DUBAI, UAE – Ayala-led ACEN Corporation is batting for viable ‘replacement cash flow’ that will satisfy its shareholders on the planned accelerated retirement of its 246-megawatt South Luzon Thermal Energy Corp (SLTEC) coal plant.

In an interview at the COP28 side events, ACEN President and CEO Eric T. Francia indicated that the targeted ‘replacement cash flow’ has been among the three (3) major conditions laid down by the company for it to reach decision point on shortening the operating life cycle of its coal plant by 10 years – or for it to firmly agree on its coal plant retirement by 2030.

“We need replacement cash flows for the coal plant – because we’re answerable to our shareholders – if we re-acquire that plant, then shut it down in the future, then we would be giving up cash flows,” he explained.

Francia admitted there’s no clear figure penciled in yet for that, but it will be part of the discussion that the company will be having relative to the transition credit paradigm that ACEN has agreed on with The Rockefeller Foundation and the Monetary Authority of Singapore (MAS) for the SLTEC plant’s targeted phaseout at an earlier timeframe.

“We have to do detailed studies to be able to quantify – my hypothesis is: there’s a solution space, there’s a win-win here. Hopefully, it will be a discount to carbon prices,” the ACEN executive noted.

Francia added “we need as much support mechanism to enable the early retirement of coal -and transition credits together with blended finance …that will entail incorporating some concessionary loans and transition credits which I am very optimistic about.”

Apart from replacement cash flow concern, the ACEN executive also cited two other major conditions that must be realized for coal plant retirements to thrive as economically feasible option in the just energy transition call at COP28 – these would warrant having replacement capacities that must be drawn from renewables or clean energy technologies; and ensuring ‘responsible phaseout’ of coal plants – meaning, these facilities must no longer be re-commissioned in the future and the welfare of the workers and communities shall also be addressed.

“If we shut down coal plant earlier, we need to ensure that we replace that with clean energy that is reliable – i.e. dispatchable. In our view, we shouldn’t add to the problems of the grid by just producing intermittent renewable energy – it has to be reliable/dispatchable; and that is costly relative to baseload coal plant,” Francia stressed.

He, nevertheless, qualified that the emerging bright spot to this is integrated renewables and energy storage system (IRESS) which is already seen competitive with current gas prices.

In Francia’s view, the renewables-energy storage tandem could already flourish as a cost-reasonable replacement to capacities voided by the early retirement of coal plants.

“For gas plants, it’s already at par based on prices today – but I think the system is still trying to come around the notion that mid-merit is already in the P9.00/kWh (kilowatt hour) range. We need to incentivize the system to at least lock in a long-term IRESS at a discount to gas price today; and therefore, the transition credit should be able to help address that perceived gap. There’s no gap in reality, but we want to be ahead – we want to be lower and then lock it in,” he said.

Francia expounded “the other important element of a just transition that must be factored in into the cost – that would be the decommissioning of the plant in a responsible way – then how to transition communities and workers.”

He thus emphasized “all of these values will need to be reflected in transition credits… If these can be realized, then it will help us accelerate the just transition of coal plants; and hopefully become a model for others to follow.”