India’s Green Energy Sector: A Path to Sustainable Growth

India’s energy demand is likely to grow more rapidly than any other country over the coming decades due to its large population and potential for development. To meet this rising demand, relying on low-carbon, renewable energy sources is crucial. The country has committed significantly to achieving net zero carbon emissions by 2070. It plans to generate 50% of its renewable energy by 2030.

This article explores the remarkable growth, key investments, and potential of India’s renewable energy sector and the leading green energy stocks. 

Green Energy Sector Growth in India

As of 2023, India ranked fourth globally in wind power, solar power, and overall renewable energy capacity. The country’s renewable power capacity has grown rapidly, with a compound annual growth rate (CAGR) of 15.4% between FY16 and FY23, reaching 125.15 GW by FY23. India is the fastest-growing market for renewable electricity, and the new capacity additions are expected to double by 2026.

With strong government support and better financial prospects, the renewable energy sector has become increasingly attractive to investors. As India aims to fulfil its energy needs domestically, projected to reach 15,820 TWh by 2040, renewable energy will be essential in meeting this demand.

Recent Investments

To support the growth of the renewable energy sector, the government allocated ₹19,100 crore to the Ministry of New and Renewable Energy in the Union Budget 2024, a significant increase from the revised estimate of ₹7,848 crore for Budget 2023-2024. 

Additionally, ₹851 crore was allocated for wind and other renewable energy programs in the Union Budget 2024-25, compared to the revised estimate of ₹946.30 crore from the previous year. The government will also invest ₹600 crore in the National Green Hydrogen Mission, which had a revised estimate of ₹100 crore in Budget 2023-2024. Furthermore, the bioenergy program received ₹300 crore in Budget 2024-25, up from ₹75 crore last year.

According to ICRA, India’s installed renewable energy capacity is projected to grow from 136.57 GW in December 2023 to around 170 GW by March 2025.

SWOT Analysis of Green Energy in India

Strengths

• Government Support and Initiatives: The Indian government has launched various programs to promote the green energy sector, such as the National Green Hydrogen Mission and the Production Linked Incentive (PLI) Scheme. Investments in large-scale projects, like the agreement with NTPC Green Energy for 28,500 MW of renewable energy projects in Rajasthan, demonstrate the government’s commitment to this sector.
• Increasing Renewable Energy Capacity: India is rapidly expanding its renewable energy capacity, aiming for 500 GW by 2030 and aspiring to be a leader in green hydrogen production. 
• Environmental and Sustainability Benefits: Green energy initiatives are essential for reducing carbon emissions and achieving global targets like net-zero emissions by 2070.

Weaknesses

• High Initial Costs: The high upfront costs for setting up infrastructure and implementing technology can be a barrier to widespread adoption. 
• Dependence on Imported Technology: India relies heavily on imported technology and equipment, especially in the solar sector, which can affect cost efficiency and project timelines.
• Infrastructure and Grid Integration Issues: Integrating renewable energy into the existing power grid is challenging due to inadequate infrastructure and transmission capabilities.
• Policy and Regulatory Uncertainty: Frequent changes in policies and regulations can create uncertainty, affecting investor confidence and the smooth implementation of projects.

Opportunities

• Expansion of Renewable Energy Projects: Programs like the PM Surya Ghar Muft Bijli Yojana can significantly increase the adoption of rooftop solar power across the country.
• Green Hydrogen and Battery Storage: India aims to produce 5 million tonnes of green hydrogen by 2030, creating opportunities for green hydrogen production and electrolyser manufacturing.
• International Partnerships: The approval of the Sovereign Green Bonds framework and participation in global agreements like the Paris Agreement can attract foreign and domestic investments.
• Rural Electrification and Sustainable Development: The focus on sustainable cities and rural electrification through renewable energy can improve energy access, reduce pollution, and support sustainable development.

Threats

• Uncertain Policy Environment: Changes in government policies or budget allocations can impact the progress of green energy projects.
• Competition from Traditional Energy Sources: Fossil fuel-based power generation remains dominant, with thermal energy expected to contribute over 50% of power by 2030, competing with renewable energy growth. Traditional energy sources’ cost competitiveness could slow the transition to renewable energy.
• Technological and Supply Chain Disruptions: Dependence on imported technology and potential supply chain disruptions can hinder project timely execution.

Massive Projects in the Green Energy Sector in India 

The green energy sector in India is rapidly evolving, with key players making significant strides towards sustainability and carbon neutrality. Green energy sector companies are at the forefront of this transformation, actively contributing to the country’s ambitious renewable energy goals. 

On March 15, 2024, NHPC announced that it secured a 200 MW solar power project at Gujarat State Electricity Corporation’s (GSECL) 1125 MW renewable energy park in Khavda, Gujarat. The project is estimated to cost around ₹846.66 crore. NHPC received a Letter of Intent from Gujarat Urja Vikas Nigam Limited (GUVNL) on March 14, 2024, for this project.

On September 24, 2024, Adani Green Energy Ltd (AGEL) and Adani Energy Solutions Ltd (AESL) announced their membership in the Utilities for Net Zero Alliance (UNEZA), launched at COP28 to support India’s carbon reduction efforts. Both companies aim for Net Zero by 2050, with AGEL planning to boost its renewable capacity from 11.2 GW to 50 GW by 2030, while AESL targets a 70% share of renewable energy in bulk power purchases by 2030.

Apart from these, many other contributions are made by the green energy sector companies in India. 

Green Energy Stocks In India Based On Market Cap

Note: The green energy stocks list provided here is sorted as per the market capitalisation as of September 24, 2024. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.