ACEN will continue to manage and map out the transition for the SLTEC plant. The promise is to replace it with renewables and battery storage, according to an update given by ACEN’s chief executive officer Eric Francia to a room full of Asia’s biggest investors at a sustainability summit held in Singapore this April. 

The use of transition credits will potentially slash around 19 million tonnes of carbon dioxide emissions, he added. 

In an interview with Eco-Business, Francia gave the assurance that “there is close to zero chance” that SLTEC will be replaced with anything other than a renewables facility, given the strict carbon financing rules drafted by the Coal to Clean Credit Initiative (CCCI). 

For example, CCCI, which is led by United States non-profit The Rockefeller Foundation, has specified that the coal asset’s boiler will need to be dismantled to ensure its permanent shutdown. 

The methodology, currently reviewed by carbon credit certifier Verra, also states that the coal plant “must not be mothballed or repurposed to continue to combust fossil fuels”. This includes co-firing biomass with coal or gas. 

Local community organisers who are starting to learn of the transition plans, however, still have doubts. Some want to know specific timelines, as well as what exactly the coal facility will be replaced with. 

This is especially as natural gas interests still dominate in Batangas. Apart from coal, the province is a preferred area for many liquefied natural gas (LNG) projects since it already has supporting infrastructure and pipelines installed. A natural gas field known as the Malampaya field, which feeds gas to five power plants all located in Batangas, is found just off the coast of the province. 

The only other natural gas-fired power plant in the Philippines is in Cebu. Environmentalists believe that climate-warming gases from natural gas could be as damaging as those from coal. 

Documents obtained by Eco-Business from Calaca’s treasury office also show that Puting Bato West is expected to generate the city’s second highest revenue from annual taxes by the end of the year, at about US$3.8 million. Revenue generated by the SLTEC plant accounts for more than 90 per cent.

It remains to be seen if the two ongoing pilots in the Philippines can build a blueprint for the rest of Southeast Asia to follow.

The country’s deregulated electricity market has made it easier for foreign investors to work with independent power producers like ACEN to shut down their fossil fuelled-facilities, said Joe Curtin, managing director of the power and climate team at The Rockefeller Foundation.

This is not the case in neighbouring nations like Indonesia and Vietnam, where power markets are highly regulated. “With state-owned utilities and more regulated markets, there is a lot of interest in this kind of opportunity, but it might take a bit longer,” said Curtin.

Across Southeast Asia, more than five gigawatts (GW) of coal plants will have to be retired per year, over the next two decades, in order to phase out all fossil fuels, according to latest estimates.

Indonesia, Malaysia, Vietnam and the Philippines –the top coal-consuming countries in the bloc – are cumulatively operating about 90GW of coal power. The region has a particularly young coal fleet, with an average plant age of about 13 years.

Domestic regulatory conditions could complicate the pairing of coal retirement with clean energy deployment in a single transaction, a requirement under the draft methodologies by CCCI and Gold Standard.

For instance, while ACEN is able to use proceeds from transition credits and its 2022 ETM transaction to fund the replacement of SLTEC’s retired coal capacity with clean energy, this is not allowed for plant owners in Indonesia.

As a result, ADB has had to separate the process for financing coal retirement and renewable energy development for Cirebon-1, despite that not being the ideal way of structuring a managed phase-out deal, said Elzinga. 

“It's a regulatory issue...Any new contract has to be competed for, with as many actors as possible. You can't give any advantage to the original coal plant owner. It has to be pure new competition,” he said. The transaction structure would be more ideal if the two processes can be merged, with or without transition credits, he suggested.

A globally accepted benchmark for the issuance of transition credits has yet to emerge. 

SLTEC will be using CCCI’s methodology, which it expects to finalise by end-2024, upon Verra’s approval. But ADB, which has been developing a methodology for credits aligned with Article 6.4, a clause in the Paris Agreement that establishes a global carbon market overseen by a United Nations body, has not decided between adopting the rules by CCCI and Gold Standard for its Mindanao deal.

“CCCI and Gold Standard have very different methodologies right now. So the question is which one will be closer to the principles that we have in our Article 6.4 methodology,” said Camangon. 

Curtin said that the CCCI’s current methodology assumes that the power plant in question has a long-term power purchase agreement – which SLTEC has – as “that is the easiest way to establish a counterfactual scenario”.

