Gas Crunch Turns Europe's Last Coal Plants Profitable as Lignite Spreads Reach $72 a Megawatt-Hour
Record LNG tightness has flipped Europe's remaining coal-fired fleet back into profit, with German lignite generation margins near $72/MWh against zero a year ago, and the IEA now expects a slower decline in European coal use.
The global LNG squeeze has made Europe's last surviving coal plants profitable again. One measure of the profitability of generating power from lignite in Germany has jumped to as much as $72 (EUR 64) per megawatt-hour this month, compared with zero at the same time last year, according to Energy Aspects estimates cited by Bloomberg and reported by OilPrice on 16 October. Energy Aspects analyst Sabrina Kernbichler said the spreads are expected to stay high through March. Germany and Poland host most of the remaining operational or backup-ready coal capacity in Europe, and both have shut capacity in recent years under climate targets.
Coal has become indispensable for grid stability as gas-fired generation slumps under demand destruction and gas conservation. European benchmark gas prices remain close to their highest since the end of 2022, because LNG from Qatar is still not flowing and Hormuz shipments stay disrupted. The demand response is visible beyond Europe: South Korea is set to lean more heavily on coal-fired generation this coming winter as spot LNG prices surge and Middle Eastern deliveries stay absent, despite its own climate commitments. In Germany, two startup electricity retailers have announced they will cease operations as spiking wholesale prices squeeze the retail supply industry again.
The International Energy Agency has already revised its European coal view higher. In its Coal Mid-Year Update 2026, the agency said total annual coal demand in Europe is now expected to reach 276 million tonnes in 2026, down from 292 million tonnes last year but higher than previously expected, with higher gas prices reducing the expected decline in countries such as Germany and Poland where gas generation and spare coal capacity remain available. The IEA added that weather events such as cold spells going into winter could temporarily push coal use above even those revised expectations. European coal demand remains in structural decline, but the rate of decline has slowed.
For fuel markets the implication is that the gas-for-coal switching bid is no longer theoretical. Every incremental tonne of lignite and hard coal burned in Germany and Poland displaces gas and LNG that Europe would otherwise have to bid for against Asia, and it puts a ceiling under how far TTF and JKM can run. It also tightens the market for globally traded thermal coal at the margin, at a time when Asian buyers are making the same calculation. With spreads expected to hold through March, European utilities are likely to keep that optionality live well into the first quarter.