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Turkey Poised to Lead Europe in Coal Consumption by 2024

Turkey is poised to outpace Germany and claim the title of Europe’s largest coal-fired electricity generator in 2024. This shift is attributed to the impact of high inflation, prompting power producers in Turkey to curtail purchases of costly natural gas in favor of more economical coal for electricity generation.

In 2023, Turkey achieved a record-breaking 117.6 terawatt hours (TWh) of electricity generated from coal, resulting in a corresponding emission of 118 million tonnes of carbon dioxide and related gases. This surpassed the coal generation figures of Europe’s current leader, Germany, which produced 117.9 TWh, as well as Poland, Europe’s most coal-dependent power system, with 97 TWh. Notably, both Germany and Poland experienced significant declines in coal generation in 2023 and have committed to further reducing coal usage while accelerating the adoption of renewable energy sources.

In stark contrast, Turkey has witnessed a consecutive annual increase in coal-fired electricity output, signalling a continued preference for cost-effective coal amid the country’s struggle with one of the highest inflation rates globally. In 2023, Turkey faced an annual inflation rate of 64.77%, a consequence of controversially low interest rates during the first half of the year, followed by substantial price hikes across various sectors in the latter half. To counter inflation, Turkey’s central bank implemented a drastic shift in June, embarking on an aggressive policy rate hike campaign, raising rates from under 9% to over 42% in the second half of the year. While these measures have slowed the pace of price increases, economists anticipate a persistent cycle of rate hikes until mid-2024 before inflation shows consistent signs of decline.

In 2023, Turkey’s LNG imports declined by 8.2% compared to the previous year, reaching the lowest level since 2019. The reduction in gas imports necessitated a parallel cut in gas-fired electricity generation to slightly over 66 TWh, marking the lowest output in four years.

However, the composition of these coal imports revealed a significant shift toward Russia, which, facing sanctions from the European Union since 2022 following the Ukraine invasion, offered substantial discounts on energy exports. Turkey’s total thermal coal imports from Russia reached a record 22.8 million tons in 2023, marking a 25% increase from the previous year. Russia’s share of Turkey’s coal exports also surged to a record 58%, up from 46% in 2022 and less than 20% in 2018. This shift resulted in decreased imports from other coal-producing countries such as Colombia, South Africa, Australia, and North America, potentially yielding significant cost savings for importers despite the overall flatness in total coal import volumes.

Given the ongoing financial pressures on power firms, it is anticipated that Russian coal will continue to play a pivotal role in electricity generation throughout 2024, even as the contribution from renewable sources such as solar and wind continues to rise. If coal-fired generation in Germany remains stagnant, Turkey is poised to emerge as Europe’s primary coal-fired electricity producer in the current year, drawing attention to southern Europe as a key focal point in the ongoing energy transition efforts.