FactCheck Q&A: Will India no longer buy Australian coal?

Q&A, Monday August 17, 2015.

LEADER OF THE GREENS, RICHARD DI NATALE:  We’ve got India no longer buying our coal…

TONY JONES: I don’t think it’s true that India is no longer buying our coal. I think you must have that wrong… It’s about to build one of the biggest mines in Queensland.

RICHARD DI NATALE: India in the next decade have made a statement that they will no longer buy not a kilo of Australian coal. They will be out of the coal business as far as Australian imports is concerned in the next decade.

India’s electricity demand has been steadily increasing over the last decade and will continue to do so. The country still has around 300 million people who aren’t connected to the electricity grid, with the current government saying they’re determined to fix that.

Senator Di Natale is right about India’s coal import intentions. Indian Energy Minister, Piyush Goyal, is on the record stating in 2015 that

We are confident that in the next year or two, we will be able to stop imports of thermal coal, while imports of coking coal will continue until we are able to explore more reserves.

The government aims to protect the environment as well as make India’s power supply more self-sufficient.

This is a rather optimistic objective, considering coal still makes up nearly 70% of India’s current generation capacity and demand is still 10% greater than the capacity to supply.

India’s Coal Secretary Anil Swarup recently told Reuters that India’s coal imports are expected to increase 19% to a record of about 200 million tonnes this fiscal year.

The evidence

When asked for data to support his statement, a spokesman for Senator Di Natale said by email that “the new Indian federal government was elected among other things, to revolutionise their country’s electricity system.” He said:

  • They are aiming for 175 gigawatts of renewables to be built by 2022. This is the equivalent of building four times Australia’s energy infrastructure.
  • They are also ramping up domestic coal production in order to create jobs and they want to reduce imported thermal coal because it has been identified as the most expensive source of energy
  • In November 2014, Energy Minister Piyush Goyal said it was his intention to stop importing coal in two to three years.
  • In February 2015, the government released a commissionedstudy that found only two or three coal plants near the coast would benefit from imported coal. The transport costs are too high to justify moving it to the rest of the coal generation fleet.

If anything, the decade timeframe was being generous, the spokesman said.

These commercial realities are of course completely at odds with the development of the Carmichael Mine proposed to be developed by vertically integrated Indian power company Adani. Major international and Australian banks have refused to fund it.

India’s optimism

Experts expect India to surpass China’s population and it may become the world’s second largest economy by 2050. Power demand has grown astronomically in the last few decades and isprojected to grow further in future.

To meet their stated objectives, India’s government must not only continue to increase generation capacity, but replace existing generation with alternative renewable technologies.

The Indian government has a major plan to reduce carbon emissions by 20-25% of 2005 intensity by 2020, as well as one of the largest renewable energy deployment plans in the world.

As well as adding new capacity to the grid, India will also need substantial additional infrastructure if it’s to have any hope of meeting its goals. More distribution network assets – things like poles and wires - will be required in areas where there is existing electricity supply. New transmission and distribution infrastructure will be required in areas of new supply. These can be substantial projects, with planning alone taking a number of years.

Using renewable technologies located close to places where the electricity is to be used will substantially cut down on time lags.

Major Indian coal companies such as Adani are still aiming to acquire Australian coal assets such as the much publicised Carmichael coal mine development in Queensland, but they are alsolooking at other options.

Adani has also recently entered into a joint venture to build one of India’s largest solar PV manufacturing plants, fleshing out the firm’s coal interests with renewables.

India is not ceasing electricity generation from coal. In fact, it intends to increase local coal production and use their local resources rather than rely on imports (local coal costs around US$24 a tonne, compared to US$62 a tonne for imported Australian coal).

Prime Minister Narendra Modi has already overseen India’s largest solar project and does have a passion to see the electricity generation mix move towards more renewable resources.

However, private enterprise will always seek out the lowest cost option. If growth in the electricity sector is through private rather than government-owned projects, growth in renewables will likely slow down and coal generation will likely continue.

India wants to be able to produce enough local coal to meet their generation needs – whether they’ll be able to achieve that is not known.

The timeframes set out by the Indian government seem very optimistic, given the substantial task it has set itself of increasing access to grid-connected electricity and reducing fossil fuel-based power at the same time.

The Coal in India report, published this year by the Australian government’s Office of the Chief Economist, said that:

… India is likely to continue to rely on imports. The expansion in India’s coal use presents some opportunities for the Australian industry, which is not currently a large supplier of thermal coal to India. Australia has large deposits of high-energy, low ash coal that is suitable for use in advanced coal-generation technologies. The roll out of advanced coal generation technologies in India presents a significant long term opportunity for coal producers

Verdict

It is true India is on record saying they will stop importing coal within two to three years.

However, some analysts see this as an optimistic and perhaps unrealistic goal for India.

Review

The fact checker is correct.  As the sources identified show, the Indian government has indeed declared its intention to stop importing foreign coal in the near future. India has larger anthracite coal reserves than Australia, and is exploiting those reserves at rates comparable to those in Australia. So India does have the ability to supply its own coal at current consumption rates.

However, as the author has identified, the increase in appetite for electricity and other forms of energy will increase dramatically, so the challenge of meeting those demands with local fossil fuel will be significant. India has demonstrated a rapid uptake of renewable energy technologies, but to continue that expansion at required rates is also is a massive challenge.

Have you ever seen a “fact” that doesn’t look quite right? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article.  You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.

The Conversation

Craig Froome, Global Change Institute – Clean Energy Program Manager , The University of Queensland

This article was originally published on The Conversation. Read the original article.

Roger Dargaville

The Conversation

Media

Research Areas:
Geological resources; Demand side management

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