Coal India Limited has reported another record rate of domestic coal production growth, up 13 percent year over year in January. Coal inventories are now at a record high and electricity demand growth is slower than expected, up 4.4 percent.
The inevitable conclusion? Indian coal imports will fall rapidly over 2016.
The trend undermines any remaining strategic or financial logic to the development of the Galilee coal basin in Australia. And while the Queensland government has recently approved environmental permits for the massive Carmichael proposal, the fact remains that no financial institution will finance the project in the face of this Indian electricity sector transformation.
Some additional fresh numbers of note:
These forces combined—lower than expected electricity-demand growth and higher than expected domestic coal production—are creating record high coal stockpiles at India’s power plants. As of Jan. 31, the combined stocks of thermal coal at 101 power plants in India was at a record low 34.2 million tons.
The obvious point of flexibility in the big picture is coal imports, so it makes sense that coal imports are down 15 percent year over year across nine months and that the rate of decline has accelerated, with coal imports down a record 34 percent year over year in December 2015. IEEFA sees a further 20 percent year-over-year decline in thermal coal imports into India through 2016.
IT’S ALSO WORTH NOTING THE 25 PERCENT YEAR-OVER-YEAR DECLINE IN SOLAR TARIFFS IN INDIA, where the cost of solar power has recently touched a record-low Rs.4.34 / kWh (US$64/MWh) for contracts awarded on Jan. 19 in Rajasthan, where a total of 420MW of capacity was granted.
Solar power is now being installed at a deflationary tariff , so that its costs are immediately below that of new imported coal-fired power generation.
The pressure on Indian coal imports is both extreme and permanent today, driven by technology transformation being introduced by Reliance Power, RattanIndia and Adani Enterprises—energy companies that are rapidly diversifying away from coal.
It’s no coincidence that Adani this week reported it will shortly commission the world’s largest solar project, a 648MW project in Tamil Nadu, where construction commenced only a year ago.
Tim Buckley is IEEFA’s director of energy finance studies, Australasia.