India has set an ambitious target of generating 175 GW of renewable energy. Of this, 100 GW is expected to come from solar energy alone. This shows the government’s focus and commitment towards developing the solar sector in the country. With strong policy support and declining solar tariffs, the Indian solar industry is poised for significant growth in the coming years. This provides retail investors with an opportunity to participate in the solar energy growth story through the route of systematic investment plans or SIPs.
Government policies driving solar energy growth
India has put in place progressive policies and incentives to boost solar power generation. Some of the key policies and initiatives supporting the solar sector include:
- Viability Gap Funding: Financial assistance provided to solar projects to bridge the gap between the costs and tariffs. This helps overcome financial barriers for developers.
- Higher Power Purchase Agreements: State electricity utilities are obligated to buy solar power at fixed tariffs that are usually 25-30% higher than average power purchase costs. This ensures revenue stability for developers.
- Preferential Tariffs: Solar projects get must-run status and preferential grid connectivity which allows them to evacuate power without curtailment.
- Fiscal Incentives: Accelerated depreciation, concessional customs and GST duties help lower project costs and boost investor returns.
- Land Availability: State governments promote use of barren/uncultivable lands for solar parks which helps reduce project costs.
Investment opportunities through SIPs in solar companies
Given the growth potential and falling costs, investing in solar energy companies through SIPs can help participate in this emerging sector. There are several publicly listed Indian solar companies across the whole value chain including:
– Module Manufacturers: Adani Solar, Tata Power Solar, Waaree Energies
– EPC Contractors: Sterling and Wilson, Nikhil Adhesives, Voltamp Transformers
– Project Developers: Adani Green Energy, ReNew Power, Azure Power, ACME Solar Holdings
– Engineering Companies: Kirloskar Solar, Borosil Renewables, Sigma Electric
One can systematically invest small amounts every month in these stocks through SIPs for 5-10 years. The advantages of SIP investments in solar shares are.
– Rupee Cost Averaging: Investing fixed amounts every month averages out purchase costs over market fluctuations.
– Compounding Returns: Small investments get reinvested each period leading to exponential growth over long periods.
– Participation in Growth: Facilitates benefitting from rise in share prices as Indian solar industry expands manifold in coming years.
– Lowers Risk: Regular investing avoids lumpsum market timing and averaging reduces risk of investing at market peaks.
– Long Term Wealth Creation: With expected annual returns of 15-20%, SIP investments can generate substantial wealth over a decade or more.
Conclusion
Given India’s ambitious solar energy plans backed by progressive policies and declining costs, solar power is poised for strong growth. Investing in the sector through low amount SIPs in select listed solar companies provides an opportunity to participate in the sunrise industry’s upside over the long run in a disciplined manner. This helps create wealth while supporting India’s renewable energy transition. Regular monitoring and periodic rebalancing as per performance is advisable for optimum results.
