The Philippines-based energy firm ACEN, Temasek-owned GenZero and Singaporean conglomerate Keppel have teamed up to develop a scalable model to accelerate Southeast Asia’s transition away from coal to renewables using “transition credits”.
To continue reading, subscribe to Eco‑Business.
There's something for everyone. We offer a range of subscription plans.
- Access our stories and receive our Insights Weekly newsletter with the free EB Member plan.
- Unlock unlimited access to our content and archive with EB Circle.
- Publish your content with EB Premium.
The memorandum of understanding (MOU) builds on a similar one signed by GenZero and Keppel at the COP28 climate summit last December, where ACEN’s South Luzon Thermal Energy Corporation (SLTEC) plant was separately chosen by Singapore’s central bank as one of the two pilots to trial the novel class of carbon credits.
Under this deal, the three parties will support the origination and sale of transition credits to retire the 246-megawatt (MW) plant by 2030, a decade earlier than planned.
In April, ACEN’s chief executive Eric Francia said that the transaction could slash 19 million tonnes of carbon dioxide emissions, based on a framework drafted by the United States non-profit The Rockefeller Foundation. Francia also previously told Eco-Business that an estimated 1,000 MW of solar and 250 MW of wind, alongside battery storage, will be needed to fully replace the current annual output of the coal plant, after accounting for the intermittency of the respective renewable energy sources.
According to the press release for the MOU, the 9-year-old coal plant will be replaced with a “mid-merit” integrated renewables and energy storage facility consisting of solar and battery storage. In contrast to baseload power, which is constantly produced but lacks flexibility to meet fluctuations in energy usage, a mid-merit power plant adjusts its output to meet varying electricity demands throughout the day.
“The Philippines is at the forefront of energy transition initiatives, and this collaboration potentially unlocks further opportunities in the country,” said Francia. “We also believe that this model can scale across the region, and even globally.”
However, as Eco-Business reported earlier this week, it remains to be seen if SLTEC’s pilot transaction can build a blueprint for the rest of Southeast Asia to follow.
While the deregulated electricity market in the Philippines has made it easier for foreign investors to work with independent power producers like ACEN to shut down their fossil fuelled-facilities, elsewhere in the region, such as in Indonesia and Vietnam, power markets are highly regulated, said Joe Curtin, managing director of the power and climate team at The Rockefeller Foundation.
The three partners have announced they will take into account “just” transition considerations, including the training of workers and minimising the impact of the plant’s early closure on local communities. However, many of the residents Eco-Business spoke to in Puting Bato West, Calaca, where SLTEC is located, have not heard about plans to shutter the facility by the end of this decade.
A local administrator that Eco-Business spoke to urged ACEN to sign a memorandum of agreement with the town to prioritise employing locals for this upcoming project – something that he had surfaced unsuccessfully to SLTEC’s previous owners at a 2013 public hearing ahead of the plant being built.
Following Singapore’s pledge to offtake transition credits that meet its eligibility criteria at COP28, the country has also signed an agreement with the Philippines to work towards a definitive agreement for carbon credits transfers. The city-state has signed MOUs with 14 other countries so far.
In July, the republic set up a new alliance to increase the supply of state-approved credits for corporations looking to meet their net zero goals or to offset their carbon tax obligations. While the city-state has already inked two legally bindings deals with Papua New Guinea and Ghana, both have yet to deliver any eligible credits for trading.
Read our special report on the complexities behind SLTEC coal plant’s bid to become the world’s first to be retired using transition credits.
