Brazil's biomethane sector — also known as renewable natural gas (RNG) — is poised to gain more market share but will continue to face challenges, among them the lack of a renewable attribute price in the country's gas markets.
The sector expects to gain a bigger share of the Brazilian natural gas market soon, with public policies and other government incentives. In an industry event in Sao Paulo state last week congressman Arnaldo Jardim promised to include RNG in the fuel of the future bill, which has been a demand from producers. They expect Brazil's national energy policy council CNPE to set required 1pc biomethane mix on natural gas pipelines, which could be adjusted up to 10pc, according to market participants.
But producers still struggle with pricing their products at a premium without a liquid renewable gas certificate market. The sector has been adopting Cbio carbon credits, as RNG plants are allowed to issue them depending on the biomethane's final use. But Cbios do not reflect all possible added value from green natural gas for uses outside of the Renovabio specifications. Environmental certification issuing body Instituto Totum started certifying biomethane renewable energy certificates (Gas-RECs) in June, but there are still few transactions and no liquidity.
Investors eye biomethane opportunities with enthusiasm, according to speakers at the event, but must manage the fuel's higher price compared with conventional natural gas. The ideal leverage for an RNG project to withstand a price drop is the natural gas price plus the possible revenue coming from Cbios and Gas-RECs, according to Carla Primavera, energy transition and climate superintendent at Brazil's development bank Bndes.
Recent advancements in Brazil's natural gas market are widely considered positives to help develop Brazil's blossoming RNG market, including the market's liberalization and ongoing regulatory improvements to allow for more competition, according to conventional natural gas production representatives who hope the renewable gas will complement the traditional market.
The main challenge for biomethane is matching supply and demand, but market will likely adapt as RNG grows. For example, distribution and transportation companies will have to transition from a market with few suppliers in mostly coastal regions to a decentralized market with supply spread across Brazil's heartland.
