Montel Magazine 1 - 2020 - Page 47

“Certainly, I wouldn’t see great prospects for coal in Europe. The economics support gas and the European political environment is such that coal is in dire straits” on an economic basis – with prices back to 2016 levels – so somebody must be saying ‘why not speed up the coal phase out?’,” he says. The Global Coal Des ARA index – a benchmark for Atlantic basin physical coal prices – last year averaged just over USD 60/t, around 35% lower than in 2018.However, Coghe says there is only limited scope to consume increased volumes of gas, even if prices remain competitively low versus coal. “There is a lot of LNG coming in, and the question is whether there is too much.” Diana Bacila, senior coal market analyst at Alpiq, agrees. “Coalto-gas switching was a hot topic in 2019, but I assess the switching potential left is rather limited in 2020,” she says. While gas has displaced coal “heavily” in Germany, Spain and Italy, she says the effects have been less pronounced for the UK and France, where there is not so much coal-fired power capacity left. “The impact of increased LNG send-outs to Europe will likely continue igniting coal-to-gas switching in southern Europe – Italy and Spain – while Germany will be able to optimise between Norwegian and Russian pipeline supply and LNG volumes,” she says, adding total coal power output “at risk” from the main consuming western European nations was around 10 TWh/month during winter and around 5 TWh/month during summer. Last year, Europe’s total coal-fired generation fell 27% year on year to 420 TWh, while gas-fired units increased generation by 12.5% to just over 500 TWh, according to EnAppSys. Alpiq’s Bacila reckons future growth in LNG supply could even start to displace lignite – the dirtiest form of coal burn – in Germany and potentially drive gas-fired power output in France, thereby helping to limit power price spikes on days with low nuclear availability. But market dynamics alone cannot be relied upon to push coal from the European energy mix – even if alternative capacity is available – so government policy must also aid any transition, participants say. “If you have a German power plant built right next to a coal mine, it’s not ➤ Montel Magazine 1–2020 47