What is Energy Stocks
Tuesday, Sep 12, 2023
If you ever thought of India's energy consumption, it actually ranks third on the globe. The trend has been going on like that ever since the advent of crude oil. The requirement for the use of energy has only been on the rise. There seems to be no stopping the development of all the cities in the world. Every city has been demanding more energy, and the only way to cater to this need is to explore, produce, and refine more quantities of renewable energy that is sustainable.
India currently keeps greenhouse emissions below average per capita. Out of 2.3 million vehicles, 90% are either 2- or 3-wheelers. By 2030, India wants its mobility to be electrified and has a plan to spend $266 billion to make that transition possible.
In terms of the development of renewable and clean energy, India has taken some initiatives to grow this sector further. Indeed, the RBI allows banks to offer 40% of the credit to those sectors that are prioritized, and among those is the renewable energy sector.
With the advancement in hand, the energy stocks look appealing.
But what are ‘energy stocks’?
To answer "What are energy stocks", these stocks pertain to the O&G industry, the mining industry, which includes coal, the power distribution sector as well, and all industries that pertain to power generation. These industries are essential for the optimal functioning of every nation on the planet.
How's India doing?
India is a nation that has a continuous track record of breaking records. Such a vast nation, with almost the largest population, requires a lot of energy. Even though India is still only a developing nation, across the globe, India is ranked 4th for both solar power and wind power capacity, which implies tremendous progress. Since the last 8.5 years, it has increased by 396% in regards to non-fossil fuel capacity. As of 2022, India has witnessed a year-on-year growth of 9.83% in renewable energy.
It is on the mission of achieving net zero carbon emissions by reducing the carbon intensity to 45% by the next decade and eventually to net zero by 2070. Also, it has a goal to produce around five million metric tonnes of green hydrogen by 30. The evolution of cities is clearly visible, and that means more energy is required for them to run. The annual energy usage of metropolitan cities is exponentially increasing, ending on a high note each year. With this growth trajectory, the energy industry in India is set to reach the moon.
How do I invest in energy stocks?
1. Management
While making investments in this sector, it is important to assess the management of the energy companies. Even though the industry is set to rise, the capabilities of specific companies in this sector greatly depend on their ability to stay relevant.
2. Watch out for geopolitics
Global news has a lot of impact. This is especially true for the highly volatile energy markets. Major policy changes by one dominant global player impact energy markets worldwide. The way of impact depends on how each country's leaders navigate the particular geopolitical circumstances. For instance, India smartly assessed the situation during the Russia-Ukraine war and took a call that was apt from the perspective of the Indian population. Energy prices were controlled, and exports were increased. This led to stable energy stock levels, and even the value rose significantly.
3. Business Sustenance
It is important to note the policies and business strategy that an energy company is employing. If the practices are not sustainable, then chances are that it's going to be tough to survive and thrive in the energy game. Active strategic investments and operations optimisation are crucial to staying ahead of the competition and ensuring the growth of the business.
4. Investment Goals
What are your investment goals? Everybody is aware that the world is moving towards producing clean energy. The brightest minds in the world are working towards creating reliable sources of clean energy production. If you can bear with the technology's development and have a keen eye towards the companies that are making it happen, you can try to gain an excellent position in its nascent stages. Also, coming to the energy veterans, this is an excellent time as the Indian government currently possesses coal that will last a hundred years.
5. The Weather
Why do you have to watch out for the weather? This seems like a joke, right?
Well, not quite!
Renewable energy production very much depends on the weather. Offshore wind turbines are dubbed clean energy solutions, especially in the West. But did you know that the OWTs operate not just in low-wind conditions but also in high-velocity states? The turbines can generate electricity only at optimal wind velocities.
Climate change and the climate sciences definitely have their say in our attempt to make our presence carbon-neutral. This affects the net operating and energy production costs, which in turn affects the revenue, valuations, and market cap of renewable energy companies.
Bottomline
The ambition of India to be the hub for green hydrogen production is strong. The goal of transforming India in regards to climate adaptation will not just help the people but the planet as a whole. However, the clean energy sector is emerging as economically viable due to the falling prices of batteries, wind turbines, and solar panels. The energy sector has come out as a great opportunity to be invested in.
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