Return Of Coal Power May Alter Global Clean Energy Drive

Rising gas prices and supply disruptions linked to the Middle East crisis are pushing countries like India, South Korea, Germany, and Italy to rely more heavily on coal for energy security.

Governments that previously pledged to phase out coal are delaying shutdowns, extending plant lifetimes, or restarting reserve coal facilities to stabilise grids and control energy costs.

Despite coal’s comeback, renewables remain structurally cheaper in many markets.

Coal is considered the single largest driver of global temperature rise, responsible for roughly 40 per cent of all greenhouse gas (GHG) emissions and 70 per cent of energy-related combustion increases.

Its heavy carbon footprint makes it the most polluting of all major power generation sources, emitting twice as much CO2 as natural gas per unit of energy produced. However, the ongoing comeback by coal is unlikely to reverse the clean energy transition in large part due to falling renewable energy costs.

Indeed, the Levelised Cost of Energy (LCOE) for solar and onshore wind is now significantly cheaper than coal, falling in the range of $24- $96 per MWh compared to $68-$166 per MWh for new coal plants.

It may be recalled that 50 years ago, over 40 countries pledged to scale back and phase down unabated coal power at the COP26 UN Climate Summit by 2030-2040, with hundreds of institutions promising to end international coal financing.

Three years later, the Group of Seven (G7) nations, namely the United States, UK, Canada, France, Germany, Italy, and Japan, officially agreed to exit from unabated coal power generation between 2030 and 2035, marking the first major commitment by the world’s largest economies. But the rules are now being rewritten, and in times of crisis, it always comes back around to dirty coal.

Global demand for coal as a primary power source is surging again, thanks to the ongoing energy crisis triggered by the war in Iran, with countries that previously prioritized cleaner energy reversing course and utilising coal as a reliable, cost-effective baseline alternative.

Governments worldwide are desperately tweaking their energy strategies to counter the supply crunch and soaring natural gas costs. India imports about 60 per cent of its LNG through the vulnerable Strait of Hormuz, and now, high gas prices have forced the country to prioritise cheaper, domestic coal.

India is now burning record amounts of coal amid a nationwide heatwave that’s pushed power demand to new highs, with temperatures soaring past 45°C in some regions. India’s peak power demand has surged to an all-time high of 257 GW, with coal-fired plants providing upwards of 75 per cent during peak load periods. Authorities have ordered coal plants utilizing imported fuel to run at full capacity and instructed idle gas-fired plants to restart to shore up the grid.

Similarly, South Korea, drastically boosting its coal-generated electricity by more than a third and pivoting away from LNG. That’s seen coal imports surge significantly, with imports from Russia alone jumping 95 per cent during the first quarter of the year.

The Korean government has abolished the spring-time regulatory cap that had historically limited coal-fired power plants to 80 per cent capacity.

The utilisation rate of nuclear reactors has also been ramped up to as much as 80 per cent to preempt supply risks.

Coal is making a comeback in clean-energy-obsessed Europe, too. Back in March, Chancellor Friedrich Merz announced that Germany may have to slow down coal plant phase-outs to protect the core of the country’s industry against unrealistic decommissioning targets.

The push for a slower phase out comes amid delayed auctioning and building new hydrogen-ready gas-fired power stations, which were intended to serve as reliable backups for wind and solar. Industry representatives have been urging lawmakers to temporarily allow coal-fired power plants currently held in “reserve mode” to return to the regular market to help cushion energy price spikes. Berlin’s climate neutrality goals don’t always align with the short-term realities of energy security. While the federal government recently published new draft laws for gas-fired power plant subsidies to support the green energy build-out, grid operators continue to rely on coal to stabilize fluctuating renewable supplies.

Germany’s landmark Coal Exit law passed in 2020, mandates a step-by-step shutdown of coal and lignite power stations, with a final termination deadline set for 2038. However, the country’s strategy to replace coal with up to 15 gigawatts of hydrogen-ready gas power plants has fallen significantly behind schedule, creating a potential gap in baseload electricity capacity.

Meanwhile, Italy’s lower house of parliament voted earlier this year to postpone the nation’s permanent coal phaseout deadline by 13 years, from 2025 to 2038. Lawmakers justified the reversal of the 2017 phaseout pledge by citing intensifying geopolitical tensions and oil supply crunches in the Middle East. Italy’s last four coal stations–primarily owned by the utility company Enel S.p.A.have now seen their lifetimes officially extended. The government now considers these plants as emergency assets that could be reactivated if natural gas and oil prices remain high.