Global Gas Crunch Makes Europe’s Remaining Coal Plants Profitable

Profitability means coal plants can once again generate electricity at a margin. The price they receive for power is higher than the cost of producing it, especially when gas prices rise sharply. This matters because Europe has closed much coal capacity, leaving fewer plants available when energy markets tighten.

Germany provides the clearest example. Energy Aspects estimates that one profitability measure for German lignite generation reached as much as $72, or 64 euros, per MWh this month. The same measure was zero at this time last year. High gas costs make coal-fired generation relatively cheaper, improving its spread over operating costs.

Coal demand remains in structural decline, but the remaining plants are becoming economically useful again. In Germany and Poland, coal units are also important for grid stability as gas generation falls. Energy Aspects expects the spreads to remain high through March, although the article does not predict permanent coal growth.

Power producers compare the cost of different fuels before deciding which plants should run. When natural gas and LNG become expensive, gas-fired electricity costs more to produce. Coal then becomes more competitive, even if coal demand is declining over the long term. This is especially important where spare coal capacity still exists.

Germany and Poland hold most of Europe’s remaining operational or back-up-ready coal capacity. The article links their renewed coal profitability to soaring gas supply costs, limited LNG movement from the Strait of Hormuz, and gas prices at their highest level since the 2022-2023 crisis. These conditions widen the economic advantage of coal.

The effect is not simply commercial. Gas generation is slumping amid demand destruction and gas conservation, while remaining coal plants help stabilize electricity grids. The IEA therefore expects a smaller coal-demand decline in countries such as Germany and Poland, where gas generation and spare coal capacity remain available.

The IEA expects total European coal demand to reach 276 million tons in 2026. That forecast still represents a decline, but it is smaller than previously expected because expensive gas is encouraging more coal generation in some countries. The figure shows that coal’s long-term retreat has not eliminated its short-term role.

The comparison with 2025 is straightforward: Europe’s expected coal use falls from 292 million tons last year to 276 million tons in 2026. That is a reduction of 16 million tons. Germany and Poland are central to the change because both have gas-generation capacity and spare coal capacity that can be used when fuel markets tighten.

The IEA says the decline is set to slow this year. Cold spells before or during winter could temporarily lift coal use further. Even so, the article describes European coal demand as remaining in structural decline, rather than entering a lasting growth phase.

Electricity grids must keep generation and demand closely aligned. If gas-fired plants produce less power, other available generators must fill the gap or help manage the system. Europe’s remaining coal plants matter because they provide conventional generation when gas supplies are costly, constrained, or being conserved.

The article identifies Germany and Poland as the main locations for remaining operational or back-up-ready coal capacity. Gas generation is slumping amid demand destruction and gas conservation. In that setting, coal plants can run more often or remain available as reserves. Their value is therefore both economic and operational: they can sell power and support grid stability.

This does not reverse Europe’s broader energy direction. Countries have closed coal capacity because of climate targets, and coal demand remains in structural decline. However, the current supply crunch makes remaining plants indispensable. Cold winter spells could increase their use temporarily, while high gas prices are expected to keep coal spreads elevated through March.

Many European countries shut coal capacity because they adopted climate targets that required lower coal use. Coal demand was already in structural decline, so closing plants fit the long-term direction of energy policy. These decisions reduced the number of coal units available, but did not remove the need for dependable electricity during difficult market conditions.

The article shows that Germany and Poland still have most of Europe’s operational or back-up-ready coal capacity. When gas prices soar and LNG supply is constrained, gas-fired generation becomes less attractive or falls because of conservation. The remaining coal plants can then provide conventional generation and help stabilize the grid.

This creates a policy tension rather than proving that closures were abandoned. Coal remains less aligned with climate goals, while energy security can require keeping some capacity available. The IEA still expects European coal demand to fall in 2026, to 276 million tons from 292 million tons in 2025, although the decline will slow.

Several technologies can help supply electricity or stabilize a grid when gas and coal are limited. Nuclear and hydropower can provide steady generation where available. Wind and solar add low-carbon electricity, although their output varies with weather. Batteries can respond quickly by storing power and releasing it when needed. Demand response can also reduce or shift electricity use.

These technologies work through different mechanisms. Nuclear and hydropower can provide sustained output. Batteries balance short-term gaps. Demand response changes consumption during tight periods. Wind and solar reduce the amount of fuel-based generation needed, while stronger transmission links can move electricity between regions.

The source article does not discuss these alternatives or compare their availability with coal. It specifically describes remaining coal plants as important for conventional generation and grid stability while gas generation slumps. Therefore, these technologies are established alternatives from broader energy knowledge, but their ability to replace coal in this situation cannot be determined from the article alone.

An electricity grid balances supply and demand by adjusting generation and consumption as conditions change. Power plants increase or reduce output, storage charges or discharges, and flexible users can shift consumption. The goal is to keep the system stable while meeting demand. If available supply falls too far, reliability can suffer.

Fuel costs strongly influence which plants operate because they are a major part of generating electricity. When gas becomes expensive, gas-fired plants cost more to run. Coal may then become the cheaper available option, especially where coal capacity remains operational or ready for backup. This is the mechanism behind renewed coal profitability in Germany and Poland.

The article connects this dispatch logic to Europe’s current energy stress. LNG supply is barely moving out of the Strait of Hormuz, gas prices are at crisis-era highs, and gas generation is slumping. Remaining coal plants therefore support conventional generation and grid stability, even as coal use continues its longer-term decline.