16 Aug 2024 | 11:44 UTC

Singapore, Philippine companies to use transition credits to retire coal plant

Highlights

Singapore's GenZero, Keppel Ltd, and Philippines' ACEN sign MOU

Credits to finance early retirement of coal-fired power plant in Batangas

Transition of 246 MW coal plant to renewables, battery storage

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Singapore's GenZero and Keppel Ltd. and the Philippines' ACEN have signed a memorandum of understanding for the generation and utilization of carbon credits, called transition credits, to support the early closure of a coal-based power plant, the companies said in a joint statement Aug. 16.

The transition credits will be used to accelerate the retirement of the 246 MW South Luzon Thermal Energy Corp. coal-fired power plant in Batangas in the Philippines by 2030, 10 years earlier than its life span, and replace it with a clean energy despatch facility, the statement said.

"When completed, this project is expected to be one of the first converted coal-fired power plants in the world to generate transition credits," the companies said, adding that the move will help the transition to clean energy in Southeast Asia.

Coal plants are the single largest source of carbon emissions globally and Southeast Asia is home to the fourth largest coal fleet in the world, and among the youngest ones with an average age of less than 15 years, the companies said.

The early retirement of coal plants is critical for countries to meet Paris Agreement goals and net-zero targets by 2050, but most Asian power producers have been cash strapped and unable to shoulder the losses of plant closure before its full economic value has been realized.

Transition carbon credits were proposed for the first time in 2023 by GenZero, investment fund Temasek's climate platform, as a means to provide these funds. Under the MOU, the parties will study the usage of transition credits to achieve early plant retirement.

"Cross-border collaboration is critical to achieve a just energy transition in Southeast Asia and help our economies achieve our decarbonization objectives. Transition credits can help crowd in catalytic financing for such coal-to-clean energy initiatives," said Frederick Teo, CEO of GenZero.

Eric Francia, ACEN president and CEO, said this model of using transition credits can be scaled up across the region and even globally. ACEN is a unit of Philippine diversified conglomerate Ayala Corp.

The project will also explore the replacement of the 246 MW baseload of coal plant with a mid-merit integrated system consisting of a solar plant and battery storage. It will be carried out in collaboration with the Rockefeller Foundation's Coal to Clean Credit Initiative and the Monetary Authority of Singapore's Transition Credits Coalition.

The project could also come under Article 6 of the Paris Agreement collaboration between the Philippines and Singapore, under which countries are able to transfer carbon credits to help meet their climate target.

"The Singapore government has further conveyed at COP28 that it is prepared to offtake transition credits provided they meet Singapore's standards for high environmental integrity," the companies said.


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