A new report of Institute for Energy Economics and Financial Analysis (IEEFA) said that international coal projects relying on new import markets such as India were facing financial risks.
IEEFA said that Chinese coal demand growth continued to slow down and the focus was increasingly turning to India.
The study which used in-depth financial modelling to evaluate the prospect of India as the next big coal import market said that the results demonstrated the fundamental financial problems facing the coal and coal-fired generation sector in India.
Mr Tim Buckley, Director of Energy Finance Studies, Australasia for EEF said that "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."
The report said that a key difference between coal fired power generation and renewable energy was the issue of inflation - fossil fuels are inflationary while renewables are deflationary The cost of electricity generation from solar in India had fallen 65% in the last three years alone and double-digit declines were forecasted to continue.
It said that the financial modeling demonstrates that renewables not only start out cheaper than building new imported coal power capacity, but also get cheaper overtime.
In contrast, the average price escalation for imported coal in India equated to four per cent annually in rupee terms because it requires purchasing this US dollar denominated fuel.
Mr Buckley said that "India's perilous economic and financial situation creates 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."
He said that "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 added that "A greater reliance on imported coal undermines India's national energy security position and weakens its push for greater energy sector diversity."
Souce:- coalguru.com
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