Top Renewable Energy Stocks in India: Why should you invest in them?

Renewable Energy Stocks: Table of contents

• Fundamentals of the green energy investment
• What are the different types of green energy investments?
• Investment in green energy stocks
• Why should you focus on investing in green energy stocks?
• List of Green Energy Stocks You Can Invest in 2022
• FAQs

Why Switch to Green Energy?

To appreciate the necessity for green energy, we must first understand its antithesis. Fossil fuels are created from decomposing organic substances in the earth's crust. This organic stuff is high in carbon and hydrogen and, when burned, produces energy.

Coal, oil, and natural gas are examples of fossil fuels. Because of their quantity, efficiency, and comparatively cleaner burning, they are the most common fossil fuels. However, these advantages come at a cost. Although natural gas is the cleanest fossil fuel, when burnt at high rates, such as now, the cumulative emission of pollutants negates this advantage. Coal and oil are already labeled as "unclean," which means they emit the highest pollutants of any fossil fuel.

Fossil fuels are also non-renewable, which implies that, while they exist naturally in the Earth's crust, the rate at which they are replaced is slower than the rate at which they are consumed.

Thus, green energy was discovered or, rather, popularised to act as a remedy on these two troubled fronts; to move the world's needs away from present energy sources. Green energy is an umbrella phrase for all renewable energy sources that emit little or no pollution. The most prevalent green energy sources include solar, wind, hydropower, and geothermal.

And where there is a need, there is a chance to capitalize on that need. Several new companies have been formed, as well as subsidiaries of established organizations, to capitalize on the growing need for renewable energy.

Not only is business an incentive for this conversion, but numerous governments are also pushing for a shift from non-renewable to renewable energy sources due to the negative effects of fossil fuels.

The Indian government intends to raise renewable energy capacity to 500 GW by 2030. For comparison, renewable energy production capacity was roughly 10 GW in 2005, and it is expected to expand to around 100 GW by December 2021. That's a stunning 16.6% CAGR over 16 years.

Key takeaways

• Green energy is the future of the entire energy industry and that is why it is important to take advantage of this opportunity and invest in green energy stocks.
• Both corporate and government organizations are taking multiple initiatives to further develop the renewable energy sector.
• The Indian government has taken the initiative to increase the capacity of renewable energy to 500 GW by the end of 2030.
• Currently the global renewable energy sector is a US 755 billion dollar industry and is expected to go through tremendous growth in the upcoming years.

Since last year, the price of crude oil has increased by 61.13 percent and due to the same reasons, a lot of companies are slowly shifting towards green energy or renewable energy. Many companies have started generating renewable energy directly from natural resources such as water, air, and sunlight. These companies have started an initiative through which they are contributing towards the environmental cause, the stocks of these companies can be considered as green energy stocks.

With every year passing by the demand for energy is rising tremendously. With the massive progress in developing nations and emerging economies, global energy usage is expected to increase by fifty percent by the year 2050. However, scientists are also warning us about the rising temperature level in the atmosphere due to the increase of carbon dioxide and other greenhouse gasses in the environment.

Due to the rising environmental concerns a lot of countries are taking different initiatives to replace fossil fuels with the resources of renewable energy. As a result of which, lots of companies are finding out different ways to harness and utilize renewable energy and investors have the opportunity to benefit from those companies by investing in their green energy stocks.

Fundamentals of the Green Energy Investment

Green energy or renewable energy stocks are stocks of those companies that are working on different technologies that can actively replace fossil fuels with renewable energy resources such as hydroelectric, wind, or solar power. Renewable energy also refers to supplementary technologies that will become essential for green energy transformation.

For example, upgraded battery technologies can help in the transportation sector by boosting the features of electric vehicles. On the other hand, smart grids can decrease the overall electric consumption of developing economies and countries alike.

According to a new study conducted by the Bloomberg New Energy Finance, the worldwide investment in green energy technologies has extended to US 755 billion dollars in the year 2021. In the effort to reduce the total carbon emission to zero, the investment in renewable energy and related technologies will have to reach over US 2 trillion dollars by the end of 2025 and about US 4.1 billion dollars by the end of 2030.

What are the Different Types of Green Energy Investments?

