The higher uptake of renewable energy by new import markets such as India and China could pose a major financial risk for Australian coal mining industry, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).
India-based Adani and GVK acquired coal assets from Gina Rinehart in 2011 to mine coal in the Galilee Basin, while Clive Palmer's China First mine is scheduled to be completed by 2017.
The study by IEEFA found that these two major coal mining projects in central Queensland are likely to prove uncommercial due to unfavourable market conditions in India.
The IEEFA analysis shows that the wholesale cost of electricity in India is almost half that of Galilee coal-fired power, which makes it unattractive for the Indian Government.
IEEFA Australasia Energy Finance Studies director Tim Buckley said 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.
"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," 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."
According to Buckley, India will probably follow China in using renewable energy rather than coal-fired power.
Buckley said a greater reliance on imported coal undermines India's national energy security position and weakens its push for greater energy sector diversity.
"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," Buckley added.
Image: Gina Rinehart's Alpha Coal project at the Galilee basin in central Queensland. Photo: courtesy of Andrew Quilty/AAP/Greenpeace.