Europe’s Looming Coal Crisis

Poland’s government is embroiled in a political scandal for failing to increase the nation’s coal reserves. But Poland isn’t the only country that is facing a dreadful scenario, there is a looming coal crisis over all of Europe. For Poland and Germany in particular, a fuel shortage would be devastating.

There is a new energy scarcity in town; move over, gas.

National capitals have been rushing to increase their gas reserves in preparation for the winter as Europe experiences its greatest energy crisis in decades due to the conflict in Ukraine. However, coal may soon be in limited supply as well.

Consumption is rising as a number of nations, like Austria and the Netherlands, either switch on old coal-fired plants again or increase current capacity to save on gas, despite the highly polluting fuel earning pariah status as the EU strives to cut emissions.

The issue is that the EU will soon lose its largest supply as the group imposed sanctions on Russian coal in April, prohibiting new imports effective on August 10.

Consequently, the 2 million tons of coal it will acquire from Russia this month, according to Alex Thackrah, a senior coal analyst at the market information company Argus Media, will be the final shipment of its kind.

“it’s certainly going to be a challenge to get enough coal this winter,” he said, citing significant logistical difficulties in locating and shipping the fuel from outside.

Potential suppliers include Indonesia, South Africa, and Colombia, although Thackrah predicts “extremely high prices” for EU nations due to the region’s common use of a high-calorific form of coal. Last week, coal prices on the European benchmark API2 Rotterdam hub reached $380 a ton, a more than fourfold increase from this time last year.

According to Mark Nugent, an analyst at the shipbroker Braemar, the EU would also encounter “stiff competition” from entities like India and South Korea, which already have coal supply deals with numerous of these nations.

Logistical problems could make things much more difficult.

A sizable portion of the coal that enters the EU via the ports of Amsterdam, Rotterdam, and Antwerp is transported by barge down the Rhine river. Unusual high temperatures this month have caused the river’s water levels to drop to 65 cm, which has reduced the amount of cargo barges can transport by two-thirds.

Despite the fact that power plants often possess their own stockyards, coal that cannot be delivered to them is usually kept in ports until it can be transported, but “inventories at European ports are nearing maximum levels,” according to Nugent.

Approximately 8 million tons of coal are currently stranded in ports, according to information provided by the coal trade association Euracoal.

Bracing for blowback

Poland and Germany are likely to experience supply shortages and bottlenecks the most severely.

According to Rudolf Juchelka, professor of economic geography at the University Duisburg-Essen, a scarcity would be especially unpleasant for the steel and chemicals sectors in Germany, which accounted for 37% of the EU’s overall use of hard coal and lignite the year before. A smaller degree of impact would also be felt on power generation.

Juchelka also cautioned that if Russia cuts off gas supplies or technical problems keep delaying coal supply, the government may be obliged to enact harsher energy rationing measures. “If those [effects] come together … into one big effect, there will be problems,” he said.

An official from Germany’s climate ministry claimed that power plant managers had “assured” legislators that they had enough coal on hand to compensate for the missing Russian coal. The spokesperson noted that the government has also implemented a new policy that tries to “prioritize energy shipments” over other kinds of delivery in order “to be prepared” in the case of a catastrophe.

Meanwhile, Poland’s government is embroiled in a political scandal for failing to increase the nation’s coal reserves.

Robert Tomaszewski, a senior energy analyst at the Polityka Insight think tank, estimates that some 2 million houses in Poland are still using hard coal for heating, with each consuming an average of three tons each winter. Prior to the Ukrainian conflict, the nation brought in roughly 7 million tons of Russian coal each year for this use.

There is now “a very huge risk that there will be not enough coal for some households,” he said, forecasting that Poland may run out of coal by between 1 million and 2 million tons this winter as a result of the EU’s embargo on Russian coal, which is scheduled to take effect the following month.

In early March, the Prime Minister Mateusz Morawiecki’s Cabinet told him that sanctioning Russian coal might cause a significant deficit and encouraged him to establish a new strategic coal reserve, according to an investigation by the Polish news site Onet. However, according to Onet, neither he nor his administration took any action after receiving the warning or conducted an official impact analysis of the EU’s proposed coal sanctions before voting in support of them.

Morawiecki last week ordered state-owned coal companies to purchase 4.5 million tons of coal by August 31 in a bid to calm the seas. He also stated that affected households would receive a 3,000 złoty “carbon allowance” (€631) to help with the cost of coal.

According to Tomaszewski, it will be “probably impossible” to get these coal purchases to homes in time, and if inventories are low, handing money to households will not help much.

The government “face[s] a difficult task” in resolving delivery-related logistical problems, Poland’s Energy Minister Anna Moskwa said in an interview on Friday. She cited fresh contracts that were being negotiated to argue that it was “not true” that there would not be sufficient coal for the winter.

A spokesman for the Polish Ministry of the Environment said that in order to increase the supply of coal, the ministry was working on “multidirectional solutions” to the coal problem and had instituted a new regulation that “temporarily suspends the existing quality requirements” for some types of coal sold on the market for household uses for 60 days.

Tomaszewski cautioned that in addition to the impending winter issue, a prospective coal shortage could be problematic for the conservative government during the parliamentary elections, especially in light of recent polls that indicate the possibility of the ruling party’s defeat for the first time since 2015, according to Tomaszewski.

Morawiecki’s “political mistake,” he claimed, might “hurt him very much politically.”