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A 270 billion dollar bet on the ecological?

by SuperiorInvest

Solar panels at the Welspun Energy solar power plant in Neemuch, Madhya Pradesh, India.

Vivek Prakash | Bloomberg | fake images

This report is from this week's CNBC 'Inside India' newsletter, delivering timely and insightful market news and commentary on the emerging powerhouse and the big companies behind its meteoric rise. You like what you see? You can subscribe here.

the great story

While Elon Musk decides to stay home to deal with a high-pressure earnings report, Indian Prime Minister Narendra Modi is still waiting for his meeting with the Tesla boss.

But even if the two had crossed paths this month, any benefits to Tesla or the Indian economy would have taken years, if not decades, to materialize.

In the short term, there appears to be plenty of opportunity for investors as India transitions to renewable energy.

One sector in particular, electric power transmission, will reap $270 billion in financial benefits, according to Goldman Sachs. It is expected to spur investment on a scale rivaling that of the US Inflation Reduction Act's $369 billion subsidy program.

While utilities like Power Grid Corporation of India may be perceived as unattractive, compared to growth stocks like Tesla, India plans to promote renewable energy without the taxpayer spending a single rupee.

This is made possible by allowing renewable energy consumers to access the interstate transmission network free of cost. Industrial companies based in one state, for example, would pay solar and wind farms for energy production in another state, without the additional cost of transmission.

Instead, the cost of transporting this green energy will be passed on to non-renewable energy consumers, making the cost of delivery neutral for ratepayers.

The impact of such a framework is expected to be felt throughout the economy.

Clean energy consumers are less likely to be held hostage by a simple cloud hanging over a local solar power plant, as the grid is expected to redirect electricity from a solar farm running at full speed somewhere else in the world. country.

Ensuring uninterrupted renewable energy without using high-cost batteries also means that new opportunities could be brought to industries that were previously unviable.

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For example, according to Goldman, the cost of producing green hydrogen is reduced by 30% since electrolyzers can operate 24 hours a day.

Companies such as Reliance Industries and Adani Enterprises have already set targets of reducing the cost of hydrogen production to $1 per kilogram by 2030, which would seriously undermine fossil fuel-derived forms of hydrogen.

Cheaper hydrogen will make India home to manufacturers of green ammonia, a key fertilizer ingredient, and potentially enable agricultural self-sufficiency for the world's most populous country.

Made with flourish

It doesn't end there. From the energy producer's point of view, it will make it possible to build solar power plants and wind farms where the sun shines longer and the wind blows stronger.

This will likely create jobs and opportunities, which are becoming a focal point in the ongoing general election, and generate them much more evenly across the country, rather than forcing concentration in a single state.

It has been relatively easy to add renewables to the energy mix in the past, as India has had excess capacity in its transmission network.

The country has added about 70 gigawatts of solar power capacity over the past decade without racking up more costs simply by maximizing grid usage. However, there is a risk that growth in renewable energy production will be slowed unless large-scale investments are made to expand grid capacity.

Ironically, any development that makes grid-scale batteries, which can reliably and safely store energy for the grid, more affordable is also likely to change the course of India's energy transition. Batteries are typically installed where they are needed, meaning that energy production and consumption are localized and concentrated in a few areas.

Currently, state governments in India impose surcharges and taxes on every unit of high-carbon energy transmitted over the grid. As the proportion of total electricity generated from renewables increases, free access to clean energy would mean a steady decline in future tax revenues. Realizing this, several local governments could rebel against this policy.

Above all, if dirty energy consumers are unwilling to tolerate an increase in energy prices to offset clean energy, going green could become a distant dream.

The latest on the elections.

News editor Vinay Dwivedi is our roving reporter in India as the elections begin. His first dispatch late last week looked at Tamil Nadu, India's sixth-largest state by parliamentary seats, which is generally dominated by regional parties, namely the Dravida Munnetra Kazhagam and the All India Anna Dravida Munnetra Kazhagam. But the winds of change appear to be blowing, with experts and politicians telling CNBC that Modi's Bharatiya Janata Party is set to record notable growth in the region.

This week in New Delhi, Vinay discussed the major problem of unemployment. Unemployment is particularly high among India's youth: those aged 15 to 29 make up a hefty 83% of all unemployed in the country.‎ These statistics are used against Modi, with the country's main opposition calling the situation a “time bomb”. “

I need to know

Vodafone Idea gets a much-needed boost with FPO. An FPO, or follow-on offering, is another public offering that occurs after the company's initial public offering. In the case of mobile network operator Vodafone Idea, it was an opportunity to raise funds, improve competitiveness and combat years of subscriber losses. Shares rose more than 14% when new trading began on Tuesday.

The Maldives is expected to move away from India politically. Maldives President Mohamed Muizzu's pro-China ruling party consolidated its grip on power over the weekend with a landslide election victory. The result is expected to accelerate the Indian Ocean archipelago's shift toward Beijing and away from its traditional ally India.

India's favorite sport is preparing for a great showcase in the United States. We also look at the upcoming T20 World Cup, which will be co-hosted by the United States and the West Indies. India, where cricket is the most popular sport, is gearing up for mouthwatering clashes with Pakistan and the United States.

Jamie Dimon says America needs someone like Modi. India's prime minister appears to have another high-profile endorsement. At a conference hosted by the Economic Club of New York, the JPMorgan chief praised Modi's “tough” approach to India's bureaucratic system and said “a little more of that” is needed in the United States.

“Eight stocks to buy as India's big elections get underway”. [Subscriber content] On CNBC Pro, several strategists gave their views on the Indian market, with some agreeing that large caps offer a good risk-reward ratio that investors can take advantage of.

What happened in the markets?

Indian stock market indices, Sensex and ingenious 50, are headed for a positive week so far, after losing around 1.5% last week. The benchmark indices are up 2.23% and 3.86% so far this year, respectively.

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The 10-year Indian government bond yield has fallen back to 7.18%, after briefly rising 5 basis points on Friday. The Indian rupee has gained ground against the American dollaras global oil prices fell from their peak of $90 last week.

For stock investors, the iShares MSCI India ETF is up 1.3% so far this week, underperforming iShares All Country World Index ETF, which has risen 2.1%. The India ETF is up 6.5% this year.

This week on CNBC TV we feature Mumuksh Mandlesha, research analyst at Anand Rathi Institutional Equities, who analyzed government policy and the outlook for India's automotive sector.

Staying on the topic of cars, we also spoke to Rajeev Chaba, CEO Emeritus of MG Motor India, who responded to a question about Tesla by saying that competition in the space “is limited right now… Hopefully more and more will come players”. , with more and more options.”

Meanwhile, Rob Brewis, portfolio manager at Aubrey Capital Management, argued that a better short-term investment opportunity was actually India's electric two-wheelers.

What will happen next week?

Election aside, one of India's leading heating equipment companies will complete its initial public offering in the new week. JNK India's listing date will be next Tuesday.

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