A Hefty Price Tag
Maranan, Fernandez, and their team at ACEN set their eyes on the South Luzon Therman Energy Corp. (SLTEC) coal plant about 70 miles (115 kilometers) south of Manila.
ACEN sold SLTEC to investors in 2022 with a plan to retire the plant in 2040, halving its lifespan and cutting 50 million tons of carbon emissions. ACEN is to remain the operator and manager until the plant closes.
Now ACEN’s goal is to shut the plant a decade earlier, in 2030. That earlier decommissioning, however, will not come cheap.
The costs include supporting and retraining displaced workers, safely dismantling the plant, and investing in replacement cleaner energy sources, including costly battery storage. All of this comes at a price tag of almost $2 billion, much of which cannot be covered by traditional sources of private or even concessional capital.
The stark reality is there is no economically viable offramp from coal to clean for the SLTEC owners today — and it’s the same for most coal asset owners in the region.
So ACEN, the energy arm of the Philippines conglomerate Ayala, joined forces with the Monetary Authority of Singapore and The Rockefeller Foundation to drive the creation of transition credits — a new financing tool that monetizes reduced carbon emissions.
These credits help plant owners retire coal assets early, transition to renewable energy, and support affected workers and communities.
This is part of The Rockefeller Foundation’s Coal to Clean Credits Initiative, which aims to accelerate the decommissioning and replacement of up to 50 coal asset owners by 2030, reducing 2 billion tons of emissions.
The goal is to set a powerful precedent for clean energy transitions globally.
By the Numbers
- 0MillionMillion
people live in the Philippines, an archipelagic nation in Southeast Asia consisting of 7,641 islands
- 0Coal-fired plantsCoal-fired plants
in the Philippines have an installed capacity of about 12,406 megawatts
- 0DegreesDegrees
per decade temperature hike has been recorded in the Philippines since 1961
Unlocking the Benefits of Energy Transition
Coal-fired plants dominate the Philippines’ energy sector, supplying about 60 percent of the country’s energy needs. The SLTEC plant is roughly only eight years old today, meaning that it could have more than forty years left in its technical life to keep operating and generating millions of tons of emissions in the absence of a plan for early retirement.
An SLTEC operator uses a thermal scanner to monitor temperatures in the plant’s coal pile. (Photo Courtesy of ACEN)
ACEN is using the Energy Transition Mechanism (ETM) to close the 246 MW SLTEC plant by 2040. ETMs attract public and private investment, offering long-term returns as renewables become more profitable, alongside incentives like subsidies and tax breaks.
ACEN aims to use transition credits to decommission the plant a decade early, cutting up to 19 million tons of carbon emissions — equivalent to removing four million cars from the road for a year.
“The urgency of this issue is real. We needed to get this done yesterday,” said Shi Min Tan, a sustainability group director with the Monetary Authority of Singapore, which is supporting the ACEN effort.
“But we are also very realistic. To make an asset class out of carbon credits takes time, and we know that you can’t just push things through,” she said. “We need to very clearly spell out the benefits of carbon credit financing and why anyone should support it. Because we want to scale the market, not just make one transaction work.”
A Second Initiative Drives Demand
Driving demand for carbon and transition credits was a major factor behind The Rockefeller Foundation’s collaboration with the U.S. State Department and the Bezos Earth Fund to launch the Energy Transition Accelerator (ETA). The initiative aims to unite government and private sector efforts to mobilize up to $207 billion in carbon credits by 2035.
“Accelerating the shift to zero carbon in the power sector is absolutely urgent,” said Dr. Nathaniel Keohane, the ETA’s Secretariat and president of the Center for Climate and Energy Solutions. “But it needs to be done in a way that follows a just transition and doesn’t shortchange growth.”
“In 2050, my daughter will be younger than I am now. So our kids are going to be experiencing a world really shaped by what we do. We need to harness capitalism to lower emissions rather than create them,” Keohane said. “And for that to work, the integrity of the carbon credits is crucial.”
The ETA aims to connect willing sellers and buyers employing high-integrity carbon crediting to support a faster energy transition. At Climate Week NYC in September, 19 major companies signed a letter of intent to continue engaging with the ETA as a way to catalyze finance for large-scale power sector transformations.
“We need to see advance market commitments which would give the assurance to countries that there is demand at the other end of the tunnel,” said Keohane. “The scale of the climate crisis is so big that you have to be audacious and swing for the fences.”
“The opportunity here is for companies to contribute to decarbonizing the grids that they and their suppliers are dependent upon for electricity,” said Curtin. “By bringing all these actors into synchronicity, we have the potential to do something truly groundbreaking and transformative.”
Powering a Just Transition
SLTEC operates with a workforce of around 200 plant employees. Situated in Calaca’s industrial park, the plant supplies energy to the neighboring area, playing a vital role in local employment and the community.
“We have been very transparent and forthright. I have promised the workers I will tell them everything as it happens. And we will work with them on an individual basis to make sure their future is tailor-fit and no one is left behind,” Fernandez said.
“Of course, there is some trepidation. But most of my people are excited and hopeful to be part of this energy transition.”
A coal plant employee volunteers at a local dialysis center as part of SLTEC’s community outreach. (Photo Courtesy of ACEN)
Some of the 25 percent of employees who live far from the plant — sometimes up to ten hours away — have noted the potential silver lining of being relocated closer to home at renewable energy or battery storage facilities, Fernandez said.
Fernandez and his team have earned trust as responsible community members; their efforts extend beyond the plant, like last year when they installed lighting along the entire eight-kilometer stretch of road near the facility.
And each month, as part of the volunteer initiative Project Kaarawan, employees whose birthdays occur that month conduct activities such as teaching students how to prepare for natural disasters, bringing supplies and toys to children with special needs, or spending time with senior citizens living in assisted communities.
While several hurdles remain before transition credits can fully finance the plant’s revolutionary shift, the groundwork is being laid for a new energy chapter.
“The banker in me thrives on the innovative transaction,” said Fernandez, who has a background in investment banking and finance. “But what I am most excited about is what these transition credits can enable. We all know it’s not a done deal, but I’m hoping it will be successful.”
Maranan said she is kept up at night by the thought that the world won’t act quickly enough to stop temperature rises. “I want my daughters to have a good future. It is that generation I am worried about.”
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