An International Reliability and Affordability Backstop

There’s a very good reason global coal demand is on track to set another record this year: when affordability and energy security matter most, the world leans on coal. That’s playing out right now in both India and thousands of miles away in Europe.

In India, every coal plant in the country is now running all out to keep the lights on as the driest monsoon in 17 years has sapped hydropower and the country has faced gigawatts of supply shortfalls when solar power fades after sunset.

Not only has the federal government declared an emergency and asked India’s coal fleet to run all out but captive coal plants above 50 megawatts – those belonging to industry to power their factories – are also being asked to run at full throttle to sell surplus power onto the grid.

India’s coal generating capacity – which already meets about 70% of the nation’s power needs – is proving once again to be irreplaceable. The fleet has been running at such a high capacity factor this summer, coal inventories at power plants have more than halved from a year earlier. For India, affordable and reliable energy leads again and again to coal. While alternative sources of power may complement it, India will be building on the shoulders of coal generation well into the future.

In Europe, the swing to coal isn’t about a weak monsoon season but a response to soaring natural gas prices as the liquified natural gas (LNG) market remains tight from the ongoing conflict in the Middle East. Benchmark European gas prices are above €80 ($90.98) per megawatt hour this month, their highest in three years.

Power generation from Europe’s remaining coal fleet is likely to jump by a quarter in the next six months to offset ‌a similar reduction in gas-fired generation. Even with a robust carbon tax, European coal plants are proving a more affordable option than their gas-fired counterparts. Said another way, European coal capacity is providing desperately needed relief for consumers from spiking gas prices. Relief that has been constrained by years of misguided energy policy. Europe’s dash away from coal to imported gas has proven an energy security and affordability catastrophe.

Commodity traders expect LNG supply constraints to persist with some traders already expecting coal to remain the more affordable option in Europe through March of 2028.

With decisions about the future of Europe’s remaining coal plants hanging in the balance, coal is gaining notable momentum with policymakers and voters demanding commonsense energy policy. Europe’s crippling electricity prices have become a top-tier issue at the ballot box as consumers demand lower prices and industry tries to tread water under mounting costs.

That is certainly the case in Germany where the Alternative for Germany (AfD), Germany’s biggest opposition party, which opposes the country’s planned coal phaseout, has won three state elections including two this month.

The lesson from India and Europe is remarkably similar: energy systems can move away from coal on paper but they cannot repeal the laws of supply, demand and reliability. When hydropower falters, solar output disappears at sunset, or natural gas becomes prohibitively expensive, coal is still there to keep electricity flowing. For all the prognostication of coal’s decline, should we really be surprised global demand continues to grow? The real-world consequences of high energy costs and fragile reliability lead again and again to the most obvious and secure answer. They lead to coal.