Rising carbon prices in the EU ETS, from €9 in January 2018 to its peak at more than €100 in February 2023, have been encouraging utilities to switch from coal, a highly polluting fuel to cleaner gas, which produces roughly half the carbon of a hard-coal plant.

When gas prices started to climb following the Russian invasion of Ukraine, worries about switching back to cheaper coal started to spread. However, data revealed that the EU ended up burning less coal during the 2022-2023 winter season, compared to the previous one, mostly due to higher renewables.  

The drop of the EUAs over recent months from their all-time high to the current level of around €60, has created renewed speculation regarding fading coal-to-gas dynamics. However, falling carbon prices are paired with lower gas prices and rising coal prices in the international markets for non-Russian coal.

According to Veyt analyst Marcus Ferdinand quoted by Reuters, carbon prices “would need to fall further to 47 euros per metric ton or lower for even high-efficiency coal plants to be able to replace low-efficiency gas plants in the first quarter of 2024.”

“We saw clear evidence of a large shift in coal-to-gas switching in 2023, which has continued into 2024,” said Fabian Roenningen, the vice president of Rystad Energy, quoted by Reuters, adding that the process is expected also in nations known for their coal dependencies such as Germany, Poland, Romania, and Bulgaria.

According to Forum Energii, analyzing Poland’s power mix, “in February 2024, electricity generation from conventional sources relied more heavily on natural gas than a year ago. Gas-fired power plants accounted for 1.7 TWh (up 26.5% y/y). At the same time, the share of hard coal (-13% y-o-y, to 4.9 TWh) and lignite (down 9.8% y-o-y to 2.6 TWh) fell in the generation mix”. The share of coal currently dropped to just 54,6% from 86,6% in 2010 and 70,8% in 2021.