Renewable natural gas (RNG) could replace an estimated 10% to 15% of the global natural gas demand and reduce emissions from that sector by 50%. The main impediment right now is cost, as RNG typically sells at U$10-20/MMBtu in the U.S. market, a 5x to 10x premium on existing natural gas prices. Without subsidies, or high paying decarbonization credits, the economics of an RNG plant don’t make sense yet. Nevertheless, companies in Latin America are making important strides to become the first movers in this space.
Fueled by Brazil’s “zero methane” plan in 2022, which include methane credits (CBIOs) and lower taxes on biomethane plants, a flurry of announcements have been made:
- Raizen, which is a joint venture between Shell and Brazilian energy producer Cosan, is developing the 4th largest RNG facility in the world in Piracicaba (SP), where it will produce 26mn m3/yr of renewable natural gas. They will use vinasse (residue from producing ethanol = 1 liter of biofuel is 10 liters of vinasse) to supply Yara Fertilizers and VW Brazil starting in 2024.[1]
- Brazil’s Orizon plants to invest U$240mn in new biomethane plants, adding 1MN m3/d of new capacity starting in 2024. They use solid urban waste from landfills[2]
- Vibra bought 50% of ZEG for U$29.6 million to increase its biomethane production.
- French company Veolia (BR) plans to deploy new installations of biomethane in SP and SC to reduce emissions by 1.5 tons of CO2eq in 2023[3]
The 5 Main RNG Sources and Their Carbon Intensity Levels
Instead of extracting gas from the earth’s core, and releasing additional emissions into the earth’s atmosphere, RNG is a drop-in fuel (i.e., it can be used interchangeably with fossil gas so there is no need for pipeline or engine modifications) that is created by using what is already out there in the atmosphere. There are five main sources of RNG, all of which have different levels of carbon intensity:
1. Landfill gas is the most common source of RNG and is also the cheapest and easiest to handle. However, it also has the highest carbon intensity because methane continues to be emitted during the capture of biogas. Although large landfills are mostly in place in Latin America, less than 1% of them have a system in place to capture the gas and turn it into a source of energy. Companies such as Veolia, ZEG/Vibra, Orizon and Ecometano are leading this space in Brazil. In Mexico, there were reports that Engie was developing an RNG pilot plant in Durango, but the project is currently on hold as they analyze its feasibility.
2. The second most common source of RNG is cow manure, which has a lower carbon intensity but requires more money to convert into energy (since the cow has already used up a lot of that energy). Due to its high cost, it is unlikely that manure based RNG will be sold to utilities, but rather, will likely be used to generate low carbon credits such as the CBIOs in Brazil and RINS in the U.S (i.e., RNG comes from removing CO2 and other contaminants like methane present in biogas, which allows producers to generate carbon credits). CBIOs trade just under $14 in Brazil and don’t need to meet the criteria of additionality—representing a unique opportunity among the booming livestock industry in the region[1]
3. The third most common source, which is not yet a reality in Latin America, is using food waste to produce RNG. In the U.S., companies such as StormFisher capitalize on the high energy volumes present in food that haven’t been consumed, while simultaneously reducing methane emissions by diverting the food away from landfills. The cost of food-waste RNG usually ranges from U$15 to 30/MMbtu, 6x to 10x premiums in pricing compared to conventional natural gas. Although this will delay its adoption in Latin America, the region can still serve as a supplier of food waste to the rest of the world
4. Synthetic gas, produced using green H2, is still a distant reality as the price of electrolysis is still unfeasible without subsidies. Nevertheless, due to its very low carbon intensity, it does have the potential to become a major contributor to future RNG production.
5. Wastewater is also a lesser common source of RNG, especially in Latin America, where the technological costs make it unfeasible. This is a largely untapped and underutilized resource.
Why Waste Is Not a Waste—It’s the Future
Society often talks about how a certain trend is the future. Right now, many are saying that artificial intelligence is the future. In the energy sector, many will say hydrogen, solar, or even battery storage are the main trends to watch. Few people, however, talk about how waste is, in fact, the future. Waste is called “waste” for a reason—it is something people want to get rid of. It’s something people don’t want to see lying around. But humans continue to innovate and find ways to use even the most “worthless” materials, ranging from animal manure to landfill gas.
Waste will be a major part of our net-zero society and RNG will be a key beneficiary of this trend. Latin America, with its large landfills, livestock, and food industries, will be a key supplier of the inputs needed to produce this cleaner gas.
Next Steps
Contact us to explore how we can help you in understanding the powerful potential of waste material and how you can turn it to your advantage.
Whether it is helping companies secure a long-term feedstock supply for renewable natural gas, breaking down the market size and value chain of leading feedstock suppliers in a country, finding the optimal location for an advanced RNG plant, or conducting competitive intelligence on industry leaders, AMI has over 20 years’ experience in Latin America’s energy sector. AMI has a proven track record of helping both multinationals and investors understand the changing market dynamics to ensure a successful low-carbon strategy in the region.
SOURCES
[1] Raízen, April 2022. “Raízen anuncia a construção da sua segunda planta de Biogás, a primeira dedicada à produção de gás natural renovável
[2] BN Americas. April 2023. “Brazil’s Orizon to invest US$240mn in biomethane plants”
[3] BN Americas. February 2023. “Veolia looks to increase Brazil biomethane output, power generation”
[4] EPBR, December 2022. “Oportunidades para biogás e biometano no mercado de carbono e no RenovaBio”
