Coalmining in Australia is entering a “structural decline”, with projects set to become unviable due to unrealistic expectations over the potential to export the fossil fuels to China and India, according to a new report.



The study, by the US-based Institute for Energy Economics and Financial Analysis, suggests that two huge coalmining projects in central Queensland, backed by Indian cash, “are likely to prove uncommercial” due to unfavourable market conditions.

The projects, backed by Adani and GVK, which bought its coal assets from Gina Rinehart in 2011, will attempt to open up vast deposits of coal buried in the Galilee Basin region. Clive Palmer’s China First mine is also slated for completion by 2017, removing a projected 40m tonnes of coal a year for export.

But 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 price of coal has dropped sharply in the past three years. The mining industry has claimed this is part of a cyclical reverse in fortunes as the resources boom cools.

However, several high-profile projects have been cancelled recently, including the departure of BHP, Anglo American and Lend Lease from the vast mine, rail and port operation required to mine and ship coal from the Galilee Basin.

Tim Buckley, director of IEEFA, told Guardian Australia that India is likely to follow China in looking more to renewable energy than coal-fired power.

“People think India will just follow the same growth of China, but India’s economy has choked on coal energy and it doesn’t need more expensive coal imports,” he said.

“The solution for energy poverty in India isn’t coal, it’ll be a mix of energy sources, as China has started to move towards.”

Buckley said China’s huge investment in renewable energy will be replicated, albeit on a smaller scale, by India, 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% in the last 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,” 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.”