Which clean energy hot stocks to watch out amid $1 billion energy deal?

Gas-led recovery plan was introduced by the federal government of Australia in September 2020 with the aim to reduce the domestic gas prices and leverage the domestic manufacturing. The plan also incorporated saving the energy for future. However, the plan gained criticism from the policy makers, environmentalists and industrialists.

RELATED: Does the Morrison Government plan impact the ASX listed Gas players?

To address the issues of the previous plan, South Australian government and federal government signed a deal of $1 billion. It is a bilateral trade which will increase the gas supply in the east-coast market of Australia.

A part of the deal will result in creation of interconnectors between NSW and South Australia. This will allow NSW, South Australia and Victoria to share and take advantage of the energy reserve. In effect, NSW will reduce the consumption of coal and South Australia energy requirements will be fulfilled by solar and wind energy.

Must Watch: How is the world putting its best foot forward in the clean energy space?

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The deal is based on the premise that South Australia has the potential to create solar and wind energy, and it can export the renewable - energy through hydrogen projects and transmission lines to NSW and Victoria. It will result in reducing the emissions and carbon capture.

Moreover, the deal will create job opportunities as businesses and families will have access to reliable energy at affordable prices.

Interesting read: How Is Australia Accelerating The Shift to Renewable Energy?

What will be the impact of energy price shocks on green energy stocks?

A study by Zhao (2020) reported that the shocks in the energy supply and prices have a significant impact on the stock returns of clean energy stocks. It was also observed by the contributor that economic policies related to the energy prices have a positive impact on the stock prices of clean energy companies.

Optimism can be seen amongst the foreign and domestic investor after the $1 billion deal. A lot of money is put on the table and boom can be expected in the job market as well.

With the $1 billion energy deal, the cost of production and manufacturing can decline significantly for the manufacturers who utilises green energy and local manufacturers. In effect, the revenue is likely to increase for the clean energy manufacturers of South Australia, Victoria and NSW.

A ripple effect can be created with the execution of the project as the people will have larger some of money to spend on other goods or to invest in the shares because the price of energy will reduce significantly. In effect, the economy will also be benefited at large.

Also Read: 3 ASX Green Stocks Under the Spotlight

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Clean Energy Hot Stocks To Watch Out

MPower Group Ltd (ASX:MPR) – The company deals in the distribution of power solution such as energy storage system and solar farms. Further, it has a sound track record of executing projects successfully across Australia. The company has recently secured exclusivity over its first location in New South Wales, increasing its pipeline of potential Build Own Operate sites to ten. The flow of funds within the industry in the form of government grants indicates the strong position of the stock.

Santos Limited (ASX:STO) – The company has the largest gas and oil portfolio in Australia. It is the largest domestic supplier in Australia with sound infrastructure facility as they have well-connected and extensive pipeline facility. The company provides gas at the lowest price to their consumers. With the energy project, the prices can reduce significantly as cost of gas transportation will decrease. In effect leveraging the revenue of the company.

RELATED: Santos Limited to Acquire Gas Assets

Origin energy (ASX:ORG) – It is a low-cost gas producer in Australia along with operations in the field of storage of energy. The company also deals in the renewable energy sources like solar and wind energy. During COVID-19, the company saved funds for investing in the renewable energy portfolios. With the support in form of government grant after the energy deal, the company will be able to expand their portfolio.

RELATED: Lower Earnings Estimate for FY2021 Drags Down Origin Energy (ASX:ORG) Share Price

 


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