Europe's Power Move: Leaving Coal Behind

Next week, the world’s sixth largest economy will bid farewell to coal, with the United Kingdom closing its final coal-fired power station, bringing to end a chapter that has lasted more than 140 years. Like the UK, Europe is also seeing a collective phase out of coal, with a majority of European Union states pledging to transition away from the fossil-fuel. Historically, coal was the backbone of European industrialisation, providing cheap, reliable energy. However, because of a combination of environmental policies, market forces, and social pressures, the landscape is changing dramatically. Europe’s commitment to decarbonisation, reflected in the European Union's Green Deal and Paris Agreement commitments, has accelerated the phase-out of coal in favour of renewables. The implications of this shift are far-reaching, especially regarding energy security, the viability of renewable energy, and the geopolitical consequences for Europe’s energy future.

The Rationale for Exiting Coal

The primary driver of Europe’s exit from coal lies in the region’s ambitious climate goals. As a signatory to the 2015 Paris Agreement, the EU has pledged to reduce carbon emissions to net-zero by 2050. Coal-fired power generation is one of the largest contributors to carbon emissions, responsible for approximately 36 per cent of global CO₂ emissions in the electricity sector, according to the International Energy Agency (IEA)[i].  Energy think tank, Ember reports that for the first half of 2024, coal-fired power plants were responsible for around 10 per cent of the total CO₂ in the EU, and while it is down five per cent when compared to 2019,[ii] further reducing this figure is crucial in meeting its international and domestic climate targets.

European policies like the Emissions Trading Scheme (ETS) have played a pivotal role in making coal increasingly uneconomical. The ETS, launched in 2005, created a cap-and-trade system where companies must buy allowances for their carbon emissions. This market-based approach by placing a price on carbon incentivised industries to reduce emissions over time. As the price of carbon allowances has increased, surpassing €90 (AUD146) per tonne in 2023, operating coal-fired plants has become economically unsustainable. According to Carbon Tracker, another think tank, coal power across the EU has been operating at a financial loss since 2019, with costs rising further as the ETS carbon price has increased.

As seen in Australia, technological advancements in renewable energy has dramatically changed the business case for coal plants. Between 2012 and 2022, the cost of electricity from solar PV dropped by 89 per cent, and onshore wind costs fell by 49 per cent[iii]. These reductions meant renewables was no longer seen as merely an environmental choice; but also delivered cost advantages over coal generation. According to a study by Ember, the levelised cost of electricity (LCoE) for new solar and wind projects is now cheaper than operating existing coal plants across much of Europe.[iv]

Figure 1: Timeline of coal phase out plans, European countries

Source: Beyond Fossil Fuels

*Note: This figure  includes only those countries with committed plans. Countries that have either not had coal in their energy mix, do not have any phase out plans, or who’s plans are under discussion, are not included.

Energy Security Challenges

In parallel with Australia’s energy grid, the European coal exit has raised questions of energy security and reliability. Historically, coal has provided baseload power, offering a stable and reliable energy supply regardless of external factors such as weather conditions. Renewable energy, primarily wind and solar, is inherently variable, posing a challenge for maintaining a consistent energy supply, especially during periods of peak demand or low renewable output.

Solar generation is obviously limited to daylight hours, and wind power will fluctuate based on wind speeds.  In 2021, Europe experienced an energy crunch as lower-than-expected wind speeds in Northern Europe reduced wind power generation by as much as 20 per cent in some countries, according to the European Commission[v]. This shortfall led to a spike in electricity prices, underscoring the need for backup power.

Parts of Europe can call on nuclear and interconnectors to access baseload generation, but energy storage and grid modernisation will also be increasingly essential for mitigating the challenges of intermittency. Battery storage technologies, while improving, are still in the early stages of development in terms of the scale and depth of storage required (see this previous EnergyInsider).

The European Battery Alliance estimates Europe will need at least 200 GWh of battery storage capacity by 2030 to support renewable integration. However, current installed capacity remains far below this target. Pumped hydro storage and emerging technologies like hydrogen storage may also play a role in addressing these energy gaps, but in the case of hydrogen, it remains a work in progress.  The European Commission’s Hydrogen Strategy envisions hydrogen providing up to 13 per cent of Europe’s total energy mix by 2050[vi].

The phase-out of coal also shifts the burden to other energy sources, with natural gas expected to play a critical role as a transitional fuel. Gas-fired power plants can provide the flexibility needed to balance supply and demand when renewable output is low. However, Europe’s heavy reliance on natural gas imports pose significant geopolitical risks. Before Russia’s invasion of Ukraine in 2022, the EU imported 40 per cent of its natural gas from that state[vii]. The Ukraine conflict dramatically shifted the region's energy landscape, with European leaders scrambling to diversify gas supplies and reduce dependence on Russian imports.

