Europe’s Gas Squeeze Gives Coal a Comeback—with a Hard Limit

Europe spent years pushing coal out of its electricity system. Now, punishing gas bills are making the remaining coal plants more attractive again. Coal-fired electricity has become cheaper than gas-fired power in Europe for the first time in years, according to OilPrice (direct). Germany, the European Union’s largest economy, is among the countries turning back to the fuel as utilities face another energy squeeze.

The reversal exposes a difficult choice for European leaders: contain energy costs now while trying to build a system less vulnerable to the next disruption. OilPrice links the pressure to Europe’s continued dependence on imported liquefied natural gas, or LNG—gas cooled into liquid for transport by ship. Renewables are expanding rapidly, but the immediate economics of power generation are also giving coal a fresh opening.

Gas costs reshape the power market

According to the report, the latest shock followed the United States and Israel’s offensive in Iran and disruption to roughly one-fifth of global oil and gas trade. Six months after the war began and the Strait of Hormuz initially closed, Europe was still dealing with the fallout. Gas prices reached a three-year high during the month covered by the report, keeping pressure on countries already navigating their third energy crisis in four years.

The price advantage for coal may not disappear quickly. OilPrice cited Reuters reporting based on a conversation with Marta Wroniszewska, an analyst at Veyt. Her assessment puts the potential duration of that advantage well beyond the immediate crisis. Prices for gas delivered further into the future suggest traders expect supply constraints to continue, rather than a quick return to easier conditions.

Coal is expected to stay cheaper than gas for power generation through next year, and possibly until March 2028, according to Reuters reporting cited by OilPrice, based on Veyt analyst Marta Wroniszewska’s assessment.

Political frustration is rising alongside the bills. An unnamed European diplomat, quoted by the BBC and cited by OilPrice, said leaders were again scrambling for short-term answers and worrying about angry voters instead of concentrating on long-term competitiveness. The diplomat compared the response with the crisis following Russia’s full-scale invasion of Ukraine: a different conflict, but familiar divisions over energy.

Fewer coal plants leave less room to switch

Europe cannot simply restore its old coal-heavy electricity mix. Years of policies to reduce and eliminate coal use have sharply reduced the number of plants available. Coal supplied more than a third of EU electricity in 1990; by 2025, its share was just 9.2%, according to Eurostat data cited in the report. Higher gas prices benefit the remaining plants, but that smaller fleet places a ceiling on the rebound.

The picture is different in Asia. Coal remains the world’s largest single source of electricity, and emerging economies including the Philippines and Indonesia are still adding capacity. OilPrice identifies Asia as the region hit hardest by the Hormuz closure. Coal’s low cost and ready availability support its role in developing economies, even as its use carries substantial climate costs.

What matters next is how long gas stays expensive—and how much protection new renewable generation can provide. OilPrice reports that clean energy is growing alongside coal’s revival. In a Fortune opinion piece cited by the outlet, Norrsken general partner David Frykman argued that domestic wind and solar reduce exposure to foreign energy pressure. Europe’s challenge is to turn that security argument into a durable alternative while its remaining coal plants benefit from the current squeeze.