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One of MAS’s two coal plant retirement pilots provides first update since COP28

Jovi Ho
Jovi Ho • 5 min read
One of MAS’s two coal plant retirement pilots provides first update since COP28
The first Coal to Clean Credit Initiative (CCCI) pilot project under consideration in the Philippines could avoid up to 19 million tonnes of carbon dioxide emissions. Photo: The Rockefeller Foundation
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The first Coal to Clean Credit Initiative (CCCI) pilot project under consideration in the Philippines could avoid up to 19 million tonnes of carbon dioxide emissions, announced the Philippines-headquartered Acen Corporation and The Rockefeller Foundation on April 17.

The CCCI aims to unlock carbon finance to accelerate the early retirement of coal-fired power plants (CFPPs) and replace them with renewable energy. 

The first pilot project being explored under the CCCI is the closure of the Philippines’ South Luzon Thermal Energy Corporation (SLTEC) coal plant in 2030, 10 years ahead of its scheduled retirement.

Acen fully divested from 246-megawatt (MW) SLTEC in 2022 and is coordinating the early closure of SLTEC with the owners of the plant for this pilot project.

The project aims to replace the plant’s output with clean power and battery storage, while supporting the livelihoods of workers affected by the plant’s early transition. 

RMI, a technical partner of The Rockefeller Foundation under CCCI, led the initial assessment. Announced during the Financing Asia’s Transition (FAST) Conference, the analysis applied CCCI’s draft methodology, currently under review by Verra, to assess SLTEC’s eligibility for carbon financing. 

See also: South Pole, GenZero launch Asia Centre of Carbon Excellence in Singapore with EDB support

It found that while the project meets the eligibility criteria of the draft methodology, decommissioning by 2030 would not be possible without carbon finance. 

This would cover three areas: costs associated with the early retirement of SLTEC’s contract; costs associated with 100% clean replacement of SLTEC’s generation; and decommissioning and just transition needs. 

From here, Acen aims to complete the Project Design Document (PDD) for the pilot by 2024. The PDD will further provide details on the programmes to ensure a just transition for affected communities and workers.

See also: MAS launches coalition, two pilots to test 'transition credits' for early retirement of coal plants

This will include a consultative process with those affected, as well as plans for the rollout of an “affordable and reliable” energy replacement for the CFPP, such as through wind, solar and battery, say Acen and The Rockefeller Foundation. 

By 2025, Acen hopes to finalise buyer discussions and reach a financial close for the world’s first coal-to-clean carbon credit transaction.

Acen is the listed energy platform of the Ayala Group, the Phillipines’ oldest and largest conglomerate. The company has around 4,800MW of renewable energy capacity in operations and under construction across its key markets in the Philippines, Australia, Vietnam, India and Indonesia. 

“We’re going to be building potentially 1,000MW of solar [power] and 250MW of wind [power],” says Eric Francia, president and CEO of Acen, in a presentation on April 17. “The missing piece, though, is that if we did that, if we stopped there, we would put a lot of strain on the grid. So therefore, we need to incorporate battery storage, which is still expensive, and therefore we need to subsidise that through transition credits.”

First update since COP28

This is the first update on the partnership between Acen, CCCI and the Monetary Authority of Singapore (MAS) since COP28, when the collaboration and “transition credits” pilot was announced.

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So-called transition credits are generated by retiring a CFPP early and replacing it with clean energy sources. With the funds raised from selling these offsets, MAS believes this “complementary financing instrument” could incentivise plant owners to retire their assets early and replace them with renewable energy.

At COP28 in December 2023, MAS launched a transition credits coalition with close to 30 members and knowledge partners. The central bank also announced two pilot projects to test the use of transition credits.

Aside from the CCCI, the other pilot is a collaboration with the Asian Development Bank (ADB), which is advising the Government of Philippines on the retirement of a coal plant in Mindanao under its Energy Transition Mechanism (ETM). 

Launched in 2021, ADB’s ETM aims to use concessional and commercial capital to accelerate the retirement or repurpose of fossil fuel power plants and replace them with clean energy alternatives.

While members and partners of MAS’s coalition are not directly involved in any pilot transactions, insights from these pilots will contribute to its work in examining a possible standard approach that can be replicated across markets.

There are over 6,500 coal-fired units in operation across the world, which will collectively emit an estimated 190 billion tons of CO2 over their remaining operational lifetimes. 

The majority are insulated from market competition by long-term contracts, say Acen and The Rockefeller Foundation. 

Coal is the single-largest contributor to global emissions, says Elizabeth Yee, executive vice-president, program strategy at The Rockefeller Foundation. “It accounts for 20% of global emissions and 70% of power emissions. And it is, most importantly, the leading cause of premature death in the world. Worldwide, 800,000 people perish early because of coal.”

Speaking at the FAST Conference, held on the third day of Temasek’s Ecosperity Week 2024, Yee says the problem is getting worse. “We’re seeing coal power growing by about 3% annually with over 1,000 plants coming online or being under construction. That’s a real problem.”

Founded in 1913, The Rockefeller Foundation is the second-oldest major philanthropic institution in the US. Yee adds: “For us at The Rockefeller Foundation, when we dug into the data, we didn’t like what we saw. We saw that solving for coal was an immediate urgent priority for us to ensure that we accelerate climate action, and also ensure that we protect the well-being of humanity.”

Photo: Temasek

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