By K Raveendran
Tensions over Ukraine have combined with record-high gas prices to raise questions about the long-term security of gas imports through Russian-operated pipelines, giving coal a new place of importance in the energy mix.
European countries have been gradually decommissioning coal infrastructure over recent years, as the power market moves towards a greener, less carbon-heavy future. However, new geophysical as well as other developments, especially in view of the reliability of other sources of energy is called into question, have given coal renewed importance.
Accordingly, coal-fired electricity generation has been steadily declining in Europe since 2012. However, affordability concerns surrounding gas, and availability concerns impacting nuclear, wind and hydro generation, could maintain coal’s momentum in 2022 and beyond, according to market analysts.
Following several years of strategic de-carbonization of the European power market, preliminary numbers suggest coal-generated electricity increased in the region last year for the first time in almost a decade, rising 18 percent from 470 terawatt-hours (TWh) in 2020 to 579 TWh. Gas, hydro and wind power generation dropped last year, increasing the pressure on other energy sources, including coal, to bridge the gap, according to energy consultants Rystad Energy.
If high gas prices persist or military conflict between Russia and Ukraine materialises, coal generation could jump by an additional 11 percent this year to 641 TWh – a return to 2018 levels – to ensure the lights stay on across the continent.
Coal’s resurgence last year was triggered by other components of the continental power mix facing new challenges, including record-high gas prices amidst tensions between Russia and Ukraine.
A military escalation would disrupt Russian gas flows even without any supply disruption, record-high prices are forcing buyers to explore alternatives. Gas prices in December 2021 hit $207 per megawatt-hour (MWh), a record high and a staggering 900 percent year-over-year increase.
If gas prices remain high or the Russia-Ukraine conflict results in a significant drop in gas-fired generation in 2022, Europe has options to make up the shortfall. Despite decommissioning infrastructure, coal power generation remains the most flexible option, with the possibility to increase supply by 63 TWh. Bioenergy plants and liquids, which currently make up a small portion of the total power generation, could add 77 TWh combined, while new wind and solar PV capacity that is expected to come online this year could contribute an extra 33 TWh.
A ray of hope in 2021 came in the form of nuclear generation, which rose by 6 percent compared with 2020, climbing to 884 TWh. Nuclear has been the largest contributor to electricity generation in Europe since 2014, but dark clouds may be on the horizon, highlighted by French nuclear power generation company EDF last week downgrading its expected nuclear output in 2022 and 2023.
EDF dropped its output expectations for the second time in a month due to aging reactors, scheduled maintenance and unexpected outages. France’s average nuclear power of 370 TWh will be slashed to between 295 TWh and 315 TWh in 2022 and between 300 TWh and 330 TWh in 2023. This is worrying news for the market, as reduced nuclear generation will extend and exacerbate the European power crunch and continue to put pressure on the already tight supply situation for electricity on the continent.
Reservoir levels in hydroelectric dams across the continent are at worryingly low levels, meaning an increase in hydro-generated power in 2022 is unlikely. As a result of these limitations of other sources of power generation, gas is expected to remain the marginal supplier that can make up any shortfalls. If gas prices remain high, which looks likely, consumers may have to battle with soaring energy prices for some time to come. (IPA Service)