Europe Returns to Coal as Gas Prices Surge Above €80/MWh
European utilities are reverting to coal as gas prices soar, pushing power generation from coal up by a quarter in the next six months. The war in Iran has disrupted liquefied natural gas shipments through the Strait of Hormuz, sending European gas prices above €80 per megawatt hour for the first time in three years.
This reversal is due to higher coal and lignite plant profitability compared to gas-fired equivalents, according to data from analytics firm ICIS. The so-called 'clean dark spread' has soared since the conflict began, while the equivalent measure for gas, the 'clean spark spread', has plummeted.
The increased reliance on coal comes despite years of closures and a significant drop in coal's share of Europe's generation mix from 9.2% in 2025 to its lowest point on record. The power system has limited flexibility if gas prices climb further, with the remaining coal plants nearing their practical limits.
Marta Wroniszewska, an analyst at Veyt, predicts that coal will remain cheaper than gas for power generation through next year and potentially until March 2028. Germany's closure of its last nuclear power plant in 2023 has further reduced the system's flexibility.