With Russian gas gone, coal makes EU comeback as ‘traditional fuel’ – As Energy prices could double long-term in Germany

Though wholesale prices for gas and electricity have recently dropped, German utility companies expect the end price for consumers to double long-term.

After Russia’s invasion of Ukraine led to a squeeze on cheap energy supplies to Germany, gas and electricity prices reached record levels last year.

But in the last few months energy prices have been falling. Wholesale prices for electricity have dropped by around two-thirds since mid-December, while the price of a kilowatt hour of gas on the stock exchange is now around the same as it was before the war began.

But private households don’t buy their energy on the exchange: they have supply contracts with utility companies, which are usually structured in such a way that end-customer prices are not directly adjusted to developments in the market price.

Now German utility companies are warning that, in the long term, gas and electricity tariffs are set to be double.

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7) With Russian gas gone, coal makes EU comeback as ‘traditional fuel’
EurActiv, 26 January 2023

Coal demand in Europe went up for the second consecutive year in 2022, led by “strong growth” in electricity generation, where it has partly replaced gas as a backup power source, according to the International Energy Agency (IEA).

Once eclipsed by cheaper and less-polluting Russian gas, coal is making a comeback in Europe to supply electricity when carbon-free sources like nuclear and renewables aren’t available.

And with gas prices expected to remain volatile for some time, the winds are blowing more favourably for European coal power generators, an IEA official said on Monday (23 January).

“In our forecast, despite the recent decline in gas prices, until 2025, coal is still more competitive than gas,” said Carlos Fernández Alvarez, who heads the IEA’s division on gas, coal and power markets.

Growing demand for coal was driven chiefly by the war in Ukraine and the need to reduce gas consumption following Russia’s decision to diminish supplies to Europe, according to the IEA’s 2022 coal report, published in December.

Alvarez said that the demand for coal in Europe was also pushed up by the decline in nuclear power generation coming from France, Germany, and Belgium.

“There is a gap [in power generation capacity] that needs to be filled. And with high gas prices, it’s coal” filling the gap, the IEA analyst said at a meeting organised by industry association Euracoal.

As a result, coal demand in Europe is set to grow for the second year in a row in 2022, the IEA indicated in its December report.

For many in Europe, Russia’s war in Ukraine brought an end to the assumption that gas would be used as a stepping stone to phase out coal power.

“Last year, we saw the end of the notion of gas as a transitional fuel,” said Radan Kanev, a Bulgarian conservative MEP.

Rather, “the transitional fuel is the traditional fuel,” he added about growing demand for coal last year to replace Russian gas.

Coal’s resurgence in Europe is expected to be short-lived, however.

With EU pressure piling up to meet climate goals and reach net-zero emissions by 2050, the industry assumes that coal will have disappeared entirely from the EU’s electricity mix during the next decade.

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