A report published by the Institute for Energy Economics and Financial Analysis (IEEFA) sends an urgent message to the state government of New South Wales (NSW), Australia.

The report warns that, with coal export volumes having peaked and now facing a terminal long-term decline, transition preparations must be made for the coming decades to prepare businesses, workers and communities historically dependent on coal mining.

The IEEFA report, New South Wales Thermal Coal Exports Face Permanent Decline: Grim Outlook Prompts the Need for a Planned Transition, examines the status of NSW coal export destinations.

The report found the pipeline of new coal plants in major Asian markets experienced a 74 per cent decline since 2015 with more contraction expected.

Report co-author Tim Buckley, IEEFA director of energy finance studies, said that coal does not have credible export numbers anymore and the risk to people and communities across NSW cannot be ignored.

“Thermal coal exports out of the Port of Newcastle peaked three years ago and are now set to decline,” Mr Buckley said. “Going forward we will witness a permanent, terminal decline as Asian markets continue their technology-based energy transition towards cheaper more sustainable renewables.”

According to the report, Australia’s largest thermal coal export locations – Japan, China, South Korea and Taiwan – have all introduced policy settings to reduce the consumption of thermal coal while creating opportunities to increase the development and uptake of renewable energy.

The report also looked at possible new thermal coal export destinations and found that imported thermal coal power in India costs US$60-80/Megawatt hour, double the cost of new renewables at US$34-40/Megawatt hour, fixed with zero inflation indexation for 25 years.

“Imported thermal coal is now entirely uncompetitive and possible new markets such as India and Vietnam are pursuing cheaper, more sustainable renewable energy options,” said Mr Buckley.

“If there’s any growth in coal consumption across Southeast Asia it will not be enough to compensate for declining consumption in NSW’s four major export markets. NSW is facing a terminal threat to its thermal coal export market over coming decades.”

Report co-author Simon Nicholas, and IEEFA energy finance analyst, said the International Energy Agency’s sustainable development scenario projects plummeting global thermal coal trade volumes.

Mr Nicholas observed that it is a mistake to see current high export revenues and prices as a sign of good health.

“Higher coal prices indicate growing concerns over the long-term viability of the industry, leading to lower investment in new coal mining capacity,” he said.

The report found export markets are being driven by a technological transition compelled by ever-cheaper more efficient renewable energy which is now outclassing coal-fired power on all measures. Air pollution and carbon emissions are also of increasing concern across Asia.

“With export volumes continuing to decline, the Chairman of the Port of Newcastle has recognised the need to diversify the port away from its reliance on coal,” Mr Buckley commented.

“The NSW government must catch up and begin planning an efficient multi-year transition for communities and businesses historically dependent on coal mining across NSW.”

Source: ieefa.org