India's Energy Transformation: Lighting Up The Future

By Palak Shah, Partner, Step Up Wealth Pvt Ltd

Palak Shah, Partner, Step Up Wealth Pvt Ltd

With its one-billion plus population, India is growing and its economy is booming. This is leading to a spirited demand for energy. Now the fourth largest energy consumer in the world, India in the last two decades has more than doubled its energy consumption. This whopping increase is evidence of India's rapid progress and rising aspirations—not just a mere statistic.

Going forward too, energy consumption in the country is projected to be on an ascent due to a number of causes. The nearly widespread access to power that nearly every person today has, along with rising income levels, is pushing the demand for cars, appliances, and digital services etc. The growing middle class, which aspires for better living, is a notable driver of this trend.

Add to this, the spiralling use of appliances such as air conditioners, refrigerators, and cellphones in Indian homes --- all of this is playing its part in growing energy usage.

Shift to Renewable Energy 

Fortunately, there is more to the Indian energy narrative than just increased demand—there has been a less-spoken yet significant shift. India is committed to lowering its carbon impact and tackling climate change. By 2070, i.e. in another 46 years, the government hopes to have achieved net-zero emissions.

That said, India is also building up its renewable energy capacity quickly to meet its target of 500 gigawatts (GW) by 2030. Stakeholders have realised that there is a huge economic potential and an environmental need to switch to greener energy sources such as solar and wind power.

Numerous wind and solar power projects are being built nationwide. These projects promote job creation and boost economic expansion. Initiatives such as the government's advanced chemistry cell battery storage and solar module Production Linked Incentive (PLI) programme are also doing their bit in terms of encouraging home manufacturing and lowering dependency on imports, adding a feather to Atma Nirbhar Bharat movement.

Innovation at forefront

To supply the growing demand for electricity in homes and in businesses, more infrastructure for power generation, transmission, and distribution is obviously required. The government's focus on modernising the power sector, which includes the deployment of smart grids and the privatisation of distribution companies, acts as a catalyst. Thus, the path is being paved for bigger investments and increased efficiency in this ecosystem.

Innovation holds the key to energy transition. Emerging technologies can enhance critical aspects such as energy delivery, storage, and efficiency. For instance, green hydrogen, a clean fuel made from renewable energy, has the potential to completely transform a number of industries and sectors. This includes industry and transportation too. As India strives to be a global production centre, the use of green hydrogen as part of the National Green Hydrogen Mission, will attain more mainstream status.

Growth is also anticipated in the energy ancillary industry. This niche space comprises businesses offering energy storage solutions, power transmission and distribution (T&D) equipment, and engineering, procurement, and construction (EPC) services. The need for these auxiliary services and equipment would shoot up as India develops its energy infrastructure.

From a valuation standpoint, India's energy industry seems appealing. Energy stocks have recently outperformed the market as a whole, but their valuations are still fair, indicating further upside. Therefore, by making investments in the energy industry, people can both benefit from India's economic progress and help ensure a cleaner, more sustainable future.