Energy prices still on the rise: will coal be returned to Europe?

The energy crisis in Europe is not subsiding, with still record prices for gas and beyond. In this context, coal is making a comeback, putting the green shift at risk.

The European price for natural gas and electricity spring still at record levels, indicating that the supply shortage will only worsen the very beginning of the winter season.

In this complex energy crisis for Europe , we return to thinking about coal: it would be a step backwards for the green change.

Skyrocketing energy prices: the situation in Europe

The contracts for Dutch natural gas TTF in November 2021, the European benchmark, reached a peak of 98 euros per megawatt hour on 30 September.

The UK contract also rose and hit a new high and German electricity for next year rose 7.4% to € 126.50 per megawatt hour.

In a broader context and looking to China, coal is also traveling on historical levels. Thermal coal futures on the Zhengzhou Commodity Exchange jumped 6.5% to close at 1,393.6 yuan ($ 216) a ton, a new high.

Coking coal futures on the Dalian Commodity Exchange rose 9.3% to 3,290.5 yuan per ton, the highest ever.

The world is holding its breath due to an energy shortage that it did not expect and Europe is in the midst of the crisis.

Russian gas flows to the German Mallnow terminal have decreased, canceling a partial recovery. Supplies via this important transit route are around a third less than at the start of the week.

While it is questioned whether Russia is speculating on supply to the old continent, the inability of existing gas stocks to meet energy demand is obvious and is expected to increase with the winter. Meanwhile, prices rise putting industrial production at risk in the post-Covid recovery phase.

For this reason, the use of coal in Europe is returning to the fore: a hypothesis full of doubts, primarily for the energy transition objectives . But also for the difficulties of finding.

Europe’s dilemma: more coal for energy?

Energy pressure is stressing Europe , looking for solutions.

Having largely loosened the use of coal in an attempt to green electricity generation, European countries are now in a conundrum.

The region’s gas storage sites are only partially full, liquefied natural gas suppliers are favoring Asia, and renewables are unable to fully meet demand.

In this way, the risk is to have to tie even more to Russia in order to have electricity.

As reported by Bloomberg , European utilities are in desperate need to get their hands on more coal , a European strategist told the newspaper.

There are at least two doubts in this regard. First, the resurgence of fossil fuel makes climate talks much more complicated with the COP26 meeting just weeks away.

And then there is the question of Russia, which focuses mainly on coal sales in Asia, rather than on Europeans. How will Europe get the fuel?

Russia plays a key role in coal

The producers of energy in the old continent will be forced to ask Russia more coal to alleviate the crisis with the arrival of winter and record gas prices that affect the profitability, according to officials of two Russian coal companies.

This is the indiscretion from the international media, which highlights how much Europe could depend on Russian supplies for the winter, not just for gas.

“If all European utilities switch to coal, there will be a huge spike in demand that Russia alone cannot meet on such short notice. It would also require sourcing from other countries, such as the United States, ” said Natasha Tyrina, principal research analyst at Wood Mackenzie Ltd. in Houston.

Not only that, other experts have pointed out that Moscow has been cutting fuel exports to Europe for years as the EU shuts down coal-fired power plants. It is now very difficult to redirect to Europe because there are existing contracts with Asian customers. Furthermore, the transport capacity is still limited.

Also complicating matters are Europe’s stringent environmental standards for coal burning , making it much more difficult and time-consuming for Russia to prepare supplies that meet quality requirements, according to officials from the country’s coal companies.

A cold winter is expected for Europe . The return to coal would be complicated and a step backwards towards the green shift.

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