October 18, 2021

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Europe Could Turn To More Coal If Gas Crunch Persists

Despite its ambitious green energy targets, Europe could be forced to burn more coal this winter if natural gas stockpiles are not adequately replenished amid record-high gas prices, an expert on the EU energy market told Russian news agency TASS on Thursday.

Gas prices continue to be pushed up by the risk of insufficient gas storage ahead of the winter heating season, EU energy expert Simonas Vileikis told TASS.

“If inventories are not refilled now and winter turns out cold enough, EU countries may be forced to fire up power plants burning fuels other than gas, including coal, to generate enough electricity,” Vileikis said. 

This scenario will hit the EU’s ambitions to reduce greenhouse gas emissions, the expert noted.

Gas prices in Europe have shot up in recent weeks, with the European benchmark, the Dutch Title Transfer Facility (TTF) hub, surging by 250 percent since the beginning of the year, as per Reuters estimates. Gas prices in major economies, including Germany and France, have also spiked, leading to record electricity prices.

The whole of Europe, including the UK, is grappling with soaring natural gas and electricity prices ahead of the winter heating season due to tight gas supplies, very low gas inventories across the continent, and low wind power generation amid still weather.

In the UK, now a non-EU country, surging natural gas prices and warm and still weather forced the country to fire up last week an old coal plant that was on standby in order to meet its electricity demand.

The rally in natural gas prices is also driving global demand for coal. Goldman Sachs this week nearly doubled its price projection for coal prices in Asia, expecting the benchmark Newcastle thermal coal to average $190 a ton in the fourth quarter, up from a previous forecast of $100 per ton, due to sky-high gas prices ahead of the winter heating season.

By Tsvetana Paraskova for Oilprice.com

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