FRANKFURT/LONDON The future for European coal generation looks gloomy with the odds stacked against new coal plants but if Turkey is included in the European zone a very different picture emerges, analysts say.
The global coal market's focus on booming Asian imports has distracted attention from European demand hotspots and Germany's key role as a coal consumer but Europe will remain an important market for imported coal beyond 2015.
"Internal European coal demand will remain around 500 million tonnes and with coal production declining in countries such as Germany and the UK, we would expect imports to rise to make up for that," said Paul Monnier, analyst with Paris-based Societe Generale.
Without Turkey and coal-power dependent eastern European countries such as Romania and Bulgaria, Europe's coal use will fall by around 8 percent or 13 million tonnes to 140 million tonnes a year by 2015.
With Turkey's additional planned 22 GW of new coal plants and some Eastern European new plants, consumption may rise by over 55 million tonnes a year in five years.
"The overall decrease should be compensated for by an increase in countries such as Turkey - for us included in the European zone and eastern Europe," said Monnier.
"In Turkey the new imported coal power projects could amount to a capacity of nearly 22 GW during 2010-2012," he added.
Turkey did not commit to quantifiable emissions targets under the Kyoto Protocol but new licenses for power plants are prioritizing cleaner energy gas and renewables, Turkish industry sources said.
"There are a large number of coal plants now under construction in Turkey which will raise the imports," said Turkish coal importer Robert Yildirim.
"But for new power plant proposals from now on, the government favors gas, wind, hydro to prevent more pollution," he said.
SocGen's projections are based on 1 GW of coal-fired generation equating to 2.5 million tonnes of coal use.
European utility sources agreed that clean coal legislation and nuclear and gas wedded to fast expanding renewables will keep pushing out coal power as the EU strives to meet 2020 emissions targets.
GERMANY IS WILD CARD
Germany, Europe's biggest coal generator, is a wild card, however. Analysts outside of Germany forecast a rise in German coal power and coal imports to 2015 but all hinges on Germany's new energy strategy, due to be revealed later this month.
This will settle nuclear energy's future in Germany. Coal generates 42 percent of German power and stands to lose more from a nuclear gain than gas or renewables.
"In the short term, Germany is the only positive driver of coal demand in north western Europe," said Amrita Sen, analyst with Barclays Capital.
"I have Germany rising modestly about 10 percent or so until 2015," she added.
SocGen's German forecast is also cautiously bullish.
"We think the coal-fired generation in Germany in absolute value and thermal coal use will slightly increase to 2015 because at least 3.8 GW is under construction and the existing plants are not particularly old," SocGen's Monnier said.
UK TO LOSE 8 GW MORE COAL
Elsewhere in Europe the outlook is for stable to slightly declining coal use and imports.
Long-term European power demand is forecast to grow and existing fossil fuel baseload generation will not easily be replaced by greener alternatives.
UK coal-fired generation has already fallen by 20 percent from last year's levels and will lose another 8 GW - 30 per cent of current coal generation - by 2015 because plants which opted out of the EU Large Combustion Plant Directive and did not fit anti-pollution equipment will shut down, Monnier said.
Yet the UK will need some imports for remaining coal plants. "UK coal imports fell 50 percent last year and will drop further by 2015 but not to zero," said Nigel Yaxley of the UK Coal Importers Association.
France, which is predominantly nuclear-powered, has a few coal plants but is building mostly gas power plants.
Italy's coal generation is unlikely to change significantly by 2015 because the conversion of oil plants to coal-fired will not be completed by then, Italian power industry sources said.
Spain is adding gas and wind power rather than coal and has almost halted imports since a government decree this year forced utilities to buy domestic coal instead.
Coal exporters in Russia, Colombia and South Africa say Europe will remain an important market for them because they cannot rely on Asia alone but they will target the demand hotspots and the higher prices achievable there.
"Coal exporters will continue sales to Europe if CIF ARA prices are attractive," said Monnier.
(Editing by James Jukwey)