Understanding renewable energy

Renewable energy is created from naturally replenishing and endless sources, such as the sun and wind. Transportation, space and water heating and cooling, and electricity generation are all possible with renewable energy.

Contrarily, non-renewable energy is derived from limited resources that may run out, such as fossil fuels like coal and oil.

What is hydrogen fuel?

Hydrogen fuel appears to have a lot of advantages because it is both the lightest and most plentiful element in the universe. Although it rarely occurs on its own on Earth, it can be created by splitting essentially inexhaustible water molecules using clean energy, which yields just oxygen as a byproduct.

Yet today, 96% of hydrogen is produced directly from fossil fuels, mostly natural gas, coal, and oil. Nowadays, electrolysis and natural gas reforming, which releases carbon dioxide, are the two most commonly used techniques. Other methods include solar-powered and biological processes. 

Thermal Process 

Steam reforming, a high-temperature process in which steam combines with a hydrocarbon fuel to make hydrogen, is commonly used in thermal processes for producing hydrogen. Hydrogen can be created by reforming a variety of hydrocarbon fuels, such as natural gas, diesel, renewable liquid fuels, gasified coal, and gasified biomass. Nowadays, the steam reforming of natural gas produces nearly 95% of all hydrogen.

Electrolysis Process 

The electrolysis method can be used to separate water into hydrogen and oxygen. The electrolysis process is done in an electrolyzer, which works somewhat like a fuel cell in reverse. Electrolyzers produce hydrogen from water molecules, instead of using the energy of a hydrogen molecule like a fuel cell does. 

Solar powered process 

Solar-powered processes use light as the catalyst for the creation of hydrogen. Solar thermochemical, photobiological, and photoelectrochemical processes are some other solar-powered processes. The natural photosynthetic activity of bacteria and green algae is utilized in the photobiological process to produce hydrogen. Specialized semiconductors are used in the photoelectrochemical process to separate water into hydrogen and oxygen. 

Water splitting reactions are frequently driven by concentrated solar energy, along with other species like metal oxides, in solar thermochemical hydrogen generation. 

Biological Activities

The biological process involves the use of microbes like bacteria and microalgae, which can produce hydrogen. Whereas photobiological processes use sunlight as the energy source, microbial biomass conversion uses bacteria to break down organic matter, such as biomass or wastewater, to produce hydrogen.

Why is hydrogen a crucial component of future renewable energy? 

Fuel is a chemical that can produce energy when burned. If a fuel normally burns, chemical bonds between the fuel’s atoms are broken, and the elements chemically react with oxygen (often from the air).

We have long used natural gas to heat our homes and businesses, and to power plants that produce electricity. In the UK, gas today powers 85% of homes and 40% of the nation’s electricity, while in the US, 47% of households use natural gas, and 36% use electricity. 

Natural gas from oil and gas fields primarily consists of methane. Natural gas has replaced coal, the dirtiest fossil fuel that humans have historically used for heating and producing electricity, since it is a resource that is easily accessible, affordable, and clean.

Burning natural gas produces thermal energy. Carbon dioxide, on the other hand, is a waste product that, when released into the atmosphere, aids in climate change. Carbon dioxide is not produced when burning hydrogen. 

Difference between blue hydrogen and green hydrogen 

Blue Hydrogen 

Blue hydrogen is produced using two primary methods, using natural gas as a feedstock. The most popular technique for creating bulk hydrogen is steam methane reformation, which generates the majority of the hydrogen produced globally. This process makes use of a reformer, which uses steam to react with methane and a nickel catalyst at high temperatures and pressure to produce hydrogen and carbon monoxide (CO). 

In autothermal reformation, methane is reacted with steam, carbon dioxide (CO2), and oxygen to produce hydrogen. 

Due to the fact that these two processes generate carbon as a byproduct, carbon capture, and storage (CCS) is necessary to capture and store this carbon. 

Green Hydrogen 

Green hydrogen is produced by separating hydrogen from water molecules in an electrolyzer using electricity. This process yields pure hydrogen without harmful by-products. An additional advantage of using electricity in this way is that it may be possible to use any extra electricity, which is difficult to store (like extra wind power), for electrolysis, producing hydrogen gas that can be stored for future energy demands. 

Green Energy Industry Overview 

According to British Businesses Energy, India is currently rated third in the world for investments and initiatives in renewable energy. Around $42 billion has been invested in the sector since 2014. It is undoubtedly worthwhile to look into the industry if it has attracted so significant interest on a worldwide scale. 

This overseas interest is not irrational. The industry is also among the best in the world. In terms of installed capacity for renewable energy as of 2020, India ranks fourth for wind power, fifth for solar power, and fourth overall.

The nation now has 152.36 GW of renewable energy capacity. This accounts for 38.56% of all installed power capacity.

The encouragement and comprehensive support provided by the government have been among the main causes of this growth. The administration wants to surpass the 175 GW target established by the Paris Agreement by the end of 2022 and reach 227 GW of renewable energy capacity. Out of that, 114GW will be solar energy and 67GW will be wind energy.

The government wants to install 523 GW of renewable energy capacity by 2030. 60% of this will be supplied by solar energy, and 14% by hydropower.

List of Indian Green Energy Stocks

After going through the promising future of the sector, let’s have a look at the top green energy stocks in India.

TATA Power 

With a total capacity of 2.6 gigawatts (GW) across 11 states, Tata Power is without a doubt the industry leader in the renewable energy sector. The business also has various subsidiaries with a sector-specific focus, including Walwhan Renewable Energy (WREL), Tata Power Renewable Energy, and Tata Power Solar Systems (TPSSL).

