Under a new study, Keppel and Temasek subsidiary GenZero will explore creating and using transition credits to help fund the early retirement of a coal-fired power plant (CFPP) in the Philippines. This would shorten the lifespan of the plant by a decade to 2030.
The two parties have signed a memorandum of understanding (MOU) with Acen, the listed energy company of the Philippines’ Ayala Group, to accelerate the decommissioning of the 246-megawatt South Luzon Thermal Energy Corporation (SLTEC) in Calaca, Batangas.
When completed, this project is expected to be one of the first converted CFPPs in the world to generate transition credits, a concept mooted by the Monetary Authority of Singapore (MAS) last year.
These 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, this “complementary financing instrument” could incentivise plant owners to retire their assets early and replace them with renewable energy.
The SLTEC is one of two pilot projects launched by MAS last year. Acen fully divested from 246-megawatt (MW) SLTEC in 2022 and is coordinating the early closure of SLTEC with plant owners.
The project will explore the development of end-to-end technological solutions and the economic model of the “coal-to-clean” transition.
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This refers to replacing the 246MW baseload of the CFPP with a “mid-merit” Integrated Renewables and Energy Storage System (IRESS) consisting of solar plant and battery storage. Mid-merits, also known as load-following power plants, adjust their power output as demand for electricity fluctuates throughout the day.
The MOU partners say they will take into account environmental, social and governance considerations and best practices. “This includes the training of workers and communities, asset repurposing, and the decommissioning of the plant in a manner that minimises the impact on communities and the local environment.”
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The project will be carried out in collaboration with the Rockefeller Foundation’s Coal to Clean Credit Initiative (CCCI) and MAS’s Transition Credits Coalition, an industry group launched in December 2023 to study the use of such credits.
According to the MOU partners, this project could also come under Article 6 of the Paris Agreement collaboration between the Philippines and Singapore. Under Article 6, countries are able to transfer carbon credits earned from the reduction of greenhouse gas emissions to help one or more countries meet their climate target. The Singapore government indicated at COP28 that it is prepared to offtake transition credits, provided they meet Singapore’s environmental integrity standards.
Cindy Lim, CEO of Keppel’s infrastructure division, signed the MOU on Aug 16 with Frederick Teo, CEO of GenZero; Cezar Consing, chairman of ACEN; and Eric Francia, president and CEO of Acen.
Singapore’s Minister for Sustainability and the Environment Grace Fu witnessed the MOU signing alongside Maria Antonia Yulo-Loyzaga, Secretary for the Department of Environment and Natural Resources of the Philippines.
Other leaders present at the signing ceremony include Jaime Augusto Zobel de Ayala, chairman of Ayala Corporation and board director of Temasek; Fernando Zobel de Ayala, board director of Ayala Corporation; and Jaime Alfonso Zobel de Ayala, board director of Acen.
Keppel’s Lim says the project will serve as a “pathfinder” and pave the way for more CFPPs to be retired and replaced with cleaner energy facilities. “The partnership provides us the opportunity to harness both technological and financing solutions to accelerate the shift towards low-carbon and renewable energy sources in the Southeast Asia region.”
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GenZero’s Teo says cross-border collaboration is critical to achieve a just energy transition in Southeast Asia. “Transition credits can help crowd in catalytic financing for such coal-to-clean energy initiatives. We are excited to partner with Acen and Keppel to bring complementary expertise from the Philippines and Singapore to pilot a scalable model that can accelerate such decarbonisation efforts globally.”
The collaboration is not expected to have any material impact on the earnings per share and net tangible assets per share of Keppel for the company’s current financial year.
Photos: Acen
