European gas prices have climbed above €80 ($90.98) per megawatt hour, a three-year high that has made coal cheaper than gas for power generation for the first time in years. Germany and other European nations are leaning back on coal plants, even as the continent's coal fleet keeps shrinking and the rest of the world burns more of it.
Coal undercuts gas on price
Natural gas prices in Europe hit their highest mark in three years this month, soaring above €80 ($90.98) per megawatt hour. That spike has flipped the economics of power generation: coal-fired electricity is now cheaper to produce than gas-fired electricity across Europe for the first time in years. The shift has pushed several European nations, and especially Germany, the European Union's largest economy, to lean harder on coal plants.
According to Reuters, analysts expect coal to remain cheaper than gas for power generation through next year and potentially until March 2028. Veyt analyst Marta Wroniszewska said: "Longer-dated gas prices indicate traders expect supply constraints to persist."
A shrinking fleet caps the rebound
However, Europe's ability to lean on coal has a ceiling. Decades of phase-down policy have left the bloc with far fewer coal plants than it once had. In 1990, coal supplied more than a third of EU electricity; by 2025, that share had fallen to just 9.2%, according to Eurostat data. So while Europe's remaining coal plants get a windfall from today's gas prices, the region cannot rebuild coal capacity at scale.
Outside Europe, the picture looks different. Coal remains the single-biggest source of power production worldwide, and several emerging Asian economies, including the Philippines and Indonesia, keep expanding their coal fleets. That region also took the hardest hit from the closure of the Strait of Hormuz earlier this year.
Emissions trade-off persists
Coal is responsible for about 40% of global greenhouse gas emissions, the single largest share of any power source. Yet the fuel's extended run is unfolding alongside a parallel buildout of renewable capacity worldwide, which analysts increasingly frame as a buffer against the next supply shock rather than only a climate measure.
Europe's current squeeze traces back to the closure of the Strait of Hormuz after the United States and Israel launched an offensive against Iran earlier this year, disrupting a fifth of global oil and gas trade. For Europe, it marked a third energy crisis in four years, with the continent's remaining coal plants now capturing the windfall from high gas prices.
Source: Oilprice.com
Trading involves risk.
Risk Disclaimer
