Europe largely on track for coal-fired power phaseout: EY energy lead 

For most onlookers, the coal-fired power phaseout in Europe appears to be progressing seamlessly. Assuming the current trend, by 2030, half of its coal-fired power plants will have shut, standing briefly as hulking concrete remnants of a bygone era, before being demolished and forgotten. 

Along with the UK, Germany has spearheaded this transition, announcing at the start of April plans to shut down a further 15 coal-fired power plants, describing them as “neither necessary nor economical”.  Nevertheless, the outbreak of war in Ukraine and its impact on Russian gas flows to Europe led to a temporary scramble back to the energy source, with coal-fired power generation increasing 1.5% in 2022.  

At the 26th World Energy Congress in Rotterdam, we spoke to Andy Brogan, EY Parthenon’s energy sector lead, to discuss the progress of Europe’s ongoing coal-fired power phaseout, and the extent to which the war in Ukraine has disrupted it. 

Andy Brogan: Despite the recent disruption, because of issues with gas supplies, etc, I do not see anything that changes the coal-fired power phaseout trajectory. I mean, it might take a few years longer to phase out, but the end point and destination is not in doubt. There might be a slight difference in urgency between northern Europe and southern Europe, but this is fairly minor. Countries have set their objectives and they just seem to be moving towards them.

Andy Brogan: It might stretch on for a couple of years, but does this really matter? It is clear the phaseout is the direction they are going.

Andy Brogan: The phaseout by itself will not negatively impact energy security. Phasing out without thinking about what the energy system looks like afterwards could. I think most people now know this. 

If you are going to have a renewables-dominated system, you have got to have backup generation or storage. Nobody is denying this. It comes down to a choice of what backup generation you have, what storage and what interconnector you are going to build. 

With an intermittent grid, coal has never been a backup generator anyway, it is more of a baseload. Energy security is determined by how much gas-fired backup you have got – is it enough? For Germany in particular, it is about how much capacity it has to import from France. 

The other angle to the security point is the grid and the challenges of building out the grid. An interconnected Europe-wide grid will really help to enhance security. Having that, you need many more input points for much smaller generation points, meaning a lot more money is going to need to be spent. 

Andy Brogan: France has not got this security-of-supply challenge because it made the decision to go nuclear. Everybody else, who is transferring to renewables such as wind and solar, have all got a different flavour of the same security issue. At the moment, everybody is getting by with gas-fired generation. One of the things the move to gas has shown is how quickly you can build out the infrastructure if you really need to. They permitted the offshore gasification storage in Germany within a week. 

So, gas is currently the backup, but this may switch to more interconnection when there is more renewable capacity. Small modular reactors, if they ever become a reality, could play a part. 

Andy Brogan: Poland does not seem motivated to move very quickly. It is not on the same scale, but it is kind of a reflection of what the situation is in China and India, where coal is not just used for power generation but also for heating. The coal industry also employs a lot of people, so there are political factors. Moving away from coal therefore presents multiple challenges and that is why it is so sticky in Poland. 

Furthermore, it is not just very cheap to use coal-fired power; it is also domestically produced so there is not a security-of-supply issue. For them to replace coal, they not only have to build renewables, they also have to build gas-fired backup generation, or at least import gas. Then there is not yet the connectivity for them to import gas from a ship that has landed elsewhere in Europe. 

So, there are currently a few barriers stopping them from transferring away from coal-fired power. In time, like everybody else in Europe, they will move to a renewables grid – it could just be the case that coal sticks around for a bit longer. 

Andy Brogan: Objectively, it has delayed the phaseout. We know that since Germany demolished a wind farm to reopen a coal mine. The energy transition is a 25–30-year programme. The war in Ukraine, or events like it, will have a two or three-year impact on energy use, so they might cause a delay, but they do not change the direction of travel. 

Having said that, the good thing about renewables is that once they are built, less energy has to be imported. In this way, the war in Ukraine has encouraged the renewables buildout. 

Nevertheless, from a security-of-supply perspective, coal is just so cheap and easy. It does not have any of the storage issues that gas has. You can leave it in a heap, and it can easily last for 20 years. 

Andy Brogan: Yes, certainly. The energy industry does not go five years without some form of geopolitical incident disrupting it. This is why it is important to have a system that is resilient, with multiple sources of supply.

Andy Brogan: It is economics: coal-fired power generation over there is very cheap. It is also security of supply. They have gigantic energy requirements: coal is the only option at reasonable cost that they can do domestically. It is an industrial policy as well. These countries [China and India] have got millions of people employed in their coal mines. 

We do a model here at EY, and the biggest driver of a country’s energy use is the kit that is installed to produce energy in any given country. In China, there is coal-fired power infrastructure, much of which is quite new, and it is just going to be kept running. The situation in India is very similar. 

For these countries, security of supply and cost is the absolute focus. Sustainability, while it is not nothing, comes second as a priority behind these two. Do not get the impression that this will change any time soon.