Power Stocks: Exploring the Future of India’s Power Industry and Leading Companies Trade Brains Trade Brains

Power Stocks: The increasing trend in energy has cemented the dominance of certain power companies, which produce and distribute electricity. The population growth and increased discretionary income have enabled an upward trajectory for the economy as they buy more consumer goods.

The demand has impacted electricity prices which has increased over time. Our economy has recovered and is in a growth phase after the COVID-19 downturn. In this article, we will look at the power industry and the companies that operate within it.

Industry Outlook

In terms of the installed base, the India Power Market is predicted to grow from 492.86 gigawatts in 2024 to 752.90 gigawatts by 2029, at an 8.80% CAGR during the forecast period (2024-2029).

Over the long term, the market is likely to be driven by factors such as supporting government policies, rising electricity consumption from infrastructure projects, and an increasing population.

On the other hand, significant investment is required to establish and modernise power generation, transmission, and distribution networks, and insufficient private sector investment is likely to stymie the expansion of the Indian power industry.

Nonetheless, India has an abundance of solar irradiance and receives sun energy throughout the year. This has offered significant prospects to harness solar energy from the country’s sunniest regions, including Rajasthan, Gujarat, and Andhra Pradesh. The factors mentioned above, together with foreign investment and large-scale power projects, present a chance to expand India’s power industry. 

Thermal sources are still dominant in the Power Market

Even with the increase in awareness regarding the use of green energy in the recent past, the dominance of fossil fuels holds a major share. It would take substantial time to transition and would slowly develop a sustainable environment.

India has extensive coal deposits, which are a widely available and very inexpensive fuel source for electricity generation. The country’s enormous coal deposits have made it a major producer and consumer, making thermal power plants an appealing alternative for meeting rising electricity demand.

Furthermore, India has a well-developed infrastructure for coal-fired thermal power generation. Many coal mines, transportation networks, and coal-fired power units are already operational. This existing infrastructure is the foundation for the market’s dominant position in thermal power generation.

Also, in September 2022, the Ministry of Energy India revealed that the country is planning to install up to 56 GW of coal-fired production capacity by 2030 to fulfill rising electricity demand. The 25% increase in coal-fired capacity exceeds the country’s current 204 GW of coal-fueled electricity from 285 coal thermal power plants. 

Why are Power stocks on the rise after Covid period?

Following the COVID-19 pandemic, electricity stocks rose significantly, owing to several critical variables. First and foremost is the ongoing worldwide economic recovery, which has boosted industrial activity, commercial activities, and electricity demand. This increased demand immediately benefits electricity firms, increasing their income potential and thus their stock values.

Moreover, governments worldwide have adopted major stimulus packages to restart economies following the outbreak. These packages frequently contain infrastructure expenditures, such as renewable energy projects and grid upgrading programs. Such investments improve the growth prospects of electricity firms operating in these industries, boosting investor confidence and increasing stock prices.

As part of global efforts to tackle climate change, there has also been a noticeable move toward renewable energy sources. This transformation has intensified since COVID-19, aided by increased investment in solar, wind, and other renewable technologies. As a result, companies focused on renewable energy generation have experienced increased investor interest and stock valuation gains.

The combination of economic recovery, government stimulus, renewable energy growth, and investor optimism under favorable financial conditions has propelled the surge in power equities post-COVID-19, reflecting a larger trend toward sustainable energy solutions and a resilient power industry.

How big will the transition be in the Power Industry?

The transformation in India’s electricity industry, driven by government initiatives, is expected to be significant and disruptive. The Indian government has set goals for increasing the amount of renewable energy in the country’s power mix. 

Policies such as the Green Energy Corridors project, which aims to enable renewable energy integration into the grid, are critical to ensuring power supply reliability and stability.

This shift aims to boost renewable energy capacity and efficiency, encourage electric mobility, and modernise infrastructure. These efforts are expected to reduce our reliance on fossil fuels, protect the environment, and promote long-term economic prosperity. As a result, India’s power industry is about to undergo a paradigm shift, with renewable energy playing an increasingly important role in meeting the country’s rising energy demand while also demonstrating its commitment to global climate targets.

Also read…

top Power stocks in India

Tata Power

Tata Power has 14,690 MW of installed/managed energy capacity and a 9,000 MW renewable energy portfolio that is operational and being implemented. 5000 MW manufacturing capacity for solar cells and modules. A large utility-scale solar EPC order book totaling 12,900 crores.

According to a recent transcript, the business intends to install 4 GW of renewable energy capacity in FY25, comprising 2.5 GW of third-party projects and 1.5 GW of utility-scale projects. They have a total pipeline of 5.4 GW to complete over the next 2-3 years.

