Ronald Goseco l November 11, 2022 l The Manila Times
JUST this week, the energy platform of Ayala, ACEN, disclosed the full divestment of its investment in the South Luzon Thermal Energy Corp. coal plant using the energy transition mechanism (ETM), the first deal in the world. The ETM is a novel concept developed by the Asian Development Bank (ADB) that aims to leverage low-cost and long-term funding support geared toward early coal plant retirement and the reinvestment of proceeds to enable renewable energy projects.
The ACEN deal will allow the early retirement of the 246-megawatt plant in Calaca, Batangas. As part of the ETM structure, the coal plant’s operating life of up to 50 years will be cut in half. This will help ACEN in its commitment to retire and transition the plant to cleaner technology by 2040. Through the transaction, ACEN aims to move closer toward its commitment to 100-percent renewables generation by 2025. In the global scheme, this would appear to be a small step but it is certainly a path forward and possibly a solution to the problem of funding the transition, which is being debated at COP 27 in Egypt.
World leaders gathered this week at the 27th session of the Conference of Parties to the United Nations convention. These talks are happening amid the compounding crises of war, global warming and economic turmoil that is taking a toll on every continent. The session opened under the unsettling new data from the World Meteorological Organization, which said the planet had just gone through the warmest eight years on record, including every year since countries came together in 2015 to create the landmark Paris agreement that was aimed at pivoting the global economy away from fossil fuels and slowing warming.
UN Secretary-General Antonio Gutierres set the tone for the annual climate talks with a warning that the world was “on a highway to climate hell with our foot on the accelerator.” He further said that “we are in the fight of our lives and we are losing.” Later, British Prime Minister Rishi Sunak told delegates that the Russian invasion of Ukraine should prompt countries to invest more heavily in renewable energy. “Rising energy prices across the world are not a reason to go slow on climate change,” Sunak said. “They are a reason to go faster.”
The biggest issue of this year’s talks is the question of what the rich, industrialized countries, which account for the largest share of greenhouse gas emissions, owe to those bearing the brunt of climate hazards. The world’s poorest and most vulnerable people are getting hit the hardest. The state of the global economy has made it more difficult to find an answer to this question.
Amid these talks, Germany passed two decrees to prolong the operation of sizable hard coal-fired power generation plants up to March 21, 2024 and to bring back idled brown coal capacity up to June 30, 2023 to boost supply. It is deploying about three gigawatts of coal-fired generation to ensure there is enough electricity supply to make it through the winter. This was not supposed to happen.
German chancellor Olaf Scholz said the decision to fire up coal and oil power plants again was only temporary and that his government would stick to its commitment on climate goals. He said that Germany was bringing the fossil fuel power plants back onto the grid to make up for an expected shortfall because of cuts in natural gas supplies from Russia. Recall reported maintenance works on Russian gas pipeline Nord Stream 1 via the Baltic Sea that cut supply down to 20 percent of expected levels. He expressed regret that Germany was set to fire up 16 dormant fossil fuel power plants and extend the operating permits for 11 more.
Retiring coal plants has become even more complex with geopolitical tensions. It is very, though, that it is the only way that future generations will survive. In her remarks, Prime Minister Mia Motley of Barbados linked the inability of vulnerable countries to cope with climate hazards to history, saying that countries of the Global North still controlled the money that the countries of the Global South need in order to pivot away from fossil fuels.
“This world looks too much like it did when it was part of an imperialistic empire,” she said. I am surmising that she was hopeful that the richer nations will step up and finance the transition. If this is too much to hope for, perhaps the Energy Transition Mechanism of the ADB can help.
*** Ronald Goseco is a director of the Finex Institute.