Europe Reverts to Coal as Gas Prices Soar
Europe's energy crisis has led to a surprising turn of events: coal is making a comeback. With benchmark Dutch TTF gas prices spiking above €80 per megawatt-hour, it's now more profitable for European power plants to run on coal rather than gas. This shift in economics has analysts predicting a 27% increase in European coal-fired generation in the fourth quarter, while gas-fired output falls.
The problem is not just the price spike itself, but how little firm capacity Europe left itself after years of plant closures, nuclear shutdowns, and premature demolitions. Germany, being the largest power market and largest gas consumer in Europe, is particularly vulnerable to this crisis. Despite having a 2038 coal exit target, Chancellor Friedrich Merz has hinted that Germany may need to keep its coal plants online longer than planned.
Italy too has reversed its policy of exiting coal by 2025, with Energy Minister Gilberto Pichetto Fratin suggesting that plants could be reactivated if gas prices stay above €70/MWh. Poland, meanwhile, never left the coal habit behind, with coal accounting for a record low of 51% of Polish electricity in 2025.
The situation is being driven by supply constraints and weather patterns, rather than ideology. As Veyt analyst Marta Wroniszewska notes, coal is expected to remain cheaper than gas for European power generation through next year and potentially until March 2028. Europe can rely on coal for two winters, but after that, the constraint will be physical plant availability.
Germany and the UK have already begun demolishing their remaining coal-fired plants, which may look reckless in hindsight. Japan, however, has taken a different approach, running its coal harder to save on LNG imports. The US too increased coal generation in 2025, largely driven by policy decisions that slowed clean-energy deployment.