Dramatic cost declines in solar power tenders in India have shaken up expectations on pricing for the renewable fuel and have triggered warnings that the country's need for thermal coal imports will be much lower than some are banking on.
The figures signal that forecasts for growth in thethermal coal trading market by the International Energy Agency are too bullish even though they were cut back in December, according to Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis, which supports renewable energy.
Mr Buckley said coal miners such as Adani and BHP Billiton were guilty of "ingrained thinking" in pressing ahead with coal expansion plans.
"A company that denies a technology change is real makes mistakes," Mr Buckley said. "The implication is for coal mining, coal railways and coal ports."
India's Minister for Energy, Piyush Goyal, has said India should be able to end thermal coal imports by 2017.
Others doubt this target can be met, however. Melbourne-based Project Monitor describes the assumptions underlying claims from environmental groups that renewable energy growth would damp India's coal demand as "tenuous". It points out the problem of intermittent power generation from solar and wind, and casts doubt on India's ambitions to meet its 2020 coal production target.
"The confidence expressed by some that, over the next decade, coal demand will slow significantly and imports will drop to near-zero is almost certain not to be realised," the consultancy said.
A win by US-based solar major SunEdison of a $US500 million, 500-megawatt solar auction in the southern Indian state of Andhra Pradesh in November shocked the market with its pricing of 4.63 rupees per kilowatt-hour (US7.1¢/kWh), 10 per cent below the previous record low set three months earlier.
That pricing was regarded by many as irrational and as an aggressive chase for market share in the fast-growing market, until the award of a 350 MW contract in December to a consortium led by Japanese telecommunications company SoftBank at the same price.
The contracts should act as a warning to Australian coal exporters not to rely on IEA forecasts, Mr Buckley said.
India's ambitious National Solar Mission is targeting 100 gigawatts of solar capacity by 2022, and several solar majors are committing huge investments there, helping drive down costs.
IEEFA is forecasting reductions in solar tariffs will run at 5 per cent a year in India over the next decade, making solar cheaper than power generated even from domestic coal.
In its latest coal outlook report in December, the IEA pointed to India as one of the few remaining major growth markets for thermal coal exports, along with south-east Asia.
The IEA is forecasting the world's seaborne thermal coal market will reach 1.06 billion tonnes by 2020, a reduction from its previous forecast, but still above many other analysts. It assumes India will increase its thermal coal imports to 204 million tonnes by the end of the decade, representing an increase of 73 million tonnes from 2014.
Macquarie Research puts the market size in 2020 at 25 per cent less, but still assumes a modest increase in traded thermal coal volumes. Macquarie described the IEA's forecast for Indian coal imports as "staggering", saying it expected the increased demand for thermal coal to be met mostly from domestic sources.