A new industry report warns that Australia’s two biggest thermal coal mine projects in Queensland’s Galilee Basin are commercially unviable.
An Institute for Energy Economics and Financial Analysis (IEEFA) report shows as Chinese demand slows and India faces power generation issues, the Galilee Basin in central Queensland is essentially unusable.
AAP newsagency reports the study says the prospect of India being the next big coal import market is now under a cloud as its coal-fired power generation industry encounters financial problems.
IEEFA director of energy finance studies in Australasia Tim Buckley said evidence was mounting that coal mining in Australia is entering a structural decline following steep price falls for the commodity.
“The financial justification for Galilee Basin Coal is based on flawed economic assumptions.
“This includes a reliance on the increasingly uncertain prospect of India being able to continue to finance and economically justify building imported coal-fired power stations,” Mr Buckley said.
However the IEEFA analysis shows that the wholesale cost of electricity in India, a key export market, is half that of Galilee coal-fired power, making it financially unattractive for the Indian government.
That, coupled with a new focus on renewable energy such as solar and wind, and a falling coal price due to the flood of new resource from the Galilee Basin, will cause significant problems for Australian projects, the study found.
“Renewables are a lower cost, cleaner solution, particularly when the deflationary impact of wind and solar is incorporated,” the study states.
The report contributes to growing unease about the financial viability of Australian coal exports, Mr Buckley said.
“India’s perilous economic and financial situation create further uncertainty for companies relying on its ability and willingness to import coal, with its associated implications for inflation, current account deficits, economic instability and energy security,” Mr Buckley said.
The report shows that imported coal would need to be priced at double the wholesale price of India’s electricity and would not alleviate India’s energy poverty.
Initial approvals have been granted to Waratah Coal-China First and GVK Hancock to mine in the Galilee Basin.
This would put an extra 70 million tonnes of coal each year, worth $1.4 billion to $2.8bn, through the Abbot Point port, which is planning a controversial expansion of facilities.
Mr Buckley said China’s huge investment in renewable energy would be replicated, albeit on a smaller scale, by India.
He said this would influenced by the pro-solar policies of prime ministerial front-runner Narendra Modi.
The cost of electricity generation from solar in India has fallen 65 per cent in the past three years.
“The last thing Australia should do is flood the market with extra coal, there’s no way it can handle the number of projects currently in train,” Mr Buckley said.
“China’s premier has made it clear he’s waging a war on pollution and the clear message is that they want anything other than coal.
“Meanwhile India has the majority of the top 10 most polluted cities in the world, as well as water scarcity issues.
“The move away from coal isn’t so much about climate change, it’s pollution, health and economics. That’s why savvy investors aren’t putting their money in coal,” Mr Buckley added.
