Coal-based power generation seemed to be in terminal decline in Europe. However, during the past couple of years coal plants have been working hard and burning coal has suddenly become popular once again. This is happening despite the EU’s aim to reduce carbon emissions to 80 per cent of their 1990 levels by 2020.
Frost & Sullivan Energy Industry Director Harald Thaler said: "As North American utilities started to switch away from coal towards cheap natural gas, a growing amount of coal was exported rather than consumed locally. Rising American coal exports also came at a time of slowing Chinese demand, which in combination prompted declines in coal prices. It is not surprising, therefore, that lower coal prices make the fuel much more attractive for European utilities."
As European gas is still largely supplied through long-term contracts where the price is linked to the price of oil, the price difference between coal and gas in the European market has become ever larger, making European utilities eager consumers of coal.
The third point is the failure of the European Emissions Trading System (EU ETS), which essentially was not able to penalise coal-burning plants.
"High coal usage is still expected to continue for several more years, though to a lesser extent, as some ageing coal plants get decommissioned," predicts Mr Thaler. However, there is considerable coal capacity under construction, in particular in Germany and the Netherlands, with most of this new capacity coming online in late 2013 and 2014. Beyond the EU, new plants are also under construction in Turkey and the Balkans. In addition, two coal plants have just been completed in Germany.
For more information, visit www.frost.com