LET US THINK of a world without power―imagine the electricity going off when you are in the middle of your work―now, your laptop, and your mobile phone are both minutes from dying, and all you can do is wait for the power to come back on. Without electricity, you cannot use any of your trusted appliances―be it your television, microwave or air conditioner―making the world appear like a truly dark place. Now consider driving to a faraway destination, and noticing the empty fuel signal on your car’s dashboard―we cannot reach our destination, or accomplish the simplest everyday tasks without energy.
Decoding the energy paradigm
Energy is an essential part of our daily lives, shaping our necessities and conveniences. While households once relied mainly on electric lights, gas stoves, and televisions, modern living now demands a variety of electrical appliances such as refrigerators, air conditioners, induction stoves, and microwaves. This shift highlights a broader lifestyle change and a significant increase in energy demand. Energy’s role extends far beyond households, fuelling transportation―from cars and two-wheelers to cargo engines, trains, and airplanes―and driving industrial growth across sectors like healthcare, FMCG, textiles, and IT. It supports communication networks, including telecommunication, broadcasting, internet services, and data transmission.
Considering the energy opportunities roadmap, the oil and gas value chain comprises upstream exploration and extraction, midstream processing and transportation, and downstream refining and distribution. Similarly, the power value chain involves generation from various sources, transmission, and final distribution to consumers. With the rise of renewable energy, the solar and wind value chains involve manufacturing, equipment provision, and infrastructure development, even as energy ancillary companies enhance this ecosystem by offering essential services such as EPC, maintenance, power storage solutions, and smart metering. Accordingly, the energy opportunities theme encompasses a variety of possible investment options across these avenues.
Upcoming demand for energy
India’s energy future is intricately linked to its growth trajectory―over the past two decades, India’s primary energy consumption has more than doubled, making it the fourth-largest energy consumer globally. However, India’s per capita energy consumption remains one-third of the global average, significantly lower than countries like China and Korea and as the country remains poised to become the world’s third-largest economy, its consumption is expected to rise substantially. In this scenario, power demand is anticipated to grow strongly, with shortages during non-solar hours, necessitating government focus to bridge the deficit.
India’s shift from agriculture to manufacturing, similar to China’s earlier transition, is expected to create massive power demand. Going forward, the increasing penetration of electricity and rising per capita income will drive higher energy consumption even as emerging segments like AI and data centres remain set to further escalate energy demand, potentially using more power than entire countries by 2028.
The best way forward
Even as you prepare to shell out more for the energy you consume, you can balance out the equation by investing in the energy opportunities theme, either directly or through mutual funds. Popular investment avenues include power ancillaries, the oil value chain, consisting of integrated refining and marketing companies, downstream petrochemicals, base oil processors, etc, and green energy, which comprises of companies undergoing energy transitions, and renewable energy value chains. You can also consider investments in the gas value chain, which consists of gas transmission, LNG terminal and city gas distribution, and the power value chain, which includes coal producing companies, and aspects such as power generation, power transmission, and power trading.
If you want to invest in the energy theme via the mutual fund route, ICICI Prudential Mutual Fund currently has a New Fund Offer (NFO) focused on the energy sector, open from July 2, 2024, to July 16, 2024. The scheme’s investment universe includes companies involved in green energy, oil and gas sector, power and related sectors, offering a diversified approach to tapping into these energy opportunities.
Whichever route you may opt for, there is no questioning the fact that energy opportunities is the theme for the future―making this your moment to capitalise on the sector.
The writer is founder and director, Shubhgain Finserv Pvt Ltd.