(March 19): Soaring gas prices are pushing Europe to rely more on coal generation, even as demand falls and solar generation increases as sunnier, milder weather sets in.
German coal plants have raised 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 as surging wholesale prices make the fuel less profitable for electricity generation.
If the shift gains further momentum, the impact will ripple 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.
“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.”
Still, fossil fuel generation is declining as spring progresses and warmer weather curbs demand. Germany’s power consumption has fallen about 10% so far in March from February and is slightly lower than a year ago, according to Entso-E.
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.
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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.
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 fill. Coal accounts for roughly a quarter of generation, serving as the main backup when solar and wind output dips.
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.
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