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30 March 2022

Renewable Energy Powering India’s Development

The renewable energy sector is continuing to grow strongly in markets across the world as countries ditch fossil fuels and adopt greener, more environmentally conscious power solutions.

Globally, the renewable energy sector is expected to reach a value of US$1,977.6bn by 2030, more than double its 2020 value of US$881.7bn. A number of factors have led to the upsurge in the market value of renewable energy, including greater demand for alternatives to fossil fuels, more stringent legislation and financial initiatives from governments. As a result, a host of countries have already invested significant funds into building their electric, wind and solar power infrastructures but India, the second most populous nation on Earth, is more ambitious.

Despite the country currently being heavily reliant on fossil fuels, most notably coal, India has set multiple targets for the years and decades ahead, ultimately aiming to become carbon neutral by 2070. In the shorter term, Prime Minister Narendra Modi has a target of the country getting 50% of its energy from non-fossil fuels and reaching a 500-gigawatt (GW) capacity by 2030, something which newspaper The India Times expects the country to achieve with ease.

In order to meet the growing demand for cleaner energy, India is experiencing somewhat of a green revolution, with a host of players stepping up. In October 2021, Reliance New Energy Solar Ltd (RNESL) acquired two companies – Norway-based REC Solar Holdings AS, and Indian firm Sterling & Wilson Solar – in deals exceeding US$1bn. Reliance is aiming to achieve a solar energy capacity of 100GW at its site in Jamnagar by 2030, a target equivalent to 20% of Prime Minister Modi’s target for the entire country.

Similar investments took place throughout 2021 as companies looked to get the jump on their competitors in this fast-growing market. Adani Green Energy Ltd acquired SB Energy India for US$3.5bn to boost its capacity, while Reliance Industries, the parent company of the aforementioned Reliance New Energy Solar, announced plans to invest INR750,000 crore (US$10.07bn) in the green energy segment. In December 2021, Reliance New Energy Solar announced a deal to acquire UK battery firm Faradion for £100m to expand its operations.

Building and infrastructure projects are also taking place across India as its green energy network grows, something often backed by government initiatives. In 2021, the Indian Ministry of Power unveiled new rules designed to reduce the financial stress of stakeholders in electricity production, while the government also encouraged rooftop solar power across the country, aiming to install capacity of 4,000 megawatts (MW) in the residential sector in 2022. Similarly, the Ministry of New and Renewable Energy gave the green light to build a 4,750MW renewable energy park, one of India’s largest, in the province of Gujarat.

By 2028, India’s renewable energy sector is expected to see investment worth US$500bn, building on the foreign direct investment (FDI) already seen. According to data from India’s Department for Promotion of Industry and Internal Trade (DPIIT), FDI in the country’s non-conventional energy sector reached US$10.28bn between April 2000 and June 2021. It is to these international investors and other key figures that India must sell itself as a future leader in renewable energy.

However, despite India investing heavily in its renewable energy infrastructure, the country received criticism at COP26 in November after lobbying to water down its pledge to abandon the use of coal. After pressure from India, China and other nations, the final deal committed to countries to “phase down” rather than “phase out” coal. As minor as the wording change may be, the difference in the environmental impact of a slower phase out of coal could be much greater. According to Our World in Data, India is the third largest user of fossil fuels in the world, behind only China and the United States. To meet its climate targets, India must balance its phasing down of coal with its uptake of greener energy.

As India continues to develop as a nation, renewable energy can play a huge role in the country’s infrastructure. It is clear that investment in green energy in India will continue, but whether it can meet the targets it has set itself remains to be seen.

This article was taken from the Winter 2022 issue of 1875. To subscribe to our investment publications, please visit www.redmayne.co.uk/publications.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. The value of investments and any income derived from them may go down as well as up and you could get back less than you invested.
 
Renewable Energy Powering India’s Development
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