Dossier ENGIE
PEG Gas: understanding the principle of the gas exchange point
What is PEG Gas and how does it influence gas prices? Discover the mechanisms behind PEG Gas and how they impact your energy budget!
In France, between 1 August 2022 and 11 June 2023, households and businesses consumed a total of 341.7 TWh PCS of natural gas to meet their energy needs(1). This level of consumption requires constant exchanges between the network operator GRDF and gas suppliers. This is where PEG Gas comes in: a virtual exchange point where players in the gas sector trade natural gas volumes and carry out financial transactions. But what exactly is a PEG, and what impact does it have on how natural gas prices are set in France? ENGIE explains.
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The PEG gas: what is it?
The Gas Exchange Point (Point d’Échange de Gaz, or PEG) is a virtual hub where different players in the gas sector trade natural gas volumes and carry out financial transactions.
PEG
To understand this concept, let’s trace the “journey of gas”. First, natural gas is extracted from the subsoil of producing countries. It is then transported to France via pipelines, for example. At this stage, the gas is in the hands of gas transmission and distribution network operators: GRDF in 95% of cases, while the remaining 5% of the territory is covered by local operators.
To supply their customers, suppliers purchase from network operators the volumes of natural gas they need. These players negotiate and exchange gas volumes on what is known as the wholesale market, a kind of “Rungis market” for natural gas.
However, these exchanges do not take place in a physical location. Suppliers and operators meet through a purely virtual point of the French gas transmission network, operated by transmission system operators, called the Gas Exchange Point (PEG).
Note that there has been only one PEG in France since 1 November 2018 (see below).
What is PEG gas used for?
As we have seen, PEG Gas is a wholesale gas marketplace in France, meaning a virtual place where supply and demand meet. Since the PEG contractually ensures the management of gas inflows and outflows, all users of the transmission network must source their gas through it. It is therefore within the PEG that the wholesale price of natural gas is determined.
It also helps regulate the volume of gas entering the network through a balance between supply and demand. It is important to remember that gas market players in France use the PEG to carry out exchanges, sometimes up to 3 years in advance. Using transaction data from the PEG, daily balance sheets can be established. Based on these, network operators can optimize natural gas import levels. In this way, the volume injected into distribution networks by operators closely matches what suppliers have requested (based on anticipated customer consumption levels).
Finally, these balance sheets guide network operators, who can physically route natural gas to the required delivery points. This is therefore an effective way to secure supply and avoid distribution disruptions.
To avoid confusion
The PEG and a balancing zone are two different concepts. A balancing zone corresponds to a transmission network within which gas is transported and connected to many other networks. The PEG, on the other hand, is a virtual structure where financial transactions related to a balancing zone are carried out.
How does PEG gas work?
Within a transmission zone, there are multiple physical gas exchange points. Indeed, there are many interconnection points between LNG terminals, interface points between different distribution networks, and large industrial consumers.
In France, to simplify natural gas trading on the wholesale market by network operators and suppliers, the creation of a single PEG was decided in 2018. Since 1 November of that year, a single marketplace has operated in France: Trading Region France (TRF). Following the principle of “one country, one price”, the French Energy Regulatory Commission (CRE) merged the former PEGs in France. This resulted in a single entry and exit zone concentrating gas purchases and sales for the entire TRF.
Note that this unified zone is divided into two balancing zones: TIGF and Natran.
Thanks to this consolidation of Gas Exchange Points (PEG), CRE aimed to improve supply fluidity and make the French gas market more competitive.
Did you know?
Between 2015 and 2018, two PEGs coexisted, linked to the three balancing zones of the French transmission network:
The northern PEG, linked to the Natran north network zone;
The TRS (Trading Region South), linked to the Natran south and TIGF balancing zones.
Previously, there were even more PEGs: France once had up to 5 zones!
Note that two types of gas products are traded between suppliers and network operators on the PEG:
Spot products (cash) or short-term gas products;
Forward or futures gas products, which are less volatile than short-term spot products.
What is the impact of PEG on gas prices
As mentioned above, the PEG is the market where the wholesale price is set in France. This wholesale price is one of the factors included in the final price billed to consumers for contracts where the kWh price is indexed to it.
For example, the Exx index for the PEG futures market set the gas price for 2024 at €51.54/MWh as of 06/07/2023.
PEG Gas: key takeaways
A PEG Gas, or Gas Exchange Point, is a virtual hub where gas industry players trade natural gas volumes and carry out financial transactions.
In France, since 1 November 2018, this role has been fulfilled by Trading Region France (TRF), the result of successive mergers of the different PEGs that previously divided the national territory.
It therefore serves as France’s wholesale gas marketplace, helping determine the wholesale price of natural gas and regulate the volume of gas entering the network.
Indeed, thanks to daily balance sheets based on PEG transactions, transmission system operators can optimize natural gas import levels and ensure uninterrupted supply.
It should be noted that the wholesale gas price impacts the price billed to end consumers. For reference, the PEG futures market gas price for 2024 was €51.54/MWh as of 06/07/2023.
Tariff zones: are they linked to balancing zones?
No, gas tariff zones and balancing zones are two distinct concepts. Tariff zones define the geographical distribution of gas pricing across France, whereas balancing zones are sections of the transmission network where gas is transported and connected to other networks, ensuring supply and demand remain balanced.
How to convert gas m³ into kWh?
To calculate your gas consumption in kWh, simply take your consumption in m³ and apply a conversion factor. This factor varies depending on the quality of the gas supplied and the altitude of your home. You can find the applicable conversion factor on your gas bill or directly on the GRDF website.
What is the gas PCE?
The gas PCE, or “Point de Comptage et d’Estimation” (Metering and Estimation Point), is used to measure your individual gas consumption and bill customers accordingly. Defined by the gas distribution network operator, it corresponds to the exact location of your home’s gas supply.