The European Commission’s REPowerEU plan aims to end Russian gas imports by 2027 by diversifying energy supply and increasing investments in renewable energy and energy efficiency. Until this transition is completed, Europe will remain vulnerable to supply shocks and price volatility in the gas market. The gas price spikes following the Ukraine conflict, highlighted another risk from natural gas. In the long term, Europe will need to invest in a combination of renewable energy, nuclear power, energy storage, and enhanced grid infrastructure to ensure a secure,reliable, and affordable energy supply.

Renewables: The Cornerstone of Europe's Energy Future

As Europe exits coal, the role of renewable energy will become even more critical. The European Union’s Green Deal and "Fit for 55" initiative outline an ambitious roadmap to increase the share of renewables in the energy mix to at least 40 per cent by 2030, up from around 22 per cent in 2020[viii]. To achieve this, Europe will need to significantly ramp up investments in wind and solar power, improve cross-border interconnections, and develop more robust energy storage solutions.

Wind energy, particularly offshore wind, is also poised to play a central role in this transition. Europe already leads the world in offshore wind capacity, with the North Sea serving as a hub for major projects. According to the Global Wind Energy Council, offshore wind capacity in Europe reached 41 GW as of 2024, with projections it could grow to nearly 120 GW by 2030.[ix] Offshore wind farms benefit from stronger and more consistent winds compared to onshore sites, providing higher efficiency and greater output. For instance, the Dogger Bank wind farm in the North Sea, set to be the largest offshore wind project globally, is expected to generate 3.6 GW of power[x]—enough to supply electricity to over 6 million European homes.

Solar energy also has significant potential, particularly in Southern Europe, where the number of sunlight hours is higher. Spain, Italy, and Greece are all ramping up their solar capacity, with the European Commission’s Solar Energy Strategy aiming to install 600 GW of solar capacity by 2030[xi]. The strategy includes incentives for rooftop solar installations on residential and commercial buildings, aiming to decentralise energy production and reduce transmission losses. This decentralised model is intended to help provide greater resilience to grid disruptions and localised energy shortfalls.

However, integrating these renewable sources into Europe’s existing energy infrastructure requires significant grid upgrades. Europe's electricity grid was designed primarily for centralised, large-scale power plants like coal and nuclear facilities. While nuclear will continue to play a significant role in powering Europe – in 2022 it provided around 22 per cent of the EU’s energy, the shift from coal towards distributed renewable generation will require new grid infrastructure capable of managing variable power flows. The European Network of Transmission System Operators for Electricity (ENTSO-E) has emphasised the need for smarter, more flexible grids capable of handling decentralised energy production, automated demand response, and real-time energy balancing.[xii]

Cross-border interconnectors already play a key role in stabilising Europe's energy supply by ensuring surplus renewable energy generated in one region or existing baseload power, such as nuclear generation from France, can be used to offset shortfalls elsewhere. For example, the North Sea Wind Power Hub, a proposed project to link wind farms in Denmark, Germany, and the Netherlands, will provide a model for integrating large-scale offshore wind into a pan-European grid[xiii].

Why Some Countries Aren’t Transitioning Away from Coal

Despite Europe’s broad commitment to exiting coal, some countries remain heavily reliant on the fuel, so the pace of the transition varies by jurisdiction.  Poland, Germany, and Türkiye (previously known as Turkey) have all struggled to reduce their dependence on coal with a mix of economic, social and political factors impacting their ability to transition.

Poland, for example, still generates around 61 per cent of its electricity from coal, largely due to its domestic coal reserves[xiv]. Poland’s coal industry is deeply intertwined with its economy and employment base, particularly in regions like Silesia, in the country’s south, where tens of thousands of workers rely on coal mining for their livelihoods. The Polish government historically has been reluctant to impose aggressive coal phase-out policies, fearing economic disruptions and political backlash, but following the 2023 election, the new centre-right Government announced its intention to phase out coal by 2049[xv], shifting to nuclear power instead[xvi]. This timeline, however,  has not yet been confirmed.  

Germany’s relationship with coal is more complicated. While the country has aggressively expanded its renewable energy capacity, coal still accounts for a significant portion of its energy mix, particularly brown coal, which is abundant in Germany, making it the largest coal-generator in Europe. The country’s "Energiewende" (energy transition) policy is focused on phasing out coal, but concerns over energy security and employment in coal-dependent regions have delayed the process. Germany originally planned to exit coal by 2038, but recent developments, including the Russia-Ukraine war,energy shortages, and the closure of their nuclear power plants due to safety concerns[xvii], have led the government to keep some coal plants on standby to ensure energy security during the transition.

