 to 22 GW in 2018.
India is destined to become of the biggest markets for renewable energy due to abundant availability of natural resources for renewable energy. The fast-paced growth of the renewable energy market in India is what is required for attracting more investment within the renewable energy industry sector.
The Indian Government has announced its target of renewable energy generation of 175 GW by 2022. Hence, there is a lot of government support in investment in the renewable energy sectors in the form of land acquisition, subsidies etc.
Investing in India’s Renewable Energy Sector
Investing in companies involved in renewable energy can be a lucrative option for investors, as the renewable energy sector is deemed to grow and evolved in India in the coming decade and hence offering investors to make substantial long-term gains by including renewable energy within their investment portfolio.
With the stock market going online and dematerialisation of shares and Demat accounts, investing in the stock market is simpler, easier and more accessible for everyone.
A Demat Account is a form of an account which enables investors of stock and shares to hold their shares in electronic or dematerialised form. Post 5th Dec 2018, SEBI has restricted the transfer of shares in physical form and transactions in share using a Demat Account enables electronic settlement of all transaction.
To open Demat account and its operation is similar to a bank account wherein the Demat account holds stocks, shares and other forms of financial instruments instead of cash and similar to a bank account wherein the Demat account is credited and debited when shares are bought and sold. Investors can open a Demat account with zero balance of shares and also maintain a zero balance of shares in their Demat account.
Investors can utilise their online Demat accounts to buy shares of companies involved in renewable energy and invest within the renewable energy sector in India. An analysis of the dynamic landscape of the renewable energy sector in India, which includes higher concentration among renewable developers, facilitation of financing etc. which will aid in the growth of the renewable industry sector in India and higher returns for the investors.
Trends in India’s Renewables Industry
The is a high degree of market concentration among developers of renewable energy which is aiding in the facilitation of finance for the renewable energy sector. But there might be a higher limit for industry consolidation as only a selected player within the industry have been sanctioned most of the recent renewable energy projects, which includes both the solar energy projects and the wind energy projects sanctioned between 2014 to 2017. Hence investing in these top companies engaged in renewable energy and have been sanctioned projects in recent years can expect good returns in the long run.
Solar parks are an essential component of the development of solar energy in India and provide access to investors and stakeholders from all over the world. Solar park tenders have often been over-subscribed and have attracted a lot of inflow of investment towards fuelling the growth of solar power energy sector in India.
However, the slow-speed in the sanction of new solar parks and the delay in development of solar parks due to various challenges linked with acquiring land in India and internal infrastructure set-up is affecting the tendering speed of new solar parks. The existing solar parks are yet to fulfil their true potential, and so far have only been able to achieve 16% of its target of 40 GW.
The supportive policies and ambitious targets set by the Government of India is enabling of setting up for large-scale projects in the field of renewable energy. Over the last few years, the average project size has increased drastically for both solar and wind energy projects. The solar energy projects have witnessed a four-fold increase with the average project size reaching 110 MW, and the wind energy projects have witnessed a five-fold increase with the average project size reaching 130 MW.
The creditworthiness and reliability of the off-takers of renewable energy projects impact the timely and reliable payments towards power purchase, as it has a huge impact on several decisions about investment in the renewable energy sector. Timely and reliable payments by the DISCOMS or the state distribution companies towards the purchase of power generated pose some risk for investors. Hence, there is a rise in the proportion of sanctioning of projects in solar and wind energy on the basis of agreements with Central Government Entities as compared to the projects being executed solely with the DISCOMs.
Renewable energy is the immediate need in India and all over the globe, and since this sector is in its early stages in India, it is an attractive investment opportunity for companies engaged in the business of renewable energy. The growth of the renewable energy sector can literally translate growth in returns of investors of this sector and hence retail investors can open Demat accounts and use their online Demat account to buy shares of companies within the renewable energy sector in India and reap benefits and returns from the growing Indian renewable energy sector.
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