Europe's Soaring Gas Bill Is Sending Utilities Back to Coal
Europe faces renewed energy strain as gas prices have surged to three-year highs, prompting a shift back toward coal-fired power in several countries, notably Germany. While renewables are expanding rapidly across the bloc, high gas costs and supply fears are making coal economically preferable for the near term.
Why It Matters
Rising gas costs and continuing geopolitical disruption are reshaping European power-generation choices and could slow decarbonization progress; the short-term rebound in coal use highlights tensions between energy security and climate goals.
Key Facts
- Gas price (recent): Above €80 ($90.98) per megawatt hour this month
- Strait of Hormuz impact: Earlier closure disrupted about one-fifth of global oil and gas trades
- Coal vs gas price outlook: Analyst Marta Wroniszewska told Reuters coal is expected to remain cheaper than gas for power generation through next year and potentially until March 2028
- EU coal share 1990: More than one-third of electricity production came from coal in 1990 (Eurostat)
- EU coal share 2025: Down to 9.2% of electricity production by 2025 (Eurostat)
Europe’s energy tightness has intensified as gas prices climbed to levels not seen in three years, exceeding €80 per megawatt hour. The spike followed geopolitical turmoil tied to a military offensive involving the United States and Israel in Iran and the temporary closure of the Strait of Hormuz, which the source says interrupted roughly one-fifth of global oil and gas trade. Policymakers across the bloc, already focused on diversifying energy sources after repeated crises, now face immediate price and supply pressures. Because coal-fired generation is currently cheaper than gas in Europe, multiple countries have increased reliance on existing coal plants, with Germany among the most notable re-adopters of the fuel. Market participants cited by Reuters told reporters that longer-dated gas contract prices imply traders expect persistent supply constraints, and an analyst at Veyt said coal could stay cost-advantaged into 2028. Still, the potential scale of coal’s comeback inside Europe is constrained by decades of policies that have reduced the continent’s coal fleet. Eurostat figures show coal accounted for over a third of EU electricity in 1990 but was projected to supply only 9.2% by 2025, leaving fewer plants available to scale up generation. Outside Europe, however, many emerging economies continue to add coal capacity, keeping coal the world’s largest single source of power. The return to coal raises climate concerns: coal remains the largest single driver of global greenhouse gas emissions, responsible for about 40% of the total. At the same time, the crisis has accelerated deployment of renewable generation across many countries, with proponents arguing wind and solar strengthen energy security because they cannot be embargoed or blocked by external actors. The net effect is a tension between short-term responses to supply shocks and longer-term decarbonization objectives.