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Coal looks hot compared to gas, according to CEDIGAZ report

World Coal,


According to a new report by CEDIGAZ, the International Centre for Natural Gas Information, gas has lost its attractiveness against coal in the EU power sector. Its demand by the sector decreased by one third during the past three years and its prospects are very weak in this decade. The Association warns that unprofitability of CCGTs and the retirement of old coal plants due to stringent air regulation may lead to the closure of one third of the current fleet and poses a serious security of supply issue that has to be addressed urgently.

The report notes that a confluence of factors – including flat electricity demand, the fast development of renewable energy sources (RES), falling wholesale electricity prices, high gas prices relative to coal and low CO2 prices – has eroded the competitiveness of natural gas in the EU power sector. Gas demand lost 51 billion cubic meters in the past three years, the equivalent of the total annual demand on the French gas market. By contrast, coal-fired power stations operated at high loads, increasing coal demand by the sector by 10% between 2010 and 2012.

One key reason for coal being favoured over gas is price. The black stuff is currently three times cheaper than natural gas on an energy equivalence basis. The CEDIGAZ report notes that analysis of future trends in coal, gas and CO2 prices suggests that coal’s competitive advantage may well persist into the coming decade – unless structural reforms of the EU ETS allow an increase of CO2 prices.

Role of the big three

The three largest coal consuming countries in the EU – Germany, Poland, and the UK – have mixed approaches on the role of coal in their respective electricity mixes.

For example, in Poland, where coal powers roughly 90% of the country’s electricity, decarbonisation is seen as akin to delectrification. Meanwhile, Germany has seen a return to coal as it decommissions its nuclear power plants (following the Fukushima disaster), but will look to the renewable energy sector in the long-run. In the UK, where coal makes up around 42% of the country’s energy mix, the government has been looking at alternative fuels, including shale gas, coalbed methane, as well as utilising underground coal gasification technologies. As the country looks to invest in these fuel sources, it is simultaneously closing its working coal mines, and the chancellor, George Osborne, has been criticised for favouring gas over coal, after the risk associated with importing gas was highlighted as the Ukraine crisis began earlier this year. 

The report notes that analysis of these three countries’ national energy policies clearly shows that the path to a low carbon economy can be achieved differently and at a different pace according to national specificities and trade-offs between the objectives of sustainability, competitiveness and security of supply. Countries with domestic reserves view coal as a means of increasing their security of energy supply especially in light of the current Russia-Ukraine crisis.

Gas resurgence not on the cards

Without a carbon price signal, and with the rise of renewable energy sources being used by EU nations, the CEDIGAZ report concludes that a resurgence of gas demand in the EU electricity mix is not foreseen during the coming decade.

The report said that unless the EU ETS is reformed, lower gas prices achieved, and confidence restores in the gas-fired generation market, the situation is unlikely to be reversed, and coal will remain king in the energy supply mix in Europe.

Edited by Sam Dodson

Read the article online at: https://www.worldcoal.com/power/02062014/coal_favoured_over_gas_in_europe_922/


 

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