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The Literal Sunrise Sector ☀️

In what seems to be his final big announcement before the 2024 elections, Prime Minister Modi ecstatically launched the PM Suryodaya Yojana this week - a scheme to install 1 crore rooftop solar connections!


Having made this announcement after his visit to Ayodhya, the scheme and stocks with the word “renewable” in them are being received with open arms.



The scheme goals are simple:


  • Who is it for - Low-income households to help reduce electricity bills

  • Why should they do it - Electricity bills can be 20-25% cheaper than using regular power, subsidies will be offered to set it up, and when connected to a grid, excess electricity produced by the solar panels can be sold to power distribution companies (DISCOMs) to get further discounts on electricity bills

  • Why should DISCOMs do it - While in regular grids, about 20% of power is lost during distribution, solar grids bring that to less than 10%, saving DISCOMs money. Coupled with the average cost to service a solar customer dropping since they also give DISCOMs excess electricity which they then distribute elsewhere, it seems like a sweet deal once scale is achieved

Yet, as you may have been reminded by numerous news channels already, there has already been a Rooftop Solar Programme running since 2014 that had targeted a goal of 40 GW of rooftop solar installed capacity by 2022 - but barely achieved 30% of that goal as of now!


With DISCOMs either rejecting applications or delaying them, the subsidies not being targeted to the right audience and awareness about solar power being poor, this scheme didn’t do the job.


So Why Are We Still Gung-ho about This?

The old scheme had some core issues that didn’t fuel the kind of growth everyone expected, but this new scheme just might be different:





Therefore, by tripling the subsidy, targeting the right audience, increasing awareness among the audience, and providing ample incentives to customers and DISCOMs alike, this scheme could get it right and double the rooftop solar capacity in the next 2-3 years!


What Does This Mean for the Markets?

While the euphoria may have already made its way into some stocks, companies with exposure to solar can see further upside:





Having some skin in the game with this power story and the overall energy transition towards more efficient and cleaner systems through our Value Migration portfolio, it is safe to say that this is, quite literally, a “sunrise” sector!

 

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