“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 ➤
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