By 2025, Tata Power wants to have a production capacity of 15 GW of renewable energy. Tata Power’s portfolio now includes 34% clean energy, and the business aims to grow this to 40% by 2025 and 80% by 2030. The corporation has already halted adding coal-based capacity in an effort to achieve this.

In addition to providing renewable energy, they are concentrating on some of the major issues that plague the sector. The installation of charging stations is the most crucial.

Looking at the company’s financials, we can see that its revenues increased from Rs. 26,840 crore in 2018 to Rs. 42,816 crore in 2022. Although it has decreased from Rs. 2,408 crore to Rs. 1,741 crore for the same period, its net earnings are concerning.

JSW Energy

One of the biggest power-generating enterprises in the nation is JSW Energy. The company’s total capacity for producing electricity from thermal, hydroelectric, and solar sources is 4.6 GW. The company is now working to build 2.4 GW of renewable energy projects. Among these 2218 are initiatives for solar and wind energy.

Over the upcoming 18 to 24 months, these are anticipated to be put into service. As a result, the corporation will increase its share of renewable energy from 30% to 55%.

Also, the company is working to restructure its renewable energy division. The billionaire businessman Sajjan Jindal will strategically sell off assets in the company’s green energy division to achieve this.

Future operations involving renewable energy will be managed by a subsidiary company called JSW Energy Neo after the restructuring. This will enable the business to catch up to rivals like Tata Power and Adani Power.

A number of warning signs can be seen if we examine the company’s finances in more detail. The company recorded revenues of Rs. 8049 in 2018 to Rs. 8167 in 2022, not showing growth. Although it has increased from Rs. 78 crore in 2018 to Rs. 1,729 crore in 2022, its net profits haven’t increased consistently over time.

Yet, the corporation still has debt, with a debt-to-equity ratio of 1.34. The company is undervalued when compared to the PE of the industry and has a high PE ratio of 33. The promoters still have a sizable ownership stake (74.66%), but the fact that 13.76% of this share is pledged raises additional questions.

Sterling and Wilson 

The top 5 EPC producers in the nation are Sterling and Wilson. Being an end-to-end provider of solar engineering, procurement, and construction (EPC) solutions distinguishes this business in this industry. The business belongs to the Shapoorji Pallonji Group.

Its 10.6 GW worth of manufacturing capacity is spread across 252 projects in its EPC portfolio. Both national and international projects fall into this category. This comprises 202 projects that have already been completed, giving a total installed capacity of 6,661 MW. A further 3,919 MW will be added.

Reliance New Energy Solar, a fully owned subsidiary of Reliance Industries, recently made headlines when it paid 2,850 crore for a 40% interest in Sterling & Wilson.

Let’s now take a deeper look at the company’s finances. From Rs. 8240 crore in 2019 to Rs. 5199 cr in 2022, its revenues have decreased. For the same year, it saw a fall in profits as well, going from Rs. 639 crore to a loss of Rs. 1,187 crore.

But, this is a result of the difficult environment that the entire value chain of the solar sector is currently experiencing. The firm’s debt-to-equity ratio is 8.68. A major cause for concern is the promoters’ 72.73% ownership share in the company, of which 39.52% is pledged.

INOX Wind 

Inox Wind is one of the major producers of wind turbine generators in India and one of the leading providers of fully integrated wind energy solutions. The business specializes in standalone components such as nacelles, tubular towers, and blades.

In Gujarat, Himachal Pradesh, and Madhya Pradesh, the corporation runs 3 cutting-edge manufacturing facilities. Recently, one of the biggest orders given by a PSU went to Inox Wind. By 2032, NTPC Renewable Energy expects this 150 MW wind power project to generate close to 50% of the company’s total power generation capacity.

If we look more closely at the numbers, we can see that the company’s revenues have fallen since 2017, when they were Rs. 3405 crore, to Rs. 625 crore in 2022. The profit has decreased from Rs. 303 crore in 2017 to generate a loss each year since, which is also shown in this.

72.01% of the company is owned by the promoters, of which 3.06% is pledged. The business has a tiny 0.94 debt ratio.

Adani Green Energy Limited 

Adani Group’s billionaire founder has clarified that the company has big intentions in the field of renewable energy. A thermal power plant owned by Adani Power has a 12,450 Megawatt capacity. Also, the business has a 40MW solar farm.

Adani Green Energy is anticipated to have a capacity of 25 GW from projects that are now under construction and commissioning, while Adani Solar has a production capacity of 3.5 GW. Recently, the group acquired SB Energy for $3.5 billion, securing India’s largest renewable energy industry.

If we look more closely at Adani Green’s financials, we can see that its revenues have risen steadily from Rs. 502 crore in 2017 to Rs. 5,133 crore in 2022. On the other side, the company’s profitability has been disappointing, since losses have been incurred from 2017 to 2020.

However, the business made a profit of Rs. 489 billion in FY22. The company’s high debt-to-equity ratio of 9 is a major warning sign. The PE of the stock is 154.7.

Final thoughts

It goes without saying that the business is very capital-intensive when it comes to the best green energy stocks in India. The expectation of a greener future with these companies having a lead start has, however, led to these equities performing incredibly well in 2022 despite having dismal financials. Nonetheless, these expectations are reasonable given that businesses that do not adapt to the changing environment risk becoming obsolete.

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