The energy market is changing: coal is losing competitiveness in Germany

After natural gas began becoming more expensive over the previous two years amid restrictions on Russian supplies to Europe, it was necessary to reduce consumption as much as possible. More intensive use of coal-fired power plants, especially those burning hard coal, also helped. Current fundamentals nevertheless suggest that the situation could be slightly different this year, with electricity generation from hard coal significantly lower. A marked year-on-year decline could occur above all in Germany, which still has substantial installed coal-fired capacity and postponed the closure of some plants last year, while other plants returned to the market from reserve.

Last year, Europe faced an unprecedented situation in which energy commodity prices climbed to several times their levels in previous years, setting new record highs every day. The situation was most critical in the natural gas market, and this was also reflected in wholesale electricity prices across Europe, which spiralled out of control over the summer. One of the main objectives was to fill underground gas storage facilities ahead of the coming winter season. Old coal-fired power plants also helped free up more gas for injection into storage by reducing gas consumption for electricity generation.