Coal power rises in Europe in face of gas supply concerns

Despite years of strategic decarbonisation, coal-fired electricity was on the rise last year for the first time in almost a decade, according to preliminary data from Rystad Energy Research.

Despite several years of de-carbonisation of the European power market, demand for coal-generated electricity rose 18% to 579 TWh in 2021. The provision of gas, hydro and wind power generation all decreased last year, increasing pressure on other energy sources such as coal, to bridge the gap, says Rystad.

The analysts note that coal-fired electricity generation had been steadily declining in Europe since 2012. However, recent concerns around the high price of gas, the availability of nuclear power (as several plants reach the end of their lifecycles), along with lower wind and hydro generation, could see coal power rising 11% this year to 641 TWh – signalling a return to 2018 levels.

Increasing coal’s momentum comes as a significant disappointment, since recent promises were made at the COP26 Glasgow Accord by most EU member states (with the exception of Poland and Hungary) and many other countries to reduce carbon emissions.

Coal’s resurgence last year was attributed to record-high gas prices and the strained relations between Russia and Ukraine, which raised questions about the long-term security of gas imports through Russian-operated pipelines.

Carlos Torres Diaz, Head of Gas and Power Markets Research at Rystad Energy, said: ‘European countries have been gradually decommissioning coal infrastructure over recent years, as the power market moves towards a greener, less carbon-heavy future. However, as the regional energy crisis shows, coal remains a critical component of the power mix, especially when the reliability of other sources of energy is called into question.’

Record high gas prices are forcing buyers to explore alternatives. Gas prices in December 2021 hit €182 ($207) /MWh, a staggering 900% year-on-year increase. Despite soaring prices, European gas demand from the power sector fell only marginally in 2021, by around 3bn m³ to 144bn m³. Continued reliance on gas helped catalyse the Europe-wide energy crisis and sent consumer electricity prices skyrocketing last year.

Hydro and wind-generated power fell in 2021 for the first time, due to low wind speeds and lower hydro dam levels in various countries.

Looking forward, the analysts forecast that if gas prices remain high or the Russia-Ukraine conflict results in a significant drop in gas-fired generation in 2022, coal power will remain the most flexible option (despite continued decommissioning of infrastructure), with the possibility to increase supply by 63 TWh.

The analysts conclude: ‘As a result of the limitations of other sources of power generation, gas is expected to remain the marginal supplier that can make up any shortfalls. If gas prices remain high – which looks likely – consumers may have to battle with soaring energy prices for some time to come.’

Coal-fired power station in the UK
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