Tata Power aims to invest Rs 15,000-20,000 crore per year on capital expenditure in the coming years, up from earlier forecasts, primarily for renewable energy projects. The corporation reiterated its goal of doubling revenue, EBITDA, and profit between fiscal years 2023 and 2027. 

They remain confident in their ability to achieve this growth trajectory. Tata Power will now prioritize hybrid, round-the-clock, and firm renewable energy projects above standalone solar/wind projects in order to maximize revenues. The business anticipates more states to privatise power distribution following elections, creating chances similar to their successful Odisha model. They are looking at all states as potential candidates for distribution privatisation.

Adani Power

In the recent transcript, Adani Power plans to double its existing capacity from 15.25 GW to 30.67 GW by FY 2029-30 through a combination of internal growth (6.4 GW under construction/development), brownfield expansions (4.8 GW), and acquisitions (4.22 GW). Under a conservative scenario, APL expects to generate Rs. 38,500 crore in EBITDA by FY 2029-30, up from Rs. 18,789 crore in FY 2024. This corresponds to a continuing EBITDA of Rs. 1.25 crore per MW. 

APL intends to keep a high percentage of contractual capacity, with 85% now locked up in long-term/medium-term agreements. This promotes revenue consistency and visibility. The company intends to continue securing a large portion of its fuel requirements through long-term contracts, with 79% of domestic fuel needs presently secured through long-term/medium-term agreements. 

APL has established goals to investigate net carbon neutrality options by 2024-25, attain single-use plastic-free certification for all operating locations by 2024-25, and reduce GHG emission intensity to 0.84 tCO2e/MWh by FY 2025.

JSW Energy

JSW Energy aims to reach 10 GW capacity by FY25, up from 7.28 GW. They have a longer-term target of 20 GW by 2030, which they are confident of achieving ahead of schedule. 

The company plans to spend around ₹15,000 crores in capex in FY25, up from ₹8,000 crores in FY24. This is for completing about 2.7 GW of projects and the battery storage project. JSW Energy is evaluating battery cell manufacturing. They see significant opportunity in energy storage, with 8-9 GW of battery storage capacity expected in India by FY27. 

The energy company focuses heavily on renewable projects, including wind, solar, and hybrid models. They recently won bids for 3.6 GW of renewable capacity. JSW Energy is in discussions with JSW Steel for the first phase of a 6.2 GW renewable energy supply agreement. They expect to conclude discussions and sign a PPA in the June 2024 quarter.

NTPC

NTPC has set a target to reach 60 GW of renewable energy capacity by FY32. Plan to commission 3 GW of renewable capacity in FY25, 5 GW in FY26, and 8 GW in FY27.

They plan to award 15.2 GW of new thermal capacity soon. Expect to award 10,400 MW of coal capacity in FY25, 3,200 MW in FY26, and 1,600 MW in FY27. Expect consolidated group CAPEX of Rs. 35,000-50,000 crore per annum over the next 2-3 years.

Standalone CAPEX target of Rs. 22,700 crore for FY25. Exploring small modular reactors (SMRs) and other new nuclear technologies. They are even working on battery energy storage systems as well.

Torrent Power

In the Torrent Power’s recent transcript, The company has Rs. 20,000 crore investment plan over the next 2-3 years, primarily for renewable energy and transmission projects. This is in addition to their regular Rs. 2,000 crore annual capital expenditure for the distribution business. 

Torrent Power has 3 GW of renewable projects in the pipeline. This includes solar, wind, and hybrid projects. The company is exploring opportunities in green hydrogen which is under the PLI scheme and pump storage hydro projects planned in Maharashtra. 

They are awaiting regulatory decisions on parallel distribution license applications in Maharashtra. They have also started initial work in a new special investment region near Mehsana, Gujarat. The company expects strong demand in the merchant power market and higher utilization of its gas-based power plants going forward.

Conclusion

As we near the end of the article, we have looked into how the power industry is prominent and important. We have also looked into some of the companies that operate in the power industry and the guidance they hold. In this era, the increasing consumer goods can generate more demand and the new age technology, data centers, and emerging trends in electronic manufacturing can drive the next generation ideas to an extensive level.

What do you think about the future of the Power Industry? Let us know your views in the comments section below.

Written by Santhosh

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Power Stocks: The increasing trend in energy has cemented the dominance of certain power companies, which produce and distribute electricity. The population growth and increased discretionary income have enabled an upward trajectory for the economy as they buy more consumer goods. The demand has impacted electricity prices which has increased over time. Our economy has
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