Coal-to-gas switch caused EU power emissions to fall in 2016

A switch from coal to gas-fired power generation and a steadying of overall electricity consumption have cut carbon emissions from Europe’s power industry, but the oversupply of permits within the EU Emissions Trading System (EU ETS) continues to limit overall greenhouse gas reduction in Europe. This is according to new analysis from carbon and energy policy watchers, the Brussels and London-based Sandbag and Germany’s Agora Energiewende.

Carbon emissions from EU power stations fell by 4.5% in 2016, primarily through a huge switch from coal generation to gas generation. Year-on-year, coal-fired generation across Europe fell by 12%, whilst gas increased by 20%. Half of this switch happened in the UK, say the two organisations, as some coal plants permanently closed and a higher carbon price took effect. Switches from coal to gas also took place in Germany, Italy, the Netherlands and Greece, in part due to a temporary fall in gas prices during 2016.

However, power generation from gas it is still 168 TWh below the 2010 level, says the analysis, suggesting that more coal-to-gas switching is possible without new infrastructure.

Generation from renewables increased only slightly in 2016 (from 29.2% to 29.6% of Europe’s electricity mix) due to poor weather conditions and slower solar and biomass growth. Solar and wind conditions were generally below average in 2016, compared to well above average in 2015. However, with new capacity installed, overall generation still saw small increases. On prices, 2016 saw record low renewables auction results with just €49.9/MWh for offshore wind and €53.8/MWh for solar, both in Denmark. These large price falls give hope of robust future growth, say Sandbag and Agora Energiewende.

Electricity consumption rose slightly, by 0.5% over the year, alongside European GDP rising by 1.7 %. Electricity consumption is no longer structurally falling – only two countries saw falls in electricity consumption in 2016 and most had modest increases – suggesting that energy efficiency measures need to be stepped up, say the organisations.

On the ‘failing’ EU ETS, structural oversupply has now passed the landmark of 3bn tonnes of carbon dioxide, says the analysis, as 2016 added another 255mn tonnes of allowances into the scheme. The organisations say that to play a meaningful role in EU climate policy the EU ETS needs to be fundamentally repaired and the oversupply of allowances reduced.

Sandbag and Agora Energiewende expect to see further big falls in fossil generation during 2017 – but are uncertain whether this will be from coal or gas.

Sandbag Analyst Dave Jones commented: ‘The large switch from dirty coal to gas is welcome news. It helps the climate, and more importantly leads to cleaner air for Europe. Further switching away from coal is possible without building new gas pipelines and gas power plants. However, the ingredients to make this happen do not yet exist – few old coal plants have announced they are planning to close, and gas is still more expensive than coal because of a low carbon price.’

Further analysis from the Economist Intelligence Unit also highlights the drop in coal use in Europe, with figures highlighting that coal generation has fallen by 10% since 2013. The bulk of this drop has been seen in the UK, says the analysis, and currently coal’s share of European generation is below 25%.