Although there are various ways you will be able to earn profit from green energy investment, in this article, we will discuss the most direct approach you can take and that is by identifying the individual companies that are working on green energy projects and buying their renewable energy stocks. 

However, you also need to note that the companies that are focused on research can take a huge amount of time, and not every company's stocks can be traded publicly. Therefore, as an intelligent investor try to focus on the companies that are actively involved with the practical usage of renewable energies.

Let us look at the different types of green energy you can invest in:

Clean energy stocks

Under the clean energy stocks, every company related to renewable energies can be included. Even alternative transportation technologies come under clean energy stocks. Investors will easily be able to diversify their portfolios while investing in clean energy stocks.

Solar and Wind energy stocks

If you are looking for a more purified form of green energy stocks then you can invest in those company stocks that are involved with solar energy and wind energy.

Hydroelectricity

One of the most dominant renewable energy resources is hydroelectricity and it is also expected to rise over the years. Currently, it is the most widely utilized source of green and clean energy which simultaneously accounts for the world's 17 percent electricity. Investing in hydroelectricity producing companies is always a good idea.

Investment in Green Energy Stocks

Right now, a lot of companies are focusing on saving the environment by reducing the damage dealt by them every year. Those who had invested in green energy stocks a few years back have been able to gain exponential returns in the shape of capital appreciation. 

The Indian stock exchange also has a specific index that tracks the performance of green energy stocks. The name of this index is the S & P Greenx index. This particular index traces the behavior of the top 25 green stock companies when it comes to liquidity and market capitalization. In FY 2020, the S&P Greenx index was able to provide its investors with a 29.39 percent return on their investment.

Green Energy Stocks in India: Why should you invest?

• The current supply of renewable energy is almost a quarter of the total power generated by the Indian power industry. Although the industry has been developing slowly, over the past decade the energy generating capacity of the green energy sector stocks was at 8 percent per year. 
• However, the rapid climate change has become a reason for everyone and in recent years the development of the green energy sector has progressed faster. In order to decarbonize the economy, the industry needs to progress at a much faster rate.
• Many companies have been forced to concentrate on how they can decarbonize their production process. Furthermore, a lot of organizations have signed PPA or power purchase agreements where they are bound to purchase electricity produced through renewable energy resources. On the other hand, there are certain companies that are directly investing in green energy development projects.
• As a globally responsible citizen and investor, you should also partake in this development and become a shareholder of the companies that are focused on developing green energy projects. 
• Moreover, the decreasing cost of solar panels, storage batteries, and wind turbines have successfully made green energy more economical, which in turn has transformed this industry into an attractive investment scope for investors and shareholders alike.
• The governments are also working hard in order to accelerate the overall decarbonization process. At the same time, they are also passing legislation that can help in amplifying the investment in this industry. 
• By the year 2030, the Indian government has planned to develop the green energy production capacity to 500 GW. In the year 2005, the renewable energy capacity in India was 10 GW and it was increased to 100 GW by December 2021. This data indicates an enormous 16.6 percent growth in CAGR in 16 years. 

List of Top Renewable Energy Stocks You Can Invest in 2022

Find out the best green energy stocks to buy in India for long-term investment from the table below:

(Data as of November 25, 2022)

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

Important things to remember:

1. Do Not Blindly Follow Hot Tips

No matter how credible the source is, never follow a stock marketing tip blindly without conducting thorough research personally. Always select the stocks after doing proper research and analysis on the performance as well as the companies. While some tips can work out to give you huge benefits, the wrong ones can push you down under the risk pretty quickly. 

2. Eliminate Loser Stocks from Portfolio 

There is absolutely no guarantee that a stock will rise after a great fall. Know that it is extremely important to be practical about what is possible and what's impossible in the stock market. So, upon realizing that a stock is performing poorly in your portfolio, accept your mistake and sell it immediately to prevent further losses. 

3. Don't Exceed Your Investment Budget Abruptly 

While it's true that long-term investments are way better than other forms of investment, you shouldn't exceed your investment budget in a haste. Instead, decide on a fixed amount and invest it across various good stocks. Rather than investing in only one stock, divide your budget evenly across multiple good-performing stocks and shares. 

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns