The European energy crisis is not over. Gas prices remain stubbornly high across the continent as Europeans face a long winter.
Faced with an energy crisis stemming from Europe’s continued dependence on imported liquefied natural gas, in a context of continuous global geopolitical volatility, European leaders are working to diversify the bloc’s energy mix. If this translates into a rapid expansion of renewable energy capacity, it also marks a significant return to the world’s most polluting fossil fuel: coal.
Earlier this year, when the US and Israel launched an offensive against Iran — causing a disruption of a fifth of global oil and gas trade — Europe became aware that it had been dragged, almost without realizing it, into a new energy crisis: the third in just four years. “We had sworn to learn from the past. We promised that things would change, and yet we are back to it,” a “very frustrated” European diplomat recently said (under condition of anonymity).BBC
“Instead of focusing on much-needed long-term plans — to make Europe more competitive in this increasingly unstable world — [European] prime ministers and presidents are now panicking about [energy] prices, fearing voter anger and struggling to find short-term solutions,” the source said. “It is exactly like the crisis that followed Russia’s large-scale invasion of Ukraine. The conflict is different, but European divisions and energy dilemmas remain the same. We can’t keep going around in circles like this. Things have to change.”
Today, six months after the outbreak of the war in Iran and the initial closure of the Strait of Hormuz, Europe is still suffering the repercussions of the situation, with gas prices remaining extremely high. This month, gas prices reached their highest level in three years, exceeding the 80 euro mark (90.98 dollars) per megawatt hour.
Prices are so high that, for the first time in years, electricity produced from coal has become cheaper than that produced from gas in Europe. This situation has prompted many European countries – and especially Germany, the first economy of the European Union – to turn again to coal. Moreover, experts are concerned that this trend will continue in the years to come.
“Coal is expected to remain cheaper than gas for electricity generation throughout next year and potentially until March 2028,” Reuters reported earlier this week, citing Marta Wroniszewska, an analyst at Veyt. “Long-term gas prices indicate that market operators expect supply constraints to persist.”
However, the potential for coal growth in Europe is facing significant limits. Years of policies to gradually reduce and then abandon coal have left the continent with a much lower number of coal-fired power plants than it was before. In 1990, the European Union derived more than a third of its coal power generation. By 2025, this share had fallen to only 9.2%, according to Eurostat data. Thus, if coal-fired power plants still in operation in Europe will benefit from a financial windfall thanks to current gas prices, the potential for coal rebound in the region is capping.
Outside of Europe, however, the situation is different. Globally, coal remains the main source of electricity generation. And while Europe dismantles its coal-fired capacity, many emerging economies continue to develop their own, with particularly strong growth in the Philippines, Indonesia and other booming Asian countries. It is no coincidence that this region was also the hardest hit by the closure of the Strait of Hormuz.
Although coal is cheap, abundant and considered an essential lever for the economic development of poor countries, the constant prolongation of its hegemony has negative consequences that far outweigh the benefits. Coal is the main driver of global warming, responsible for about 40% of all greenhouse gas emissions. However, not everything is negative: the return of coal is accompanied by a major increase in clean energy resources on a global scale. Renewable energy is increasingly being adopted for its role in a future that ensures better energy security, and is seen as an essential bulwark in the face of the next global energy crisis. Unlike natural gas, oil and coal, “wind and solar energy cannot be embargoed, blockaded or cut imposed by a foreign power,” David Frykman, a managing partner at Stockholm-based venture capital fund Norrsken, wrote earlier this year in a forum for Fortune. “Every terawatt-hour of domestic renewable energy production is a terawatt-hour that no opponent can turn into a weapon.”