Is India the fossil fuel nirvana imagined by Rinehart and Co?

By Giles Parkinson on 18 July 2012

Plans to spend billions and billions of dollars in Queensland developing coal mines and associated infrastructure such as ports and railways are built on the apparently unshakeable belief that coal can provide the only solution to the rampant energy needs of India – one the one of the world’s two fastest growing energy markets.

Indian coal companies themselves have invested billions of dollars snapping up coal assets in Australia in recent years, and one company, GVK, is the major partner of Gina Rinehart in developing her massive coal project in the Galilee Basin in central Queensland.

But this enthusiasm for investing in Australian coal infrastructure is masking huge problems in the Indian energy market. While coal is often painted as pretty much the only option to fuel India’s rapid economic growth – nuclear is clouded by the fallout of Fukushima, and will not reach the scale some anticipated, while wind and solar are seen as marginal – there are signs that an increasing number of companies are reassessing their plans.  Fossil fuel generation is turning out to be uncertain, unreliable and unprofitable, and many are turning away from coal and gas generation and focusing instead on solar and wind.

India currently relies on coal, oil and gas for 70 per cent of its energy supply, and even that only reaches barely half of the population. However, poor supply and pipeline infrastructure, and the high cost of coal imports mean that coal- and gas-fired generation is becoming unviable, even in a country with huge economic growth, an energy deficit and massive energy needs.

It is estimated that 30,000 megawatts  of newly constructed coal plant in India is sitting idle, unable to source coal from the state-run body charged with doing so. It says the best it can do is 50 per cent – not good enough for a coal plant. Imports are not the answer either, because of the rising cost. Plans for around 8000MW of new coal-fired capacity are now on hold because of that, and those that have been built are losing money. The energy ministry has told builders of gas plants not to bother with developments until at least 2015 because there is not enough gas.