Europe pulls coal back out of reserve as gas jumps to 80 euros per MWh

A single serious blockade of the maritime shipping lane through the Strait of Hormuz has been enough to push European gas prices to 80 euros per MWh and to make coal-fired electricity more profitable than gas-fired electricity for the first time in years, farmer.pl reports. Instead of winding down plants, Warsaw and Berlin are recounting their reserves, because without coal the system would simply fall apart.

The spreads have flipped

Two margins quietly decide which plant feeds the grid in any given minute: the clean dark spread, the margin on coal-fired generation once CO2 costs are included, and the clean spark spread, its equivalent for gas. Since the outbreak of the conflict in the Middle East, the two curves have diverged completely, with coal moving into the money and gas out of it.

According to the latest analysis by ICIS cited by farmer.pl, coal-fired power output in Europe will rise by 25% over the coming months, while the share of gas falls by exactly the same amount. That is not a minor market correction but an abrupt, forced change of direction in energy risk management, and it lands on a fleet that was being prepared for closure rather than for duty.

The industry plan described by farmer.pl is narrow and specific: select a dozen or more of the most efficient mines and a set of generating units, and keep them running as a grid stabiliser for the next decade. That sits awkwardly alongside the trajectory EU officials have been tracking, with coal's share in the bloc falling from 30% in 2000 to just 9.2% last year.

Representatives of Poland's ministry of state assets and of the grid operator PSE have put the case directly. "We need to approach coal a second time. There are coal resources in Poland that can still be extracted effectively and cost-optimally for the next 10 to 15 years," said Grzegorz Wrona, Deputy Minister of State Assets. The intention described is not new mine construction but the creation of a hard security buffer out of inflexible coal units.

Poland carries the balancing load

• Photovoltaics: 27.5 GW, or 35% of installed capacity in the Polish system
• Wind: 11.4 GW
• Hard coal and lignite: more than 30 GW combined, delivering close to 60% of the electricity actually produced

The gap between installed capacity and delivered output is the whole point. Solar is the largest single block of capacity on the Polish system, yet coal still carries generation at critical moments. When the sun goes down and the wind drops, renewables do not feed factories or households.

Germany is running at its physical limit

The position west of the Polish border is tighter still. By removing its last nuclear plants from the mix in 2023, Germany left itself fully exposed, and its coal fleet is now working at the edge of its physical capability, according to farmer.pl. Europe has been caught by its own consistency: decades of dismantling coal units removed flexibility from the system, leaving little headroom for a price shock.

Supply chains rebuilt without Russia

The fuel side has already been reorganised once. After the embargo, EU coal imports from Russia collapsed from 27 million tonnes to just 250,000 tonnes, forcing supply chains to be rebuilt from scratch, with hard coal now arriving in Europe from entirely new directions.

Domestic supply is concentrated in one place. Poland produces 44 million tonnes of hard coal a year, equal to 97% of total European Union output, and together with the Czech Republic forms the last mining bridgehead on the continent. That concentration means any additional 25% of coal-fired generation has to be covered by Polish mines and seaborne cargoes.

Coal has not suddenly become a fuel of the future. On the evidence set out by farmer.pl, it is the only remaining lifebuoy protecting the European economy from power cuts and price ruin, and the exposure it covers is the system's inability to balance itself under a price shock.