Oil & gas firms outperformed clean energy by 8.3% in returns over last 5 years: S&P Global data

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Oil and gas companies have consistently outperformed clean energy firms, delivering an average of 8.3% higher returns on capital employed, according to data from analytics from S&P Global.

"Despite investor enthusiasm and higher stock market valuations for green energy companies, S&P Global Commodity Insights data shows that oil and gas companies have consistently outperformed.... addressing this disparity is crucial for a fair and just transition and impacts the broader political economy of fossil fuel dependent industries," S&P said in its first edition of “India Forward: Emerging Perspectives” report released on Septmber 19.

The data from S&P Global Commodity Insights highlights a significant disparity in returns on capital among energy companies from 2020 to 2024. Companies with primarily fossil fuel-based operations, such as Coal India (31.1%) and Vedanta Ltd. (11.4%), have substantially higher returns compared to their green energy counterparts. Integrated and utility companies like JSW Energy Ltd. and Reliance Industries Ltd. report moderate returns of 5.2% and 5.0%, respectively.

In contrast, green energy companies like Suzlon Energy Ltd. and Adani Green Energy Ltd. show more modest returns, with NHPC Ltd. notably reporting a negative return of -4.1%, according to the data.  This disparity underscores the ongoing challenge in achieving financial parity between fossil fuel-based and renewable energy companies, highlighting the complexities in the transition to a greener economy.

In terms of subsidies and incentives, India has allocated an average of 37% to fossil fuels and 5% to green energy over the past five years, according to the International
Institute for Sustainable Development.

"Despite the policy push in a greener direction, advancing a just transition raises a few conundrums. Radical choices will be needed to ensure that each technology option, mature or burgeoning, has been applied to its full potential to bend the emissions curve," the report added.

India’s burgeoning oil demand 

The report forecasts India’s total petroleum product demand  to rise by almost 2 million b/d to reach 7.1 million b/d by 2035 from 2023 levels, led by transportation as demand for diesel and gasoline grows. Similarly, liquefied petroleum gas demand is expected to grow 41% until 2035, from 0.9 million b/d in 2023, supported by a continuous push for cleaner cooking fuel, according to the report.

India is expected to remain a net exporter of gasoline, diesel, jet fuel, naphtha and fuel oil, while dependency on LPG imports is expected to increase.

Seprately,  the report highlights that India is on track to become the third-largest economy by fiscal 2030-31, driven by a robust projected annual growth rate of 6.7%.