Europe's Utilities Flee Gas Prices with Coal Power Surge

European gas prices have skyrocketed above €80 per megawatt hour due to disruptions in liquefied natural gas shipments, forcing utilities to switch back to coal power generation. This shift is expected to increase coal-fired power output by a quarter over the next six months to offset decreased gas generation.

The surge in gas prices has made coal and lignite plants more profitable than gas-fired equivalents for the first time since 2024, according to ICIS data. The 'clean dark spread', a measure of coal-generation profitability, has soared since the conflict began, while the equivalent measure for gas, the 'clean spark spread', has plummeted.

Germany and Poland account for over 74% of the EU's remaining coal generation, but much of Europe's spare coal-fired capacity is nearing its practical limit, constrained by closures and availability. Coal is expected to remain cheaper than gas for power generation through next year and potentially until March 2028, according to Veyt analyst Marta Wroniszewska.