BMI Research: coal to dominate

BMI Research has released its outlook for India&rsquo;s power sector: "India's power sector will remain dominated by coal over our 10 -year forecast period, with coal making up a s hare of jus t les s than 70% to the total power generation mix by 2026. This is roughly the same level as it is currently, with growth underpinned by the significant and continually g rowing project pipeline for coal-fired power facilities in the country.Coal will continue to be the feeds tock of choice for the Indian power sector given its widespread supply and relatively cheap cost. Domes tic coal supply is expected to increase over the course of the decade, as Coal India ramps up output. We expect India to surpass the US as the world's second largest producer of coal during 20 16 -20 20, increasing market s hare from 9.8% in 20 16 to 12.7% by 2020. Imports will remain important for the country, as India's coal production will not meet the government's ambitious target of self-sufficiency, due to delays in opening up commercial mining to private players and s low approvals for new state mines.That said, we expect the global coal market to loos en and thermal coal prices to weaken from their 20 16 highs, with prices to settle in a US$60-70/t range over most of 20 17. This trend will be driven by China's more cautious approach to coal sector consolidation policies after provoking a policy supply s hock in the coal sector in 20 16 which sent prices rallying.Despite the prevalence of coal-fired power generation, we expect significant growth in alternative, cleaner power sources over the next 10 years - albeit from a lower base -, notably in the natural gas, nuclear and non-hydropower renewables sectors. This is in line with government efforts to reduce pollution across the country and international pressure to boos t environmental policy.In particular, India will be a key player in the global renewables market in terms of the size of its industry and rate of expansion over the coming decade, underpinned by Prime Minister Narendra Modi's strong support for renewable energy and the ambitious targets for sector growth. Growth in natural gas consumption in the power sector will be supported by the construction of several new LNG import terminals on the east coast of India. This proliferation of import capacity will drive robust gas consumption in the country, which we see rising to 88.6 bcm in 2026, with the power sector being a key beneficiary of this extra supply.Finally, India remains committed to pursuing nuclear as an answer to rapidly-g rowing demand for electricity and as a means to lower emissions through the adoption of low-carbon power sources; the government plans to source 25% of the country's electricity from nuclear energy by 2050, up from the current level of 2.5%. India has over 6 6 GW of nuclear capacity under construction, planned or proposed across the country, and although risks to project realisation remain high (low power tariffs and safety concerns being pertinent risks), we do expect nuclear capacity to increase to jus t under 10 GW by 2026."

BMI Research: coal to dominate

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