We are witnessing a disruptive shift in the energy landscape given the market’s newfound love for all things “green”. The investors are falling head over heels whenever they are hearing the term “green energy”. And, rightly so! India’s investments in renewable energy have accelerated in recent years. The traditional energy sources such as hydrocarbon-based energy are being replaced by green energy like solar, wind & green hydrogen.
The impact may be slow but we are not far away from the big disruption. In this seismic shift, it is important that you find good quality stocks in this space because not every stock will make the cut.
Below we have mentioned five ways to play this opportunity.
Buy Stocks of Companies Investing in Green Energy
Select strong renewable energy companies at attractive valuations. Companies across industries are trying to grab a share of this sunrise industry. So, it is important that you do your due diligence before investing in any of them. Some companies from this space with good balance sheets are:-
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Tata Power
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Borosil Renewables
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Websol Energy Systems
Buy Stocks of Battery Storage Companies
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We cannot get the energy from the sun & wind all the time because the wind does not always blow & the sun does not shine all day. So, renewable energy needs to be stored. WE need a storage element such as batteries to help fill the gaps. From powering your phone to powering a home, the batteries do it all.
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Battery energy storage systems (BSES) are emerging as one of the solutions to effectively integrate the high shares of solar & wind renewable power systems worldwide. This niche vertical is turning out to be a game-changer for so many companies. As the impact of climate change increase, batteries are a key to the transition to a renewable-fueled world.
Buy Stock of the “Suppliers” to Green Energy Companies
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A different way to play this megatrend is to invest in the companies supplying green energy companies. Renewable energy is the energy from sources, which are naturally replenishing but flow-limited i.e. resources that are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time. Think solar or wind, that are not available 24×7.
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Aluminum, copper & nickel are all widely used in generating solar power & have other uses too. For instance, there is the need for battery energy storage systems by renewable energy companies so that they can service their customers all time. To manufacture these batteries, you need lithium & cobalt. As demand for storage grows so will the demand for these minerals.
Buy Mutual Funds
The other way to play this opportunity is to invest in renewable energy mutual funds in India. The investment rationale of these funds is to invest in the companies that are involved in the discovery, development, production, or distribution of natural resources & alternative energy & energy technology sectors.
Some of these funds are as follows:-
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Tata Resources & Energy Fund
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Nippon India Power & Infra Fund
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DSP Natural Resources & New Energy Fund
Buy International Stocks & Funds
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The US & China have an edge over India, in renewable technology & in electric vehicles (EVs). So it makes sense to invest in the green energy sector in these markets. The US market is the largest in the world. It offers huge opportunities for investors. Unlike the Indian stock market, where there are only select stocks in this sector, an international market will have a bigger & established company involved in this space.
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There is also an easier way to tap this opportunity;- Mutual Funds. Rather than studying & investing in individual stocks, you can also choose from a basket of ESG funds. These funds track strong companies involved in this sector.
Looking Ahead
The ongoing climate change debate has forced governments around the world to introduce more ways to use renewable energy. To increase the investments, the government has announced 2 new rules to ensure the renewable utilities recover the generation costs on time & are assured of regular energy purchase by state & power distribution companies
And, as the sector grows there is a huge scope of technological progress within the industry. It is expected by 2040 about 49% of total energy will be generated by renewable energy. The green energy revolution will indeed turn on the lights for so many companies.
