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Europe burns more coal as natural gas declines

Europe burns more coal as natural gas declines

European utilities are increasingly relying on coal for power as the region tries to reduce its dependence on Russian natural gas.

Even with rising prices for the dirtiest fossil fuel, along with most other commodities, it’s still much cheaper for power plants to burn coal than gas to produce power.

Last week, power stations on the continent burned 51% more sedimentary rock than a year earlier, according to Fraunhofer ISE data. At the same time, demand for gas from power plants decreased.

Change may be here to stay, despite how bad it is for the environment. With Europe planning to cut Russian gas consumption by two-thirds this year, companies will inevitably rely more on coal, though the region will also look to increase supplies from other gas producers.

High gas prices across Europe are reducing the economic competitiveness of gas relative to coal”, said Kesavarthiniy Savarimuthu, an analyst at BloombergNEF. That is causing utilities to prefer coal over gas, particularly in Germany, which is already Europe’s biggest consumer outside of Russia.

Russia is also Europe’s largest supplier of coal; in 2020 it represented about a third of the total. And with the country increasingly isolated, traders are rushing to buy the fuel from other producers, including Colombia, South Africa, Australia, Indonesia and the United States.

Last week, Russian coal exports were still being shipped to the UK, Germany and Latvia, as European sanctions have yet to block imports of key energy sources.

A 30,000-tonne shipment of coal left Murmansk in northwestern Russia on March 3, bound for Belfast, according to shipping data provider Marcura compiled by Bloomberg.

Record price volatility is likely to continue for some time. On Friday, coal prices for delivery next month were little changed at $360 a tonne. However, they are down 16% this week after more than doubling in the previous period.

Source: Gestion

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