Coal is not making a comeback: Europe plans limited increase

Putin’s energy blackmail has left the EU with few options. Had renewable energy capacity been rapidly expanded, Europe would not need coal to keep the lights on.

Germany, Austria, France and the Netherlands have recently announced plans to enable increased coal power generation in the event that Russian gas supplies suddenly stop. This would allow gas that was being used for electricity production to be diverted elsewhere, in particular into gas storage facilities so they can reach the required 90% full levels by November. 

In total, 13.5 GW of coal-fired plants will be placed on stand-by in supply reserve facilities, adding 12% to the EU’s existing coal fleet (109 GW) and only 1.5% to its total installed power generation capacity (920 GW).

Germany’s parliament passed a new energy law on 8 July. This includes the Replacement Power Plant Provision Act, which will enable 8.2 GW of coal-fired plants to be placed on stand-by in a supply reserve facility – both hard coal (6.3 GW) and lignite (1.9 GW). The lignite plants will only be reactivated as a last resort if the hard coal units are not sufficient to meet electricity demand. The new energy law also includes a higher renewable energy target of 80% by 2030.

The Netherlands has amended existing legislation that, since January 2022, had prevented its hard coal plants (4.5 GW) from running above 35% of their maximum capacity. They will now be permitted to run at full capacity until the end of 2023. 

France will reopen its 595 MW Emile Huchet 6 coal unit but only for this winter. 

Austria’s 246 MW Mellach plant will temporarily come out of retirement and run on coal rather than gas. 

These plants will only generate electricity in emergencies. At other times they will remain on stand-by. 

While coal-producing countries in Asia may see the fossil gas crisis as an opportunity, a closer look at the energy landscape in Europe shows that could be premature. It was recently claimed that Indonesia’s Ministry of Energy and Mineral Resources revealed a plan to increase its coal production target following a supposed request from Germany to buy up to 150 million tonnes from Indonesia this year. A more up-to-date communication from the Indonesian embassy in Berlin states the figure is only 5-6 million tonnes. And Ember’s analysis does not see Germany requiring the initially reported amounts of hard coal to compensate for Russian gas being cut off. 

For one, the currently operational hard coal plants have been generating at maximum capacity since the second half of 2021 due to skyrocketing gas prices making coal power generation in Europe economical for the first time in years. This means that they will have little scope to increase generation and any additional coal power will need to come from the plants included in the German government’s proposed gas replacement reserve plan.

The total hard coal capacity that will be moved into this new German supply reserve is 6.3 GW. If all those power plants run at a load factor of 65% throughout 2023, that would result in an additional 36 TWh of hard coal power generation. This equates to an approximate increased coal requirement of 13.5 million tonnes. For October 2022 to March 2024, this would be 54 TWh and 20 million tonnes. Germany imported 39 million tonnes of hard coal in 2021, around 50% from Russia.

In addition, EU power plant operators started stock-piling hard coal early this year (in March rather than June) in anticipation of Russian coal sanctions and increased power production. And northwest European coal inventories have risen to 6.6 million tonnes, their highest levels since November 2019, as vessel arrivals outstrip withdrawals. These cargoes are predominantly from Australia, South Africa and the US. All these findings raise the question why Germany would need 150 million tonnes of hard coal from Indonesia. Total annual EU coal imports are not even that high.

As one of the world’s largest LNG exporters, Indonesia is also considering efforts to allocate gas to Europe. Although it is understandable that countries direct resources towards rising demand, any profits from additional coal deliveries will be short lived. And many Asian countries are likely to be detrimentally affected by Europe’s demand for global LNG supplies.