Poland’s coal-fired power output rises 13% y-o-y amid switchover from gas

• Higher gas prices, lower carbon costs boost coal-fired output
• Coal stocks at Polish commercial mines decline by 22% y-o-y

Poland’s coal-fired generation is up 12.6% in early April, while gas has plunged 11%. After months of talk, the data finally shows fuel switching in action.

The numbers: coal up, gas down

Polish electricity generation over the first seven days of April totalled 3 terawatt-hours. This was 5 percent higher than the same period last year. What matters is the fuel mix.

Coal-fired generation picked up to 1 terawatt-hour, which is 12.6 percent higher y-o-y. Gas-fired generation, in contrast, dropped 27% m-o-m and 11% y-o-y to 0.4 terawatt-hours. Lignite generation was stable. This is the first clear signal of gas being displaced by coal in the Polish power market.

European context

The broader European context supports this trend. Gas-fired generation in Europe’s five largest markets fell 10% y-o-y in March to 23.5 terawatt-hours. Coal and lignite output fell 6% to 10.3 terawatt-hours. However, for the first quarter as a whole, gas still registered a small y-o-y increase while coal and lignite fell. The switching trend is only now becoming visible.

Spikes in gas prices and lower carbon prices are expected to incentivise gas-to-coal switching over the coming months. German lignite offers the biggest potential, but the overall scope is limited by coal plant closures and new solar and wind capacity coming online. In Poland, the switching appears to be happening despite these constraints.

Supply is tightening

What about coal supply? Polish coal production was 3.5 million tonnes (mnt) in February, down 2.2% y-o-y. Over January and February, output totalled 7 mnt, down 710,000 tonnes (t) or 9.3% y-o-y. Stocks at Polish commercial mines fell to 3.9 mnt in February, down 7.5% m-o-m and 21.6% y-o-y. This suggests that the increase in coal-fired generation is drawing down inventories.

What to watch next

The Atlantic market remains weak overall, with spot offers into Amsterdam-Rotterdam-Antwerp close to $100/t. But Poland may be an early exception. If gas prices remain elevated and carbon prices stay contained, other Central European markets could follow. The first signs are there. The question is whether they develop into a sustained trend.