Utilities switching to coal use amid gas price surge

With the clock counting down to the start of the crucial COP26 climate change summit in Glasgow at the end of the month, there are growing concerns that rising wholesale gas prices across Europe are pushing many utilities back toward using coal to generate electricity, going against the flow of efforts to move away from such carbon-heavy production.

The European Union's Emissions Trading System charges carbon dioxide producers by the ton for any of the gas that they produce, but fluctuating prices mean that since the middle of this year, after two years of gas-fired energy production being cheaper, coal now makes more financial sense.

"While European coal generation was handcuffed by record carbon prices in the early parts of the summer, soaring TTF (Dutch gas) prices have now unlocked the gas-to-coal switching lever," analysts at Bank of America told the Reuters news agency.

The issue affects the whole of the EU but is particularly sensitive in Poland, where there are major tensions between the government and the EU over constitutional issues, which come on the back of a long-running row over the coal-fired Turow power station. This generates about 7 percent of the country's electricity, and is currently the subject of a daily penalty of 500,000 euros ($578,000) for its carbon emissions - a fine that the Polish government is refusing to pay.

On a similar topic, the International Energy Agency has urged world leaders to take action ahead of COP26, after warning that price volatility could continue for years unless investment in clean power is tripled over the next decade.

"More than 40 percent of the required emissions reductions would come from measures that pay for themselves, such as improving efficiency, limiting gas leakage, or installing wind or solar in places where they are now the most competitive electricity generation technologies," said a report published by the agency.

Meanwhile, as domestic energy prices continue to soar in the United Kingdom, with more small suppliers predicted to go out of business this week, log sellers and chimney sweeps have reported surges in business as consumers try to find a way around mounting bills. The i website reported that sales at wood fuel companies had gone up by almost 40 percent compared to the same period last year.

The head of the country's Motor Manufacturers Association has told the Financial Times that the British automotive industry is just the latest in a string of heavy industries that could find itself struggling as a result of the energy price crisis.

The group's chief executive officer Mike Hawes has warned that high prices put the country at a "competitive disadvantage" against European rivals when it comes to the matter of attracting investment.

Despite electric battery production, one of the key growth areas for the industry, and a competitive investment market at the moment, being an energy-intense process, Hawes said that the automotive sector did not feature on the government's list of energy-intensive industries, which would have access to emergency support measures currently being considered, to help deal with rising energy bills.

"We are not classified as an energy-intensive user. This is something we need to work on," Hawes said. "As the industry moves to electric vehicles, the energy we use will increase."

He also revealed the fuel crisis had led to sharp increase in consumer interest in electric cars.

"According to the dealer network, inquiries about electric vehicles are up three, four, five times over the past few weeks," he added.