Power stocks rise after Budget announces measures for renewable energy

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The power stocks rose after the Finance Minister announced measures to support renewable energy and develop nuclear energy.

In the Union Budget 2024 speech, Finance Minister Nirmala Sitharaman highlighted the government's focus on energy transition. On the rooftop solar program, Sitharaman said that the "Pradhan Mantri Suryaghar Yojana" that aims to enable 1 crore households to obtain free electricity of 300 units every month has already seen 1.28 crore registrations and 14 lakh registrations.  Sitharaman added that pumped storage projects will be announced for renewable energy projects in the coming days. Research and development of nuclear reactors, she added is also underway.

The advanced Ultra Super Critical thermal critical plant has been completed in partnership with NTPC and BHEL, with an 800 MW capacity.

The finance minister also announced a pump storage policy to promote renewable energy.

Stocks such as PFC, REC, IREDA, NTPC rose around 2 percent.

In the pre-Budget conversations, the power industry had said that it expects an extension of the Interstate Transmission System (ISTS) charges waiver to be extended and measures to promote hydropower generation such as a dedicated nodal agency.

They had wanted the ISTS charges to be extended beyond June 2025. It has been extended many times since 2019, to support the growth of renewable energy generation.

Analysts at Axis Securities, in their pre-budget note, had highlighted the need for additional government support to achieve the target of 500 GW of renewable energy capacity by 2030.

They had listed measures such as enhanced viability gap funding for battery storage, offshore wind plants, and solar energy, and increased public-private partnerships and sustainable financing for renewable projects.

Analysts had also asked for reduction in goods and services taxes (GST) on renewable energy components such as solar devices.

Power demand rises

India’s power demand has grown 7.3 percent YoY in FY24 while registering a five percent CAGR over last five years.

“From 2014 to 2021, power demand relative to GDP growth was around 0.8%, but it has now increased to 1.1-1.2 percent,” said Rupesh Sankhe, Vice President at Elara Capital, in a pre-Budget interaction with Moneycontrol.

This increase, he noted, was driven by higher per capita consumption and initiatives like Make in India and PLI schemes.

With peak demand projected to reach 370 GW by 2030, significant investment in thermal capacity and R&D for offshore wind, battery storage, and hydrogen data centres is expected, which, in turn, presents a Rs 42 lakh crore opportunity for relevant companies, he adds.

In a recent report, analysts at Kotak Institutional Equities noted that while the pace of capacity addition has picked up, we are still walking a tight rope.