6 May 2014 — A new report from the Institute for Energy Economics and Financial Analysis suggests that new Australian coal projects are economically unviable.

“Evidence is mounting that coal mining in Australia is entering structural not cyclical decline,” Tim Buckley, IEEFA director of energy finance studies Australasia said. “This report is a wake up call to investors and industry, questioning the economic basis for an increasing number of proposed coal projects in Australia.”

The report said that as Chinese coal demand stagnated, eyes have turned to the Indian market. However, the Indian coal-fired power generation industry faced fundamental financial problems.

“Detailed financial modelling has exposed Galilee basin coal as essentially unusable – the two biggest thermal coal mine projects in Australian history are fundamentally unprofitable and commercially unviable,” Mr Buckley said.

“The financial justification for Galilee Basin coal is based on flawed economic assumptions, including a reliance on the increasingly uncertain prospect of India being able to continue to finance and economically justify building imported coal-fired power stations.

“The industry’s economic models are flawed, the world’s poor won’t be helped, and the demand that is used to justify ruining Australia’s natural wonders is an illusion. Savvy operators are increasingly avoiding the Galilee.”

The report found for operations to be profitable, imported coal would have to be priced at double the wholesale price of India’s electricity, which discredited the notion that this coal-fired power could help to alleviate India’s energy poverty, Mr Buckley said.

“The good news is that renewables are increasingly affordable and effective: wind, solar and hydro can be built faster and cheaper, in addition to acting as a deflationary driver in the economy,” he said.

“The cost of electricity generation from solar in India has fallen 65 per cent in the last three years alone and these double-digit declines are forecast to continue.”

Read the full report.