Why Are Green Energy Stocks Always in Demand?

As India moves towards sustainability, green energy stocks have become increasingly popular among investors. Government support, rising corporate investments, and strong growth prospects make green energy stocks appealing. But what keeps these stocks consistently in demand? Let’s explore.

India’s Renewable Energy Ambitions

India has set an ambitious target to achieve a non-fossil fuel electricity generation capacity of 500 gigawatts (GW) by 2030. As of January 2025, the country has already reached a renewable energy capacity of 165.2 GW. Solar power leads the pack with 100.33 GW, followed by wind power at 48.36 GW. The government’s rapid progress in clean energy has significantly boosted investor interest in green energy stocks.

Government Initiatives and Policies

Government policies play an important role in driving demand for green energy stocks in India. Schemes like the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and SAUBHAGYA have played an important role. These initiatives have electrified 18,374 villages and provided power to 2.9 crore households, directly boosting demand for renewable energy.

Moreover, the Union Budget 2025 emphasised energy security with plans to increase nuclear capacity to 100 GW by 2047. While nuclear energy isn’t renewable, this diversification highlights the government’s intent to reduce dependency on coal, indirectly benefiting green energy stocks.

Corporate Investments in Green Energy

Corporate investments are a significant factor keeping green energy stocks in demand. A prime example is the Oil and Natural Gas Corporation’s (ONGC) acquisition of PTC Energy for ₹925 crore. This move expanded ONGC’s green energy portfolio, aligning it with the country’s sustainability goals. PTC Energy’s wind power capacity of 288 megawatts across multiple states makes it a valuable asset.

These acquisitions boost the growth prospects of companies and indicate a wider industry move towards renewables. This trend attracts both institutional and retail investors, sustaining the demand for green energy stocks.

Performance of Green Energy Stocks

In recent years, green energy stocks have delivered better returns compared to many traditional sectors. Companies with significant renewable portfolios have witnessed impressive growth in their stock prices. For instance, Adani Green Energy reported an 85.2% rise in net profit for Q3 FY25, driven by higher power sales and operational efficiencies. The company’s shares have gained over 30% in the past year, reflecting strong investor confidence.

The BSE Greenex, an index tracking green energy companies, has also risen, outperforming benchmark indices. This performance has led to an increase in the number of investors searching for green energy stocks on online stock trading apps. The growing focus on ESG (Environmental, Social, and Governance) investing has further boosted the attractiveness of these stocks.

Global Trends and Local Impacts

India’s markets are feeling the impact of the global surge in green energy adoption. By early 2025, renewables are set to contribute over one-third of global electricity generation. For Indian companies that are part of this global supply chain, this means increased export opportunities and stronger financials.

Additionally, international investors are showing a growing interest in Indian green energy companies. Between April 2000 and March 2024, Foreign Direct Investment (FDI) inflows totalling US$18.28 billion were made into the power sector. Foreign investments are a major factor behind the ongoing demand for green energy stocks.

Challenges and Opportunities

Despite the robust demand, green energy stocks face significant challenges. The primary hurdles include inadequate transmission infrastructure, limited energy storage capabilities, and high financing costs. For instance, India plans to add 80 GW of coal-fired capacity by 2031-32 to meet rising power demand. This coal expansion could temporarily dampen the growth of renewables.

However, these challenges also present opportunities. Investments in grid modernization, energy storage solutions, and favourable financing mechanisms can help address these issues. Companies that can innovate and adapt to these challenges are likely to see continued demand for their stocks.

Conclusion

The demand for green energy stocks in India is underpinned by strong government support, rising corporate investments, and favourable global trends. While challenges persist, the sector’s long-term growth potential remains compelling.

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