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Coal favoured over natural gas in Western Europe

World Coal,

In contrast to the US, natural gas consumption in Western Europe has been generally declining since 2011, while coal consumption – in general –has been increasing. The US Energy Information Administration (EIA) has suggested that a convergence of supply and demand factors, in both the natural gas and coal markets, as well as other economic constraints, have contributed to this phenomenon.

The GDP for OECD European countries grew by about 1% to 2% quarter-on-quarter through 2010 and 2011, however; it began contracting again by Q2 of 2012. Reduced economic activity lowered overall demand for electricity, particularly in the industrial sector. In 2011, annual natural gas consumption was 8% lower than in 2010 in OECD-Europe, while consumption of coal was 6% greater. Similarly, the region consumed 2% less natural gas and 2% more coal in 2012 than in 2011.

However, in Q1 2013, natural gas consumption increased 3% and coal consumption decreased 6% compared with the first three months of 2012. The latest shift in fuel consumption trends can in part be attributed to the Large Combustion Plant Directive (LCPD) from the European Commission, which caused a number of older coal plants to retire despite profitability, particularly in the UK.

Rising coal imports from the US and Colombia, supported by the sharp decline in global coal prices, affected energy consumption patterns in between 2011 and 2012. Electric power producers with the capability to use coal-fired generators have opted to reduce natural gas consumption.

An abundant supply of coal from countries including the US has made coal an attractive alternative to natural gas in Europe. The availability of low-priced natural gas in the US, as well as new measures passed by the Obama administration that restrict coal power, has lowered the price of US coal exports, making their prices attractive to coal-fired power plants in the region.

Following the Fukushima disaster in 2011, Germany retired eight nuclear power reactors. This move has opened up opportunities for coal-fired power plants to fill the gap left by nuclear power plants as they are decommissioned.

The US EIA also suggested that low carbon prices have made coal an attractive energy source for European countries. Since coal produces more carbon per unit of heat than natural gas, coal is more affected by a high carbon price. The price of carbon in Europe is currently very low, partly because of a prolonged economic recession in Europe, so many consumers are opting for coal over natural gas.

Edited from various sources by Sam Dodson

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