Renewable energy stocks could make you greener? 5 reasons why

Renewable energy stocks, such as NTPC Green Energy and Adani Green Energy, are not only shaping India’s energy future but also offering profitable opportunities for investors. With the global shift towards clean energy, these stocks have proven to be rewarding for many, delivering strong returns.

A recent example is NTPC Green Energy, a subsidiary of NTPC Limited, whose shares were listed on Wednesday, November 27, 2024, at Rs 111.50. Since then, the stock has risen by nearly 14%, reaching Rs 127.14. Other companies like Suzlon Energy (up 45% in the last 6 months), JSW Energy (up 9.22% in past 6 months), Adani Green Energy (up 693% in the past 5 years), Orient Green Power Company (up 672.61% in the last 5 years), etc have also performed well, raising the question: are renewable energy stocks the future of investment?

“Renewable energy sector creates green jobs and attracts ESG-focused investments, reinforcing India’s economic shift toward sustainability. Together, these companies are at the heart of a greener future. Renewable energy sector companies invest in energy storage, enhancing grid stability and addressing the intermittency of renewable sources, ensuring reliable clean energy,” said Vaibhav Vidwani, Research Analyst at Bonanza.

Investors are increasingly attracted to these stocks due to their potential for both financial growth and sustainability. Here are five reasons why renewable energy stocks could benefit investors in the future:

STRONG GOVERNMENT SUPPORT

India’s renewable energy sector is heavily backed by government policies and initiatives. Programs like the National Solar Mission and Renewable Energy Purchase Obligations (RPO) provide significant incentives for growth.

“India’s renewable energy push, through initiatives like the National Solar Mission and Renewable Energy Purchase Obligations (RPO), provides significant incentives. The goal of achieving 500 GW of non-fossil fuel capacity by 2030 fosters a favorable growth environment for investors,” said Ajit Mishra- SVP, Research, Religare Broking Ltd.

The government’s ambitious target of achieving 500 GW of non-fossil fuel capacity by 2030 is creating a favourable environment for renewable energy companies. This push not only helps reduce dependence on traditional energy sources but also attracts investors who want to be part of the clean energy transition.

CORPORATE FOCUS ON NET-ZERO GOALS

Many businesses in India are adopting renewable energy sources, including solar and wind, to meet their net-zero carbon emission targets. These efforts are part of a larger global movement to reduce greenhouse gas emissions. Companies that integrate renewable energy into their operations improve efficiency, lower costs, and boost their market competitiveness.

This corporate shift is driving demand for clean energy solutions and creating opportunities for growth in the renewable energy sector.

COST COMPETITIVENESS

Renewable energy has become cost-competitive with traditional energy sources like coal in India. The falling costs of solar panels and wind turbines, coupled with technological advancements, have made renewable energy more affordable.

“This affordability drives demand as companies seek to cut costs and improve sustainability,” said Mishra.

This affordability is encouraging industries to switch to sustainable energy solutions. As demand grows, companies in the renewable energy sector are likely to see steady financial growth, benefiting investors.

ECONOMIC RESILIENCE

The renewable energy sector has shown remarkable resilience even during periods of global economic uncertainty. The focus on energy independence and sustainability has shielded this sector from many market downturns.

Unlike fossil fuels, renewable energy is less affected by price fluctuations and supply chain disruptions, making it a stable investment option.

DIVERSIFICATION OPPORTUNITIES

The renewable energy sector is not limited to one type of technology. Investors can explore a variety of segments, including solar, wind, hydro, and biomass energy. This diversification reduces risks associated with relying on a single technology or resource.

“With segments like solar, wind, hydro, and biomass, the sector offers diversification benefits, reducing risks associated with reliance on a single technology,” said Mishra.

Moreover, advancements in energy storage technologies are addressing the challenges of intermittency in renewable energy sources, ensuring more reliable power supply.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)