Coal, the only alternative for the EU?

With the decline in Russian gas deliveries, the stability of the EU's energy supply is expected to come from coal in the short term.

Russia has already reduced gas deliveries to the European Union (EU). Thus, as the likelihood of a total shutdown of Russian flows increases, coal seems to be emerging as a short-term solution.

Is coal the only option?

According to the Australia and New Zealand Banking Group (ANZ) in a July 14 report, coal is the only option for stabilizing the European Union’s energy supply. According to the ANZ, nuclear energy does not seem to be a viable alternative:

“Nuclear power remains reduced due to aging power plants and LNG imports are at maximum capacity.”

The report adds, however, that Europe has made efforts to diversify its energy sources and supplies. Nevertheless, the report explains that alternatives are increasingly difficult to find and that they will certainly not be enough to make up for Russian gas.

With the EU sanctions against Russia, the flow of energy products, especially gas, is a major concern for the region. The EU imports 90% of its gas consumption, with Russia providing about 45% of these imports. Energy security is therefore becoming the EU’s short-term priority objective, sometimes in spite of climate objectives.

European countries revive power plants

For example, Germany is already considering restarting some coal-fired power plants. It has planned 6.9 GW of coal, 1.9 GW of lignite and 1.6 GW of oil capacity to strengthen its energy supply. The Parliament also discussed financial incentives for coal-fired power plant operators if the gas supply situation deteriorates.

Italy is also considering restarting up to 2.5 GW of coal-fired power generation capacity. This would bring Italy’s operational coal capacity to 8.5 GW.

If Nord Stream remains at about 40% capacity for the rest of the year, ANZ said gas consumption is expected to fall by 5%, and storage levels would reach about 67% before winter.

“If Nord Stream stops completely, gas consumption would have to be reduced by 10% and storage levels would reach 60% before winter. So there is a real risk that Europe will run out of gas during the winters.”

Yet coal prices continue to be under upward pressure, a consequence of strong European demand. European CIF ARA 6,000 kcal/kg NAR physical coal prices were assessed at $415/mt on July 13. Thus, according to ANZ:

“An impending energy crisis in Europe is likely to shift utilities from gas to coal, which could increase competition for seaborne coal.”


Illustration : Energy industry illustrations by SOFIA ZHELTUKHINA

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