Demand for coal grew 3.3 percent last year in Europe while sales of less- polluting natural gas fell 2.1 percent. Gas-fired plants need about half the carbon permits of coal burners. Even so, the 17 percent drop in permit prices to about 8 euros a ton has reduced their competitive advantage. Coal will continue to remain on the money in Europe because it’s more competitive to burn than gas. More and more of the coal to Europe will come from the U.S. where just the opposite is happening.
Europe is burning coal at the fastest pace since 2006, as surging imports from U.S. producers such as Arch Coal Inc. (ACI) (ACI) helped cut prices 26 percent in a year and benefited European power companies including EON AG.
Demand for coal, the dirtiest fuel for making electricity, grew 3.3 percent last year in Europe while sales of less- polluting natural gas fell 2.1 percent, the steepest drop since 2009, according to a BP Plc report. Germany’s EON and RWE AG (RWE), the biggest utilities in Europe’s largest power market, are considering shutting unprofitable gas-fired plants even as Chancellor Angela Merkel promotes gas to replace nuclear energy.
Europe’s higher coal use defies its policies to penalize carbon emissions and is based on profit margins climbing to a two-and-a-half year high for coal-burning power stations, data compiled by Bloomberg Industries show. Cheaper coal was made possible partly by a 49 percent jump in first-quarter imports from the U.S., Energy Information Administration data show.
“Coal will continue to remain on the money in Europe because it’s more competitive to burn than gas,” said Trevor Sikorski, an analyst at Barclays Plc in London. “More and more of the coal to Europe will come from the U.S. where just the opposite is happening.”
Thanks to the explosion of shale drilling, natural gas futures have fallen about 34 percent in 12 months in New York, pushing utilities to combust more gas and rely less on coal.