Fuel of the future: RNG mandate divides sector

Market: Natural gas
16/09/24

Natural gas sector participants had mixed reactions to Brazil's lower house approving the senate version of the "fuel of the future" bill, which establishes a biomethane mandate.

The mandate obliges gas producers and importers to buy biomethane or guarantee of origin certificates. National energy policy council CNPE will be responsible for setting the yearly target for the mandate, which will range from 1-10pc based on average domestic natural gas production and imports, excluding power demand, in the prior 10 years.

CNPE will also be responsible for creating a regulatory impact analysis to inform the annual target. The mandate will start in 2026 with a 1pc target.

Brazilian biogas producers' association Abiogas president Renata Isfer celebrated the vote. "This will unlock a series of investments from participants whose main business is not biomethane, by ensuring there will be demand.".

The bill also creates the biomethane certificate of origin guarantee (CGOB), which will be based on the volume of biomethane produced and sold by producers. The certificate will be issued by oil regulator ANP-authorized issuers to biomethane producers, who can in turn sell the CGOB.

Critics of the bill cite the lack of dialogue with the sector before establishing a mandate and are concerned it will increase gas prices. A study that has circulated in the market shows biomethane prices below natural gas prices for self-production and diesel-substitution uses, but with varying results depending on feedstock and who is paying for logistics for direct compressed natural gas and LNG and pipeline injection.

Biomethane contracts between glass producers and biomethane suppliers had a 73pc price increase when being negotiated during the fuel of the future bill's discussion, according to Brazilian glass industry association Abividro president Lucien Belmonte. "Our concern is the explosive increase in gas prices leading to increases in the final products' cost," he said.

Another concern is making sure the CGOB certificate is a valid way to certify the use of renewable energy internationally. The Greenhouse Gas Protocol does not accept the use of certificates for natural gas injected into pipelines, which has hindered the development of a voluntary certification market for Brazilian natural gas.

By Rebecca Gompertz

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02/10/24

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02/10/24

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