Expensive gas drives Europe back to coal / Electricity production could increase by 25%

European utility companies are turning to coal for power generation after natural gas prices exceeded €80/MWh, their highest level in three years. The increase is linked to disruptions to liquefied natural gas shipments through the Strait of Hormuz amid the conflict between Iran and the United States.

According to analysts, coal-fired power generation could increase by approximately 25% over the next six months, while gas-fired generation is expected to decline at a similar rate. Coal- and lignite-fired power plants have become, on average, more profitable than gas-fired plants for the first time since at least 2024, after emissions certificate costs are included.

The shift reverses the trend of recent years, during which the expansion of renewable energy sources and the economic advantage of gas reduced coal use. Coal’s share of the European Union’s power generation fell to 9.2% in 2025, a record low.

In Germany, coal-fired power generation is approaching the technical limit of available capacity. Analysts estimate that this source could remain cheaper than gas until 2028, amid uncertainty over supplies and the closure of Germany’s last nuclear power plant in 2023.