Major Coal Projects A ‘Huge Financial Risk’

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A new report states international coal projects, including Australia’s Galilee Basin project, that rely on new export markets such as India face major financial risks.
  
The Institute for Energy Economics and Financial Analysis (IEEFA) says coal exported to India from the Galilee Basin would require a wholesale electricity price double India’s current level to be viable. 
  
The IEEFA points out fossil fuels are inflationary while renewables are deflationary. For example, the cost of solar power based electricity generation in India has dropped 65% in the last 3 years and double-digit declines are forecast to continue.
   
Financial modeling carried out by IEEFA demonstrates renewables not only start out a more economical proposition than building new imported coal power capacity, but also get cheaper over time. Additionally, renewable energy based facilities can be built faster.
  
The financial modeling evaluated the required wholesale electricity off-take pricing required to justify the importation of coal into India from the Galilee Basin and is based on constructing a new 4,000 megawatt (MW) in coastal India, taking into account 100% imported thermal coal sourced from the Galilee.
  
The organisation says importing thermal coal achieves none of the goals set by the Reserve Bank of India, and more likely contradicts them.
  
“This report is a wake up call to global investors and industry, establishing the uneconomic basis of international coal projects which rely on India as a potential growth market,” Tim Buckley, Director of Energy Finance Studies, Australasia for IEEFA said.
  
“The global coal industry’s economic models are flawed, the world’s poor won’t be helped and the demand that is used to justify ruining the environment is an illusion. Savvy operators are getting out of coal.”
  
“Briefing Note – Indian Power Prices” can be viewed in full here (PDF).
  
The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment.