According to research from Deutsche Bank coal prices will need to rise by $80 per tonne in order for gas power generation to compete.

Because of the ongoing decline in European coal prices coupled with a tight gas market, gas power remains expensive.

"In terms of comparative value to a power generator, natural gas is currently trading at a level which is so expensive relative to coal that coal prices would have to rise to $163 per tonne in Europe and $169 per tonne in the UK in order to restore competitiveness to natural gas for baseload power generation," Deutsche Bank said in a research note.

The situation presents problems to the European Union's energy policy which wants to see a shift from coal-fired power generation towards gas, which sends fewer emissions into the atmosphere than electricity generated from coal.

The bank also said that current gas prices were far too high to create an incentive to invest into new gas-fired power generation, a move policy makers desire in order to move away from coal-fired capacity to meet European and national emissions reduction targets.

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