The Department of Energy (DOE) said Wednesday climate financing is key to the success of the Philippines’ energy transition even as it encouraged a voluntary early and orderly decommissioning or repurposing of existing coal-fired power plants.
It lauded ACEN Corp. in pioneering the voluntary retirement of its 246-megawatt (MW) South Luzon Thermal coal-fired power plant in Batangas province.
“This is consistent with our view that it must be voluntary and must make business sense in a power sector like the Philippines that is privately-owned, market driven and un-subsidized. ACEN has our full support for this initiative, and we will explore ways to facilitate this program through access to climate financing,” the agency said in a statement.
ACEN announced that it teamed up with The Rockefeller Foundation and Monetary Authority of Singapore to pilot the use of transition credits for the early retirement of its coal plant.
The Philippines has several large coal plants including the Dinginin coal plant, Masinloc coal plant, Calaca coal plant, San Buenaventura coal plant, Pagbilao coal plant, Mariveles coal plant, Quezon Power coal plant, Limay coal plant, among others.
These coal plants accounted for about 46 percent of the country’s dependable capacity as of June 2023.
“Accordingly, decisions by private businesses to retire coal-fired power plants and shift to full renewable energy are also purely market-driven and based on the economics of which projects will provide the most return to investors,” the DOE said.
It said the Philippines is also one of the few countries in Southeast Asia which do not subsidize its power sector, as the cost of energy transition is shouldered by consumers already reeling from high rates.
“Unlike other countries which are energy-source rich and use export revenues to subsidize their power sector, the Philippines only relies on cross-subsidy to provide support to its marginalized consumers as well as for renewable energy incentives,” the DOE said.
“Therefore, the costs of transition, as well as the need for greater investment infrastructure, will be fully borne by our already overburdened electricity consumers if we will not find strategic ways to shift the burden,” it said.
The DOE encouraged every effort to incentivize the business owners and institutions that will participate in energy transition.
It said the Asian Development Bank and ACEN’s Energy Transition Mechanism concept, which leverages public and private investments with the aim of retiring coal power assets on an earlier schedule, is a laudable mechanism.
“But we must also emphasize that our energy transition is beyond coal retirement. It also entails expanding our people’s access to electricity in remote islands, building a smart and green grid and improving the distribution systems, putting up more energy storage systems, and making energy affordable for all,” it said.
“In all of these, adequate and timely access to climate financing is crucial for the Philippines to equitably and effectively pursue its energy transition,” the DOE said.
The DOE said the government would continue to secure a stable supply and address the climate emergency by ramping up the country’s renewable energy target of 50 percent share by 2040.