LITTLETON, Colorado, Feb 11 (Reuters) - Europe's appetite for natural gas could climb more steeply than expected this year after skimpy snow coverage across key mountainous regions ate into hydropower production potential.

Snow coverage in key parts of Italy and Austria is well below normal so far in 2026, resulting in a steep drop in the main source of fuel for hydropower plants in those regions.

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Local utilities mainly use natural gas plants to offset declines from hydro dams, which are the largest overall power source in Austria and the second largest form of dispatchable power in Italy.

Gas-fired power output so far this year is already up sharply from where it stood at this point in 2025, climbing by 24% in Italy and 17% in Austria, according to data from LSEG.

If snow accumulation continues to undershoot historical averages, power firms will likely sustain that elevated level of gas generation and further tighten regional gas inventories - already at multi-year lows - in the process.

For major LNG exporters like the U.S. and Qatar, the prospect of higher gas demand in Europe offers bumper profit potential. But the upbeat gas outlook could still be undone if heavy regional snows and rains fall in the coming weeks.

EAST-WEST DIVIDE

A recent map of Europe's snow coverage - or lack thereof - underscores the severity of the shortfall in key areas.

While much of Scandinavia, Russia and Central Europe currently have ample snow coverage, most of Western and Southern Europe do not have much snow, including in areas currently hosting the Winter Olympics in northern Italy.

Thankfully for Olympians, ski resorts can create artificial snow to keep the games running.

But utilities looking to manage power flows can only count on the real stuff to act as a reservoir for future hydropower production during the winter and then channel the runoff into rivers and dams to generate electricity as the snow melts.

So far in 2026, Italy's run-of-river hydro dam power output is down around 22% from a year earlier and is the lowest for the year-to-date period since at least 2023, LSEG data shows.

LSEG's forecasts for future hydro production are also stunted, with estimated output through April projected to be around 13% below the long-term average.

In Austria, the projected shortfall is even steeper, with production through April expected to come in around 40% below the long-term average.

Forecasts for the broader Danube catchment area - which spans from southern Germany through Hungary and Romania - are roughly in line with the long-term average, despite sub-par readings so far this year.

GAS CRUTCH

Utilities in Austria and Italy are accustomed to patchy hydro generation and have frequently relied on gas plants to plug any shortfalls.

Utilities in Turkey are increasingly following similar generation trends, with periods of elevated gas-fired power output coinciding with bouts of low-hydro dam production.

However, with regional natural gas inventories already at multi-year lows, power firms across Europe may start to see the cost of replacement gas supplies trend higher as storage farms, utility networks and gas exporters manage system throughput.

Regional benchmark natural gas prices are already well above where they finished 2025, with prices averaging around 34 euros per megawatt hour (MWh) so far in 2026 compared with around 27 euros/MWh in December last year.

Further price gains could be seen on the back of any widespread cold snaps across Europe - which boost overall heating demand - or if there are any disruptions to LNG export flows from the U.S. or other suppliers.

Such spells of gas inflation will eat into the margins of utilities and may further lift the energy bills for consumers.

But if snow accumulations remain scarce across key hydro markets, power firms may have little choice but to pay up for the gas they need to keep the lights on this winter and spring.

The opinions expressed here are those of the author, a columnist for Reuters.

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https://www.reuters.com/markets/commodities/europes-low-snow-cover-sets-stage-even-higher-gas-burn-2026-02-11/