Coal Returns to Profitability as European Gas Prices Surge

Germany and Poland, which hold the bulk of Europe’s operational coal assets, are seeing a sharp reversal in the economics of thermal power. While climate mandates have driven a multi-year effort to retire these plants, the current scarcity of natural gas has transformed them from relics into necessary infrastructure. Energy Aspects reports that margins for lignite-based electricity have shifted from zero a year ago to significant profitability, a trend analysts expect will persist through the end of March.

Although the International Energy Agency maintains that European coal demand is in structural decline, the rate of that contraction is slowing. The agency’s mid-year outlook projects regional demand to reach 276 million tons in 2026, exceeding prior forecasts. This shift reflects a tactical pivot as utilities prioritize grid reliability over the rapid phase-outs previously planned. Should winter temperatures drop, the reliance on these plants is likely to intensify, further stalling the shift away from carbon-heavy generation.