Türkiye is another country grappling with its dependence on coal, generating around 36 per cent of its electricity from both domestic brown coal and imported black coal.[xviii] Unlike many EU countries, Türkiye has prioritized coal to reduce reliance on imported natural gas and bolster energy security. The country’s growing energy needs, driven by industrialisation and economic growth, have made coal a strategic resource for meeting domestic demand. Despite ratifying the Paris Agreement in 2021, Türkiye has been slow to implement strong decarbonisation policies. Its domestic coal industry supports tens of thousands of jobs, creating a significant political and economic barrier to a rapid phase-out. The government is cautious about transitioning too quickly, fearing mass unemployment and social unrest in coal-dependent regions.

The reasons for slow transitions in these countries are multifaceted. The availability of domestic coal resources reduces dependence on energy imports and provides economic stability for coal-reliant regions. In addition, the social cost of a rapid coal phase-out—demonstrated by job losses and economic disruption—remains a major political hurdle.

Workforce Implications

As mentioned above, the transition from coal to renewables presents significant challenges for Europe’s labour market, particularly in coal-dependent regions. According to the European Commission’s Just Transition Mechanism, up to 160,000 jobs in the coal industry could be lost by 2030[xix]. The Just Transition Fund has allocated over €150 billion (AUD243 billion) to support retraining programs and economic diversification in affected regions, and reskilling workers for the renewable energy sector.

The European Commission estimates that the renewable energy sector could generate over 1.2 million new jobs by 2030, particularly in construction, manufacturing, and operations of wind and solar projects[xx]. However, like Australia, Europe faces significant shortages in critical trades such as electricians, engineers, and technicians, which could potentially slow the pace of the transition and see Europe struggle to meet its net zero targets.

Conclusion

Europe’s decision to exit coal is a vital step in its effort to combat climate change and build a sustainable energy system. The transition, which has been driven by environmental policies, economic forces, and social demands, offers an opportunity to transform the continent’s energy landscape. However, it also presents considerable challenges, particularly to meet energy security needs and manage workforce requirements.

Renewable energy will be at the heart of Europe’s post-coal energy mix, but its integration into the grid requires significant investments in infrastructure, storage technologies, and skilled labour. Moreover, the short-term reliance on natural gas as a bridging fuel has introduced its own set of risks, including price volatility and geopolitical dependence. Ultimately, Europe’s success in phasing out coal and building an increasingly renewable energy-based economy will depend on its ability to balance decarbonisation with energy security, grid modernisation, and workforce development.

[i] https://www.iea.org/reports/coal-2023

[ii] https://ember-climate.org/insights/research/remaining-eu-coal-power-polluters/

[iii] https://www.irena.org/Publications/2023/Aug/Renewable-Power-Generation-Costs-in-2022

[iv] https://ember-climate.org/insights/research/global-electricity-review-2023/

[v] https://www.euronews.com/next/2021/12/22/power-prices-europe-wind-analysis

[vi] https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/repowereu-affordable-secure-and-sustainable-energy-europe_en

[vii] https://www.longvieweconomics.com/gas-tracker

[viii] https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/delivering-european-green-deal_en

[ix] https://gwec.net/global-offshore-wind-report-2024/

[x] https://doggerbank.com/

[xi] https://www.europarl.europa.eu/legislative-train/package-repowereu-plan/file-eu-solar-strategy#:~:text=The%20strategy%20puts%20forward%20a,natural%20gas%20annually%20by%202027.

[xii] https://www.entsoe.eu/news/2024/05/08/dso-entity-and-entso-e-submit-joint-network-code-on-demand-response/

[xiii] https://northseawindpowerhub.eu/a-blueprint-the-new-energy-highways

[xiv] https://ember-climate.org/countries-and-regions/countries/poland/

[xv] https://www.euractiv.com/section/energy/news/poland-clarifies-position-on-coal-phase-out-it-is-still-2049/ 

[xvi] https://www.power-technology.com/news/poland-nuclear-power/

[xvii] https://www.base.bund.de/EN/ns/nuclear-phase-out/nuclear-phase-out_node.html#:~:text=Safety%20was%20a%20paramount%20concern,leaves%20behind%20highly%20toxic%20waste.

[xviii] https://ember-climate.org/insights/research/domestic-coal-dontprovideabaseload/

[xix] https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/finance-and-green-deal/just-transition-mechanism_en

[xx] https://commission.europa.eu/news/focus-employment-eus-renewable-energy-sector-2022-05-16_en