Key facts
- Europe is increasing coal use due to high natural gas prices.
- Gas prices exceeded €80 per megawatt hour this month.
- Coal is expected to remain cheaper than gas through 2028.
- Europe's coal-fired power generation share fell to 9.2% by 2025 from over a third in 1990.
- Coal is the largest driver of global warming, responsible for about 40% of greenhouse gas emissions.
Europe is experiencing a significant return to coal-fired power generation as natural gas prices remain prohibitively high, exacerbated by geopolitical tensions and disruptions to global energy trades, including the closure of the Strait of Hormuz. Gas prices have surged above €80 ($90.98) per megawatt hour, making coal a more economical option for electricity production for the first time in years.
This shift is particularly evident in Germany, the European Union's largest economy. Analysts predict that coal will continue to be cheaper than gas for power generation through next year and potentially until March 2028, citing persistent supply constraints expected by traders. This situation has led European leaders to scramble for short-term energy solutions amidst concerns about voter anger and economic competitiveness.
However, Europe's capacity to significantly increase coal usage is limited by years of policy aimed at phasing out the fuel. The European Union's reliance on coal for electricity production has fallen dramatically from over a third in 1990 to just 9.2 percent by 2025. Despite these limitations, remaining coal plants are set to benefit from the current high gas prices.
Globally, coal remains the primary source of power production. While Europe reduces its coal capacity, many emerging economies, particularly in Asia like the Philippines and Indonesia, are expanding theirs. These regions were also significantly impacted by the closure of the Strait of Hormuz.
While coal offers affordability and abundance, its environmental cost is substantial, being the largest contributor to global warming. The resurgence of coal is occurring alongside a global increase in renewable energy adoption, which is increasingly viewed as crucial for energy security and as a buffer against future energy crises. Unlike fossil fuels, renewable sources like wind and solar cannot be embargoed or weaponized by foreign powers.