Barring an updated methodology, which Curtin expressed willingness to work on with ADB, the Mindanao plant — which has multiple offtake agreements with different parties — might require “a slightly different methodology”.

Since the city of Calaca is extremely reliant on SLTEC’s corporate tax contributions, replacing this foregone loss in corporate tax revenues from SLTEC will be included in the just transition framework, according to ACEN. 

The energy firm is currently writing up the framework with the Coal Asset Transition Accelerator, a global platform supporting asset owners and governments in their transition away from coal, its spokesperson said.

Adelino Magpile, town captain of Puting Bato West, believes that beyond paying taxes to the city, SLTEC should prioritise the hiring of locals. Otherwise, residents who failed to benefit from the coal plant’s operations in the past decade may miss out once again as it transitions into a renewables facility, he added.

Magpile, who has lived in the town for decades, told Eco-Business how SLTEC previously failed to prioritise employing people in the suburbs, even if these people were qualified for the jobs.

“I once tried to help my brother, a former safety officer in another coal plant, get hired by SLTEC, but he was refused. There was a husband of someone from the local government unit who already had experience as an engineer abroad but was also not given an opportunity," he said. “They prioritise applicants from the bigger cities like Batangas City and Metro Manila.”

Back in 2013 when SLTEC conducted a public hearing before building the coal plant, Magpile had called for a memorandum of agreement (MOA) between the plant owners and the town to prioritise employing locals. But his plea fell on deaf ears.

“People from our barangay should not have to go to other places to find work. For the next project, I hope SLTEC gives priority to our residents and takes part in a MOA,” he said. Barangay is Tagalog for village.

ACEN’s Francia acknowledged that the 'just' elements under the transition credits scheme need to be prioritised this round.

In its 2022 market-based ETM, ensuring the just transition of communities and workers was “less of an issue”, as there was a high chance that SLTEC could have been repurposed to run off alternative fuels, rather than being retired, he explained.

“The chances of there being similar jobs was high, because it’s still a thermal plant,” said Francia, so little resources were put to transitioning the workers. But now that ACEN has decided to permanently shutter the coal plant, it has to think of the people.

Transition credits standard-setters are also grappling with how to deal with the impact of an accelerated coal phase-out on the local community, beyond the workers who work in the plants.

While CCCI's methodology is “pretty robust" when it comes to dealing with the impacts on workers hired by coal plants, Curtin admits that it will need to do more to look into how it handles the impacts on the broad local community.

In its draft rules, CCCI proposed allocating a minimum of 5 per cent of the transition credits revenue to implementing a developer’s just transition plan. Like Gold Standard, the CCCI methodology stressed the need for “ongoing information dissemination, dialogue and seeking feedback with identified stakeholders”.

But so far, no community members living near SLTEC have been consulted. ACEN declined to share the notice period they intend to give workers once the decommissioning plans are confirmed.

ADB plans to map the just transition component of the CCCI methodology to the principles it developed for Cirebon-1, said Camangon.

However, the Indonesian coal plant has been beset with allegations of corruption, harassment and human rights violations from local civil society groups, which have argued that its owners should take responsibility for adverse impacts of the plant’s construction and operation on local communities instead of being compensated for their economic losses.

“ADB has made it clear in previous dialogues and ETM drafts that addressing legacy issues is not covered by the mechanism. Clearly, without reparations and justice for those who have long been impacted by the coal facilities, there will be no ‘just’ transition,” said Gerry Arances, executive director of Philippine think tank Centre for Energy, Ecology and Development (CEED).

ADB’s Elzinga argued that speed and ambition of the transition to clean energy are constrained by the private sector requiring returns and the fact that while the external pressure to shut plants down is increasing, it is still relatively weak. 

“The private sector operates like the private sector: they invest, they expect to get returns, and they do it under a legal environment, hopefully." Until that changes, the limits will remain, he said.

Meanwhile, local communities impacted by the low-carbon shift do not have much expectations, or are not invested in the conversations.

For residents like Cabrera and Jose, who have no clue that they could be eligible for benefits under a just transition plan, they are resigned to the fate that corporations will decide for them what they get out of the deal.

This report was developed and written by Hannah Fernandez and Gabrielle See, with editing support from Ng Wai Mun.