ACEN Corp. is coordinating with The Rockefeller Foundation’s Coal to Clean Credit Initiative (CCCI) and the Monetary Authority of Singapore (MAS) to fast-track the phase out of coal plants in line with the Paris Agreement.
ACEN, CCCI and MAS are seeking to develop the world’s first Transition Credit, or the coal-to-clean pilot project, that would leverage carbon finance to phase out a coal-fired power plant and replace it with renewable energy. This first-of-its-kind project would mark a major step towards phasing out coal in line with the Paris Agreement.
“Today’s development marks a critical contribution to accelerating a global energy transition. Without a rapid and proactively managed transition away from coal-fired power, the world will not meet its climate goals; the urgency of solving this problem cannot be understated.
ACEN is proud to be working with The Rockefeller Foundation’s Coal to Clean Credit Initiative and the Monetary Authority of Singapore to develop this world-first project,” ACEN President Eric Francia said.
The power arm of conglomerate Ayala Corp. fully divested last year its coal plant subsidiary South Luzon Thermal Energy Corp. (SLTEC) through a mechanism that funds the transition from coal to renewables. The coal retirement was made through the energy transition mechanism (ETM). ACEN said this groundbreaking initiative could reduce 15 to 25 years’ worth of emissions given that coal plants typically operate for 40-50 years.
“If the world does not break its overreliance on coal, current and planned coal-fired power plants will release 273 billion tons of carbon dioxide over their operational lifetimes and trigger a catastrophe for our planet and the people living on it,” said Dr. Rajiv J. Shah, President of the Rockefeller Foundation.
“To retire coal plants and avoid those emissions, we need to create the right incentives for asset owners and communities and mobilize additional finance. This innovative CCCI agreement will pilot a coal-to-clean credit methodology in the Philippines, one critical step toward breaking that overreliance and building a better future.”
Complementing this initiative is MAS’ Transition Credits Coalition (TRACTION) that will test the use of transition credits in early retirement of coal-fired power plants transactions. Supported by close to 30 members and knowledge partners across key stakeholder groups, TRACTION will study the challenges and propose solutions to scale the early retirement of coal-fired power plants in Asia.
“The economics of phasing out coal-fired power plants are challenging. There is a need for effective market-based financing solutions, including the use of transition credits to improve the economic case of retiring these plants early and we are pleased to collaborate with ACEN Corp. and Climate Smart Ventures to pilot the use of CCCI’s methodology,” said MAS Assistant Managing Director and Chief Sustainability Officer Gillian Tan.
According to the International Energy Agency, to achieve a net zero scenario by 2050, power generation from coal power plants should be reduced by around 55 percent by 2030, from the 2022 level.
Southeast Asia, which has the fourth largest installed coal plant capacity globally, has among the world’s youngest coal fleet with an average age of under 15 years. With strong electricity demand growth in key markets like Indonesia, Vietnam and the Philippines, reducing coal generation within the next two decades will be “a major challenge.”
“We need to replace that with a hybridized or what we call an integrated renewable energy storage system [IRESS] which is a combination of wind farm and solar with battery storage. About 1000MW and 4 to 6 hours of battery. That’s what we hypothesized, we need to deploy, to be operational by 2030 if we are to shut down a coal plant by 2030 and that means we need to start building by 2027,” Francia said.
Transition credits will enable ACEN to increase its ambition of further accelerating the transition of SLTEC coal plant to clean technology as early as 2030. Also, transition credits will be an important mechanism to help ensure a just transition, ensuring affordability of the replacement energy as well as the just transition of the local community and the affected workers.
He said it would take roughly three years to build an IRESS which would entail an investment of about $1.5 billion, and the levelized cost of electricity could be about 40 to 50 percent higher than a baseload or mid-merit coal plant.
“There is an affordability gap. We need to address that through transition credits. The other gap is just transition. We need to decommission the plant responsibly, makes sure that it can’t be recommissioned at some point in future. Also, the just transition of communities, workers affected. All of those have to be reflected in the transition credit,” said Francia.
This pioneering energy transition initiative is in line with ACEN’s aspiration to reach 20 gigawatts of renewables by 2030, 100 percent renewable generation by 2025, and net zero greenhouse gas emissions by 2050 or earlier.