Coal from the Carmichael mine in Queensland was supposed to alleviate poverty in South Asia, but instead it’s further entrenching deep energy inequality and debt in Bangladesh, according to a new report.
The high cost coal from the mine is contributing to Bangladesh being charged nearly $US150 ($218) per megawatt hour (MWh), two and a half times what it is able to sell that same energy for and double the initial forecast price.
The Carmichael mine is owned by Indian conglomerate Adani, which also owns the soon-to-be commissioned Godda power plant in Jharkhand state, India, which will export power to the Bangladesh Power Development Board (BPDB).
“Coal is being imported from Carmichael and railed 700km from port to the Godda power plant in Jharkhand state, India. The full cost of this is being passed onto Bangladesh,” says Simon Nicholas, author of the report Carmichael Coal Is Not Reducing Poverty in South Asia – High Cost of Coal Is Adding Pressure for Power Tariff Hikes in Bangladesh.
“During the Carmichael coal mine’s protracted development phase, backers of the Queensland project often stated that the project was needed to help people out of poverty in South Asia. This was merely coal industry spin. If anything, it is doing the exact opposite.”
Nicholas told RenewEconomy that although there is no data available for how Carmichael coal is priced, it is a lower quality product with a lower energy content than Australian thermal coal benchmarks, so it will be priced at a discount to that.
Entrenching energy poverty in Bangladesh
Bangladesh is already struggling with high fossil fuel prices which rocketed following Russia’s attempted invasion of Ukraine.
The BPDB has not been able to pay independent power producers, like Godda, since May and owes $US2.5 billion, and asked the International Monetary Fund (IMF) for a $US4.5 billion loan in July. That energy debt led credit rating agency Moody’s to put the country under review for a downgrade this month.
Bangladesh heavily subsidises power but the high price from Godda makes these increasingly unaffordable and is already leading to the BPDB asking to lift retail tariffs.
Already the high cost of power, driven by fossil fuel price rises, is causing blackouts and school and office hour cuts.
“The growing burden of fossil fuel imports has been putting Bangladesh’s power system under growing financial strain for years and IEEFA has been warning that this will lead to the need for higher power tariffs,” says Nicholas, who is energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA).
Carmichael was a bad idea
Adani has been trying to find buyers for its coal from Carmichael for years.
The global shift to renewables as solar and wind prices plummeted drastically changed the economics of the mine which was originally supposed to produce 60 million tonnes per annum and run for a century. When it launched a decade after being proposed, in December 2021, the numbers had changed to 10 million tonnes per annum and a life span of two to three decades.
It pitched Vietnam in 2018 and Nicholas says it’s possible all output is going to Godda.
“We don’t know where else (if anywhere) Carmichael coal is going,” he told RenewEconomy.
“The Godda plant will need around seven million tonnes per annum and Carmichael’s capacity will be higher than that so some coal will likely be exported elsewhere.”
The original plan for Godda was to use local coal mined in Jharkhand state. The plan was later changed to use Carmichael coal and lock the Bangladesh Power Development Board (BPDB) into a power purchase agreement that allows Adani to import coal into an Indian coal mining state from Australia and pass the full cost onto Bangladesh.
“It is even clearer now that the Godda power plant deal with Bangladesh was aimed primarily at propping up the development of the Carmichael coal mine,” he says.
“The full cost of the coal imported to the Godda power plant can be transferred onto Bangladesh. This is an unaffordable burden for a country put on review for a credit rating downgrade by Moody’s this month, driven to a large extent by rising costs for energy imports.
“The Godda deal overwhelmingly favours Adani and will clearly not help pull people out of poverty as Carmichael backers promised.”
The $US3 billion mine is one of the most controversial coal developments in the world.
Forty-five insurers have ruled out working with the Carmichael mine, according to Market Forces data, and Adani was forced to start its own haulage company to get the coal from mine to port after the reputational damage of being associated with the project scared key East Coast coal transporters off.
India’s coal needs
India more generally is unlikely to be a consistent market for Carmichael coal.
It wants to install 500 gigawatts (GW) of renewable capacity by 2030 as it tries to reach a net zero emissions target of 2070. Currently the country generates about 25 per cent of its power from non-coal sources, according to S&P.
But it also has plans to ramp up its coal power capacity over the coming decade as well by 56 GW as it waits for energy storage prices to fall and to cater to growing energy demands.
India’s draft National Electricity Plan in September is planning to use 40 per cent more coal by the end of the decade for energy alone.
This is despite being down to just nine days of coal reserves in July, although it has repeatedly committed to plans to lift domestic coal production to more than 1 billion metric tonnes by 2023-24, with 777 billion mt reached in 2021-22.
