The Asian Development Bank (ADB) and the Philippine government, together with Indonesia and Vietnam, are considering the implementation of the energy transition mechanism (ETM) to finance the shift to cleaner energy sources.

The Ortigas-based multilateral lender, in a report by the Philippine Daily Inquirer, explained that under the ETM, coal-fired power plants would be bought, then be retired while jumpstarting power plants with lesser emissions.

Meanwhile, Finance Asec. Paola Alvarez said the planned ETM facility in the Philippines is in the pre-feasibility study stage. The Department of Finance (DOF), she said, is initially looking at transitioning coal power plants in Mindanao given their little participation in the grid at the moment.

Alvarez added that the DOF is also looking at the business model, the cost of making such move, and how the facilities would be transitioned, while bearing in mind energy security and affordability.

Back in April, Finance Sec. Carlos Dominguez III announced the government’s plan to shut down coal plants down south once the Agus-Pulangi hydropower plants start running at higher capacity.

ADB Vice President Ahmed Saeed noted that the dominance of coal facilities was an “enormous problem” in the Philippines, Indonesia, and Vietnam — the three pilot-countries for the ETM.

Based on data from the Department of Energy as of mid-2020, coal had the largest share in the Philippines’ energy mix at 41.5%.

The three Southeast Asian nations, Saeed said, are very serious about meeting their respective nationally determined contribution targets under Paris Climate Agreement.

He added that the ETM is the ADB’s way for the said countries to help them achieve a common objective in a manner consistent with their respective development trajectory and objectives.

The ETM, Saeed explained, will be composed of two funds — one for carbon reduction, the other for clean energy. The carbon reduction fund would specifically incentivize the early retirement of coal plants, while the clean energy fund would be utilized for investments aimed at the growth and expansion of renewable energy facilities in place of the coal-powered ones that would be taken out.

Relative to this, AC Energy announced last week its early retirement plans for its 270-megawatt South Luzon Thermal Energy Corporation coal plant in Calaca, Batangas (photo above) by 2040 — 15 years ahead of its technical life — using the ETM.