Europe Facing Power Crisis As Utilities Choose Coal Over Gas

The Russia-Ukraine crisis is reinforcing coal-fired power generation in Europe, where nearly a third of capacity is at risk of shutting down as utilities opt to burn cheaper and higher carbon dioxide-polluting coal over natural gas, according to a recent report by the International Center for National Gas Information, a gas association also called Cedigaz.

“The current situation has the potential to unfold into a major structural crisis,” the report warns, as world leaders meet in Brussels this week to discuss energy security and climate change. Natural gas burned in power plants emits about half the carbon dioxide pollution of coal-fired generation, according to the U.S. government.

U.S. shale gas production has led to a surplus of coal on the global market, creating a supply glut and cutting coal prices by more than one-third since mid-2011, according to Cedigaz. At the same time, natural gas prices (linked to oil prices outside the U.S.) have increased by more than 40 percent between 2010 and the end of last year as demand in the EU has dropped by one-third over that period, meaning coal is now about three times cheaper than natural gas on an energy equivalent basis.

Still, European Union air-quality rules are expected to shut down as much as one-third of coal-fired capacity by 2020, to be replaced by intermittent renewable power like wind and solar that still requires capacity back-up, Cedigaz said.

“These trends pose a serious challenge for security of supply, as thermal power generation is needed to back up variable renewable energy sources,” Cedigaz said.

Though the EU has tried to lead the global fight against climate change, aiming to cut carbon emissions by 20 percent by 2020 from 1990 levels, it hasn’t reached agreement to aim for a 40 percent cut by 2030, and there are signs that it may support conventional power sources a bit longer.

A policy paper by the European Commission trade department argues that European makers of coal-fired power plants should get financial help to export the equipment, Reuters reported. An EU diplomat speaking to Reuters off the record Tuesday said the policy paper was informal but “most EU nations” support the idea.

Leaders of European utilities asked lawmakers Tuesday to speed up legislative changes that would help them cope better with a new energy landscape where high renewable output has pushed down prices and comparatively expensive gas has made some power stations unprofitable, Reuters reported.

To encourage utilities to switch from coal to gas in power generation, the carbon dioxide price would have to rise five or six times its recent level, Cedigaz said.