(Photo courtesy Enel Green Power North America)
As the arm of Exelon Corp. which battles inside the competitive energy markets, Constellation is trying to predict the future of where energy is growing, perhaps even more intently than some regulated utilities do.
Take renewable energy, for instance. The industry must thrive in states that are mandating clean energy goals, but Constellation is also seeing more and more companies demanding renewable power purchase agreements outside of the regulatory edicts. They do the PPAs because they offer some long-term, fixed-price stability, and beyond that, it’s what the corporations want to do for strategic reasons.
“The companies we transact with are asking more and more about how to integrate renewable supply into their load contracts,” said Jim McHugh, the CEO of Baltimore-based Constellation. “That’s the demand side of what’s going on.”
Constellation has positioned itself as a competitive energy entity and also a startup investor with its Constellation Technology Ventures arm. From both vantage points, McHugh and his team are seeing some interesting new trends arise from the growth in clean energy capacity.
In other words, not one size fits all. Many major companies, such as Starbucks, have pushed into longer, corporate PPAs that offer some security on pricing. The Starbucks agreement teamed Constellation with Enel Green Power to provide wind power from the latter’s HillTopper project in Logan County, Ill. to 340 coffee shops throughout the state. The agreement leveraged the company’s Constellation Offsite Renewables (CORe) offering, which connects corporate customers with off-site renewables.
That deal provided a good example of another trend that McHugh is seeing within the corporate PPA realm: Companies want clean energy and also want to play some role in where it’s generated.
Once electricity is generated and connected to the grid, of course, it’s impossible to say whether the kilowatts Starbucks consumes are coming from an Illinois wind farm or a coal-fired plant within the region. What the companies can have, in terms of peace of mind, is knowing they played a huge role in getting new renewables on the grid in the first place.
“Companies want to know that part of the energy supply is coming from a specific resource: “ËœIt’s from my contract that I caused it to be there in the first place,'” McHugh noted, pointing out that CORe enabled Starbucks to contribute to the development of HillTopper in Illinois, where the stores are located. “We stand in the middle of that transaction … We understand the complexities” of the market, he added.
Many of the bigger companies are happy to sign headline-grabbing, long term PPAs of 15-to-20 years in duration. Smaller companies, however, are more vulnerable to the risks of a variable resource and load challenges.
So Constellation and others are starting to offer short-term clean energy PPAs more in the 3-, 5- and 7-year ranges.
“We’re helping companies that maybe are not as big as Google or Amazon, but that also want to be part of this sustainability movement which used to be reserved for bigger companies,” McHugh said. “They give the customer more flexibility.”
On the investment side, Constellation Technology Ventures has stepped in by making several key bets on smaller companies within a variety of grid sectors. One successful transaction was drone company PrecisionHawk, which uses software and sensors to deliver real-time data.
Constellation sees great value in PrecisionHawk’s ability to provide a tool for safe inspection and maintenance of power plants and transmission lines.
The company also is diving deeper into energy efficiency services, including a deal for an energy audit and large-scale lighting overhaul at the Liberty National Golf Club in New Jersey.
Constellation, like Schneider Electric in the microgrid space, is moving toward “as a service” models in which it takes away the prohibitive upfront cost of a major project and allows the customer to pay it back as part of the monthly energy bill over an extended period. Essentially, “energy efficiency as a service” is following the same model as “microgrid as a service” and “software as a service.”
“We can wrap up the costs of retrofitting into energy supply contracts for whatever term they are interested in,” McHugh says.