Europe Boosts Coal-Fired Power as Gas Prices Rally on Iran War

9rjo(}r(}qb1v4}pgs2lduca_media_dl_1.png ENTSO-E

Article content

(Bloomberg) — Europe is burning more coal as the surge in natural gas prices forces utilities to switch to cheaper fuels to keep the lights on.

Article content

German coal plants have increased their share of generation by about 2% so far this month compared with February, even as sunnier and windier conditions boost renewables, according to Entso-E data. At the same time, gas-fired power output in Europe’s biggest market has dropped by more than a third. 

Article content

Article content

Article content

If the shift gains further momentum, implications will stretch well beyond power markets. It underscores the fragility of Europe’s energy strategy, which relies heavily on gas as a bridge between coal and renewables. It also raises the prospect that governments may prioritize affordability and energy security over emissions cuts.

Article content

Article content

“We estimate it is still about 30% more expensive for a power plant to burn gas than coal to produce electricity in Europe,” Myles Allsop, an analyst at UBS Group AG, wrote in a note. “We see potential for the EU to restart dormant coal power plants if the energy crisis worsens.”

Article content

Still, any broader switch from gas to coal may be limited as spring progresses and warmer weather leads to lower demand. Germany’s power load has fallen about 10% so far in March from February and is slightly lower than a year ago, according to Entso-E.

Article content

Read: Europe’s Power Prices Resist Iran Shock as Renewables Surge

Article content

Benchmark gas futures have more than doubled this month as the war in Iran fuels concern about global energy supplies. The equivalent coal contract is up about 30% this month. 

Article content

Article content

Higher fuel costs will eventually feed through to electricity prices, intensifying pressure on households already grappling with a high cost of living and testing industrial competitiveness across the region.

Article content

The trend is also troubling for the climate. Even as renewables have supplied more than 40% of Germany’s electricity so far this month, their variability leaves gaps that fossil fuels must still fill. Coal accounts for roughly a quarter of generation, serving as the main backup when solar and wind output dips.

Article content

That reliance may grow in the coming days, with cooler weather forecasts expected to reinforce the trend. Coal plant availability has risen by about one gigawatt this week from last, according to analysts at Kpler.

Article content

Read: EUROPE WEATHER: Cool Shift Seen Lasting Into Next Month

Article content