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Financial Performance of Renewable and Fossil Power Sources in India

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  • Gireesh Shrimali

    (Precourt Scholar, Sustainable Finance Initiative, Stanford University, 444 San Antonio Road 9C, Palo Alto, CA 94306, USA)

Abstract

This paper seeks to study and compare the historical and present-day financial performance and risk profile of the renewable energy and fossil fuel power sectors. Our findings are as follows. First, renewable energy power portfolios have historically shown more attractive investment characteristics including, on average, 12% higher annual returns, 20% lower annual volatility and 61% higher risk-adjusted returns. Second, investors perceive renewable energy power investments to be less risky than fossil fuel power investments, with the expected returns on debt to the fossil fuel power sector is at least 80 basis points higher than for expected returns on debt for the renewable energy power sector. Third, the main risk factors driving the risk perception of both renewable energy and fossil fuels are counterparty, grid and financial risks; counterparty risk is the most significant risk by far, followed by grid risk and then financial sector risk. Our findings have significant implications for investments in these technologies in India.

Suggested Citation

  • Gireesh Shrimali, 2021. "Financial Performance of Renewable and Fossil Power Sources in India," Sustainability, MDPI, vol. 13(5), pages 1-23, February.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:5:p:2573-:d:507254
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    References listed on IDEAS

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    5. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
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    Cited by:

    1. Bharat Kumar Meher & Abhishek Anand & Sunil Kumar & Ramona Birau & Manohar Sing, 2024. "Effectiveness of Random Forest Model in Predicting Stock Prices of Solar Energy Companies in India," International Journal of Energy Economics and Policy, Econjournals, vol. 14(2), pages 426-434, March.
    2. Luigi Fortuna & Arturo Buscarino, 2022. "Sustainable Energy Systems," Energies, MDPI, vol. 15(23), pages 1-7, December.
    3. Rahat, Birjees & Nguyen, Pascal, 2022. "Risk-adjusted investment performance of green and black portfolios and impact of toxic divestments in emerging markets," Energy Economics, Elsevier, vol. 116(C).

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