Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

A 'power'ful billion dollar opportunity
Wed, 20 Jan Pre-Open

The grass just got greener for one of the most promising sectors of India Inc. Slated to benefit from one of the highest allocation during the eleventh and the twelfth 5 - year plans, the power sector has more coming its way. Infact billions of dollars to be precise.

The Central Electricity Regulatory Commission has enacted policies that will enable trading of instruments for energy credits. Meant to encourage power generation from clean energy, this move will also bring in additional revenues to the more efficient players.

The power sector is the largest contributor to carbon emissions in India. It is the fourth-largest emitter of greenhouse gases in the world. This is because a majority of the electricity is generated from fossil fuels such as coal. However, with the new policies in place, the sector may get greener and wealthier.

A utility or power producer that exceeds its renewable energy targets will be able to sell surplus credits to ones that fail to meet their goals. The value of a credit will be equal to one megawatt of electricity injected into the grid from renewable sources. More importantly, these will not rely on the carbon credits, which are subject to a lot of international protocols and timelines. On the contrary, the new policy will make renewable energy projects within the country self funded. India, which currently has an installed generation capacity of about 156 gigawatts, plans to add another 13 gigawatts every year. Such additions over the next few years are set to bring in the demand for greener energy.

Further, renewable energy sources are not evenly spread across different parts of the country. The energy credits are therefore expected to address this mismatch. For the players that are not energy efficient it may also mean some penalties coming their way.

Currently central institutions like NTPC and the State Electricity Boards (SEBs) dominate the power scene in India. India has adopted a blend of thermal, hydel and nuclear sources with a view to increasing the availability of electricity. Thermal plants at present account for 65% of the total power generation. Hydro-electricity plants contribute 25%. And the rest comes from nuclear, solar and wind. With the new guidelines we may see a major overhaul in this revenue sharing.

Another question that begs itself here is - which renewable source will be most favoured? What cannot be forgotten while implementing the green energy resources is the associated cost and affordability. With costs of more traditional sources of energy fast rising, solar power is once again coming into prominence. As per Mckinsey, if harnessed properly, the technology could add as much as 206 giga-watts of power generating capacity by 2020 globally. To put things in perspective, this is a little more than 1.5 times India’s total power generation capacity as it stands now. Currently though, the industry is still in its infancy with a lot of players competing to win accolades on the cost front.

The cost structure assumes importance, as the main reason the technology got into the backburner was its high cost. Mckinsey believes that costs have come down by as much as 20% in the last few years. However, it still has a long way to go before it can deliver energy at the same cost as the other contemporary sources. We are indeed waiting with bated breath as this will not only reduce dependence on fossil fuels but will also make the world greener.

For investors in the power sector, the guideline means opportunity to invest in players that have more sustainable and profitable business models. Moreover, as the sector matures in terms of efficient power distribution and lower T&D losses, investor can also hope for higher returns.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Equitymaster requests your view! Post a comment on "A 'power'ful billion dollar opportunity". Click here!

1 Responses to "A 'power'ful billion dollar opportunity"

sujoy kumarbanerjee

Apr 29, 2012

sir, i want to buy all power finance and growing poor villageus life like me.

Equitymaster requests your view! Post a comment on "A 'power'ful billion dollar opportunity". Click here!

Stock Market Updates

Sensex Ends Marginally Higher; Telecom and Oil & Gas Stocks Witness Buying (Today's Market)

Dec 14, 2018 Closing

While the BSE Sensex closed higher by 33 points, NSE Nifty closed higher by 14 points

Most Active Small-Cap Stocks Today; PC JEWELLER the Most Traded (Today's Market)

Dec 14, 2018 03:53 PM

Here's a list of most active small-cap stocks today. It also includes information on BSE Smallcap index and the broader benchmark indices.

Top 5 Mid-Cap Gainers Today; SUPREME INDUSTRIES Leads the Pack (Today's Market)

Dec 14, 2018 03:52 PM

Here's a list of 5 stocks that gained the most in the BSE Mid-Cap Index today. It also includes information on BSE Mid-Cap index and the broader benchmark indices.

SYNGENE INTERNATIONAL Surges by 5%; BSE HEALTHCARE Index Down 0.8% (Today's Market)

Dec 14, 2018 03:33 PM

SYNGENE INTERNATIONAL share price has surged by 5% and its current market price is Rs 582. The BSE HEALTHCARE is down by 0.8%. The top gainers in the BSE HEALTHCARE Index is SYNGENE INTERNATIONAL (up 5.4%). The top losers are LUPIN LTD (down 0.1%) and IPCA LABS (down 0.2%).

VARUN BEVERAGES LTD Plunges by 6%; BSE 500 Index Down 0.1% (Today's Market)

Dec 14, 2018 02:33 PM

VARUN BEVERAGES LTD share price has plunged by 6% and its current market price is Rs 734. The BSE 500 is down by 0.1%. The top gainers in the BSE 500 Index are RELIANCE NAVAL & ENGINEERING LTD (up 14.0%) and GUJARAT GAS LTD (up 5.4%). The top losers are VARUN BEVERAGES LTD (down 5.6%) and FORTIS HEALTHCARE (down 7.7%).

Sensex Trades Flat; Bharti Airtel & Yes Bank Top Gainers (Today's Market)

Dec 14, 2018 12:30 pm

The BSE Sensex is trading up by 35 points, while the NSE Nifty is trading up by 5 points.

View More Indian Share Market News

Most Popular

4 Rebound Stocks to Profit from the Current Small Cap Crash(Profit Hunter)

Dec 3, 2018

Indian small cap space is offering a discount season. Make sure you do not get too late to scoop up the bargains.

It's Almost the Perfect Time to Buy This Safe Stock(The 5 Minute Wrapup)

Dec 6, 2018

My latest StockSelect recommendation ticks all the boxes of a great safe stock.

Looking For Higher Interest Rates on Bank FDs? Read This!(Outside View)

Dec 5, 2018

Credit disbursement to the productive sectors of the economy such as infrastructure, engineering, food processing, textiles, and chemicals, among others is rising.

Are Foreign Investors Heading Back to the Indian Stock Markets?(Chart Of The Day)

Dec 3, 2018

After months of heavy FII selling, November witnessed a return on foreign money into Indian equities...

DSP Mutual Fund's Sale of DHFL Bonds: Here's What You Need to Know(Outside View)

Dec 5, 2018

PersonalFN explains the probable reason as to why the capital market regulator has initiated DSP Mutual Fund's bond sale that caused DHFL stock to crash.


Small Investments
BIG Returns

Zero To Millions Guide 2019
Get our special report, Zero To Millions
(2019 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 14, 2018 (Close)