This year, despite the record-high carbon price in Europe, the use of coal for power generation has jumped by up to 15 percent, Andy Sommer, team leader of fundamental analysis and modeling at Swiss trader Axpo Solutions, told Bloomberg in an interview published on Tuesday.
"Gas storage is so low now that Europe cannot afford to run extra power generation with the fuel," Sommer told Bloomberg.
Natural gas stockpiles are some 25 percent below the five-year average, and with such a right gas market, utilities run more coal-fired power generation, analysts say.
Europe had already started to restock with natural gas following a harsh winter that drained inventories when a cold snap in April caused unusual additional withdrawals from storage.
"A cold snap in April caused a counter-seasonal net withdrawal of inventory, worsening the storage situation which for several months has been running below seasonal averages," Wood Mackenzie said in its Q2 LNG short-term trade and price outlook at the end of May.
As a result of the low levels of natural gas in storage, the price of the Dutch TTF gas, the European benchmark, has rallied by over 50 percent so far in 2021. Prices are close to the highest level for late spring since 2008, according to Bloomberg estimates.
With the ultra-tight gas market, power generation from coal is rising in Europe, despite the record-high EU carbon price, which exceeded US$60.50 (50 euro) per ton in early May.
The current situation with the power mix in Europe is indicative of the challenges the continent and the European Union face in their push to make the grids greener.
Coal use in power generation is also on the rise in the United States, where the price rally in natural gas is discouraging parts of gas-fired electricity generation and is set to give coal a short-term boost this summer.
Tsvetana Paraskova is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
Reader Comments
Then the Russians decided to build it under the sea, directly to Germany.
However, when it comes to energy, miracles happen. The government in Poland (I do not write Poles) has committed to give up fossil energy by 2050, which is a suicide because Poland has the largest coal deposits in Europe.
Currently, Poland has two large coal-fired power plants, Turów and Bełchatów.
A strange thing, because the Czechs suddenly said that they wanted some gigantic compensation for the Turów, and at the same time, serious failures began to multiply in Bełchatów, I suppose it was sabotage.
The European Union is a terrible rot.