As European gas prices have continued their surge throughout the past couple of weeks, the role and importance of coal has sparked a new wave of discussion across the continent.
With coal demand increasing across the planet, the supply tightness has seen European coal prices follow the global appreciation trend - as of end-September, API2 Rotterdam coal futures have already breached the $230 per metric tonne threshold, up $80 per metric tonne in September alone.
Whilst the EUA ETS December 2021 carbon futures moved above €60 per metric tonne in early September and have hovered around €62 per mt since, the rise in coal generation in key European powerhouses such as Germany have overall failed to trigger a carbon price increase that would be substantial enough to disincentivize coal utilization.
Instead, stagnant carbon prices have rendered coal increasingly profitable amidst runaway gas prices - by now, for every megawatt-hour of energy that a standard German plant operator would produce, the difference between coal and gas as energy source is already around €40 per MWh. Moreover, up until early September electricity prices in most Northwest European countries have been slightly above coal generation costs, since then coal is by far the most profitable fossil fuel to use.
Third, carbon prices have so far not reacted as strongly as they could, but any drastic hike would impact coal much more than it would natural gas.
All this might be a tangible factor for the future of coal in future, however as of today they are not despite coal having the lowest calorific value amongst fossil fuels and having an efficiency rate when burned that is some 10-15 p.p. lower than that of natural gas.
The current coal demand surge should force the European Union to reconsider its position on coal - as polluting as it might be, it could still help alleviate energy crunches across Europe when the situation demands it.
https://oilprice.com/Energy/Coal/Coal-Makes-Comeback-In-Europe-As-Gas-Prices-Explode.html
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