Europe Turns Back to Coal as Natural Gas Prices Surge
European utilities are turning back to coal for power generation as natural gas prices surge. According to Reuters, coal-fired power generation is expected to increase by around 25% over the next six months, offsetting a similar decline in gas-fired generation.
The Iran-US war has disrupted liquefied natural gas (LNG) shipments through the Strait of Hormuz, leading to higher European gas prices. In September 2026, the European benchmark gas price surpassed €80 per megawatt hour (MWh), its highest level in three years.
This shift in economics reverses a trend where more competitive gas prices helped push coal out of Europe's power mix. However, Europe's electricity system is becoming increasingly constrained due to years of plant closures, reducing available capacity.
The situation is most visible in Germany, Europe's largest electricity market and gas consumer. Coal-fired power generation in Germany is expected to approach its practical limit in the fourth quarter of 2026.