ACEN, the listed energy platform of the Ayala group announced its partnership with The Rockefeller Foundation’s Coal to Clean Credit Initiative (CCCI) and the Monetary Authority of Singapore (MAS) to explore major step towards accelerating the phase out of coal plants in line with the Paris Agreement.
In 2022, ACEN successfully implemented the world’s first market-based Energy Transition Mechanism which involved the divestment and early retirement of the 246MW SLTEC coal plant in the Philippines, and its transition to cleaner technology by 2040 when the coal plant completes 25 years of operations. This groundbreaking initiative could reduce 15-25 years’ worth of emissions (or up to 50 million mtCO2 cumulative emission reduced) given that coal plants typically operate for 40-50 years.
The pioneering initiative between ACEN, CCCI and MAS seeks to develop the world’s first Transition Credit (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.
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.
“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,” said Eric Francia, President & CEO of ACEN Corporation.
“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 Corporation and Climate Smart Ventures to pilot the use of CCCI’s methodology. Through the pilot transactions that MAS has convened, we hope to road-test and learn from different approaches that can catalyse the use of high-integrity transition credits to support the early retirement of coal plants on a significantly larger scale.” said Gillian Tan, Assistant Managing Director and Chief Sustainability Officer, Monetary Authority of Singapore.
The pilot project will build on the concepts laid out in the working paper jointly published by MAS and McKinsey & Company in September 2023. Climate Smart Ventures, an advisory firm focused on energy transition, will be coordinating the pioneering initiative.
Coal fired power plants account for ~29% of energy related global carbon emissions (International Energy Agency, IEA 2021). Per IEA, to achieve a net zero scenario by 2050, power generation from CFPPs should be reduced by around 55% by 2030, from 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.
As a leader in energy transition, ACEN is looking to further accelerate the retirement of coal fired power plant, and replace the foregone generation with clean, reliable, and affordable energy. The replacement energy is likely to come in the form of integrated renewables and energy storage system (IRESS) such as a combination of wind and solar power plant integrated with battery storage. 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.
This pioneering energy transition initiative is in line with ACEN’s aspiration to reach 20GW of renewables by 2030, 100% renewable generation by 2025, and net zero GHG emissions by 2050 or earlier.