Coal beats gas for European power as prices surge

·2 min read
Coal
Coal

Coal has generated more electricity in Europe than gas for the first time since 2018 following surging costs.

Coal, including lignite, generated 110 terawatt hours of electricity, while gas generated 92 terawatt hours, in the three months to September 30, according to market specialist EnAppSys.

The trend, mirrored in other parts of the world, puts the brakes on years of efforts to switch from coal-fired generation to gas because the latter is less polluting.

It deals a blow to world leaders as they prepare to meet in Glasgow next month and agree measures to tackle climate change at the Cop26 conference.

A global gas supply crunch has triggered record gas and electricity prices, with gas in Europe climbing from less than €10 per megawatt hour in September last year to almost €50 a megawatt hour in the quarter.

"The high gas prices flipped the economics between gas and coal/lignite, with coal/lignite becoming economically more attractive despite the high carbon prices," EnAppSys said.

The last time coal and lignite output exceeded that from gas was in the fourth quarter of 2018.

The trend is likely to have continued this month as gas prices keep rising and show few signs of easing going into winter.

Under its “Fit for 55” package, the EU plans to cut emissions by 55pc by 2030, which requires phasing out coal for gas and renewables.

Nuclear power is the biggest producer of power on the Continent. But over the third quarter, coal generation reached levels usually met in January and February when cold weather means demand is at its peak.

"This suggests that coal is still an important part of Europe’s fuel mix, despite widespread efforts to switch to cleaner fuel types in the fight against climate change," added Jean-Paul Harreman, director of EnAppSys BV.

High gas prices have also triggered an increase in coal use in the US and China.

Power plants in the US are set to burn 23pc more coal this year, according to Bloomberg analysis of official data, even as President Biden pledges to clean up the power sector.

Chinese officials have ordered coal miners to produce "as much as possible" to try and tackle fuel shortages which are denting its economic growth.

In Britain, most of the coal-fired power stations have been shut, meaning coal's ability to be ramped up is limited even at times of high gas prices.

By mid-September in Britain it was cheaper to generate from the least efficient coal units than the most efficient gas units, EnAppSys said.

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