Top Pick: Suzlon Energy, Target Rs 149
A rising energy deficit, over dependence on imports for crude and nuclear energy, an inability to scale up hydro and the impact of coal on climate are all factors that will drive the adoption of alternative energy in India. While near-term concerns could stem from weak macro conditions and falling crude prices, this is a space that could witness a sustained growth trajectory given emerging policy support and structural drivers.
Wind remains the best way to play the medium-term alternative energy theme in India, as it should continue to see strong builds. The medium term wind profile for the country, though, offers low average PLFs and once the windiest sites are saturated, growth could slow, in our view. We favour equipment companies exposed to global wind capex.
Solar will displace wind in terms of relevance in India fs energy mix over the longer term, as India is endowed with sufficient solar radiation, given its proximity to the equatorial belt. Tapping a tiny portion of this is sufficient to meet India fs entire power demand. We admit that near-term demand will be restricted by higher costs, but rapid technology advances driving down costs and enabling policies could accelerate demand growth.
The biofuel space is still in its formative stage and the new national biofuel policy is expected to increase investment in this sector. The vast amount of wasteland in India for jatropha cultivation and a well developed sugarcane supply chain offer strong potential, and the near term supply bottlenecks could, in fact, help the early entrants in this space, in our view. We believe equipment suppliers and some emerging integrated biofuel producers would benefit from this trend.
Wind remains the best way to play the medium-term alternative energy theme in India, as it should continue to see strong builds. The medium term wind profile for the country, though, offers low average PLFs and once the windiest sites are saturated, growth could slow, in our view. We favour equipment companies exposed to global wind capex.
Solar will displace wind in terms of relevance in India fs energy mix over the longer term, as India is endowed with sufficient solar radiation, given its proximity to the equatorial belt. Tapping a tiny portion of this is sufficient to meet India fs entire power demand. We admit that near-term demand will be restricted by higher costs, but rapid technology advances driving down costs and enabling policies could accelerate demand growth.
The biofuel space is still in its formative stage and the new national biofuel policy is expected to increase investment in this sector. The vast amount of wasteland in India for jatropha cultivation and a well developed sugarcane supply chain offer strong potential, and the near term supply bottlenecks could, in fact, help the early entrants in this space, in our view. We believe equipment suppliers and some emerging integrated biofuel producers would benefit from this trend.
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