Surging gas prices driven by the Iran war are pushing countries in Asia and Europe towards coal to power their economies.

In Asia, Thailand has restarted coal-fired power plants since the start of the Middle East conflict, while Japan and South Korea have lifted caps on burning the polluting fuel as the war raises fears over gas supplies.

In Europe, Italy has delayed a deadline for ending coal-fired power by more than a decade, to 2038. Germany’s coal plants have been producing more electricity than its gas-fired power stations since the war began.

Coal may be an early winner but analysts say the war should accelerate the deployment of cleaner technologies in the long run, as governments around the world look to cut reliance on fossil fuel imports from volatile regions.

“Broadly speaking, it’s positive for renewables,” says Miguel Stilwell d’Andrade, chief executive of Portugal-based global renewables developer EDP. “It just reinforces the idea that we need to be more [energy] independent and renewables are more immune to shocks.”

Coal received a similar boost after Russia’s full-scale invasion of Ukraine in 2022, when countries including Germany were forced to rely on the fuel to meet demand as the Kremlin reduced pipeline supplies of gas.

But over the longer term, renewables deployment accelerated faster than coal. Global renewable installed capacity has climbed around 50 per cent since the end of 2022 to 5.1 terawatts, according to the International Renewable Energy Agency.

Global coal capacity has risen by 6 per cent to around 2.2TW over the same period, as closures of plants in Europe offset growth in Asia.

“So far we are not seeing an increase in new coal proposals,” said Christine Shearer, a research analyst at Global Energy Monitor. “Development [of new coal plants] remains steady in China, but that was already the case prior to the conflict.

“Elsewhere, most reports point to countries lifting coal consumption caps or delaying retirements due to rising gas prices, not building new coal plants,” she added.

Luca Bergamaschi, co-founder of Italian climate change think-tank Ecco, said that a big return to coal-fired power in Italy was “implausible”. Most coal power stations in the country have been idle for years and would require new environmental permits and costly renovations to restart.

Key to coal’s appeal in crises, as well as availability, is that it is a reliable source of electricity and is not vulnerable to changes in weather. Some governments are rethinking nuclear power for similar reasons. According to a rough calculation by the FT, 5.1TW of installed renewables capacity is equivalent to about 1.5TW in practice once the intermittency of technologies such as wind and solar is taken into account.

Nonetheless, the growth of renewables has been striking. Last year, wind and solar farms produced about 800TW hours globally of electricity more than they did the year before, according to think-tank Ember — roughly three times the UK’s annual consumption.

The current crisis will only accelerate that shift, argues Kingsmill Bond, analyst at Ember. “Renewables prices have fallen [over the longer term] but fossil prices have artificially increased.”

The price of solar panels plummeted by nearly 70 per cent between the start of 2022 and the end of 2025, according to energy research group BloombergNEF and PV Infolink, because of huge capacity in China, which dominates the global market.

The falling prices of batteries for similar reasons should help with renewables’ intermittency. Battery prices have also dropped by 36 per cent since 2022, according to BNEF, although their competitiveness will depend on gas prices, carbon prices and renewable resources in their market.

Thunder Said Energy, a US-based energy consultancy, has upgraded its global forecast for solar power installations this year by 100 gigawatts to 830GW, mainly due to rising gas prices caused by the Middle East disruption.

In a note to clients at the end of March, it described the 830GW figure as “undemanding” given the huge size of global module manufacturing capacity, mostly in China. 

There is early anecdotal evidence of an increase in interest from consumers for solar panels as they worry about gas and petrol prices.

Octopus Energy, the UK’s largest household energy supplier, said its solar panel sales climbed by 54 per cent during the first three weeks of March compared to the same period a month earlier, although it did not reveal absolute figures.

“When they [consumers] see that their bill is 50 per cent or 100 per cent higher, they get very worried, they call the electricians, and they say, ‘Hey, give me a photovoltaic system,’” says Paolo Rocco Viscontini, president of Italia Solare, the Italian industry association for the sector. 

However, the economic fallout from the Iran war could still pose problems for the energy transition.

Executives in the renewables industry are keeping a close watch on expectations for interest rates, which could fall more slowly or increase to curb inflation. Renewables projects require a lot of capital upfront. The surge in interest rates to deal with rocketing inflation after the Covid pandemic created particular challenges for offshore wind, although gas-fired power stations and other energy projects were also affected.

“There’s an irony here,” says Ben Guest, portfolio manager at Gresham House Energy Storage Fund. “In higher priced energy markets, the business case [for renewables] might improve, but the cost of debt is going up.” 

The pace of access to the electricity grid and obtaining planning permission also remains a challenge for renewables in many markets.

Mark Dooley, executive chair of Macquarie Asset Management Green Investments, one of the world’s largest green investors, said that they were approving investments and starting construction on renewables projects “all the time”.

But he adds: “Our challenges are the perennial ones of planning processes and access to the grid which we run into all over the world and require vision to solve — and there is progress being made in that.”

The economic shock also risks bolstering populist parties that oppose a rapid shift away from fossil fuels. Support for the energy transition had flagged before the war as US President Donald Trump cut incentives for renewables under the Joe Biden-era Inflation Reduction Act. In the EU, Brussels faced growing calls to roll back its green agenda.

Since the start of the conflict, Italy and central European nations have intensified their calls for major reforms to the EU’s flagship carbon trading scheme, which underpins clean energy investment.

Politicians in Europe and the UK have also reopened discussions over caps on gas prices or overhauling electricity markets to separate the price of electricity generated by renewables from the price of electricity produced by gas. 

“I think one area of concern is that in these moments of greater stress for politicians, they also start thinking about how to intervene in the markets,” says Stilwell D’Andrade at EDP. “What investors need is predictability and stability.”