Constellation's renewable energy business growing

Constellation Energy Group is amassing a client list as diverse as spicemaker McCormick & Co., the New York Stock Exchange, the National Baseball Hall of Fame and Museum and the Denver International Airport.

The Baltimore energy company put up solar panels on McCormick's Hunt Valley distribution center and spice mill and is working on a second project at its Belcamp plant. Constellation is selling "renewable energy certificates" to the stock exchange and baseball museum.


And Constellation plans to announce today the development of a 4.4-megawatt solar facility at the Denver airport, enough to power 634 homes a year.

Utilities like Baltimore's Constellation are benefitting from an increased interest in earth-friendly energy projects as more companies look to polish their environmental public images, as local and national governments provide tax incentives, and as states push mandates for renewable energy generation.


Constellation Energy Group is growing its sustainable energy business by helping a range of clients nationwide to be more green and save on power costs. Constellation's NewEnergy division, which includes most of the company's green initiatives and other competitive gas and electric supply businesses, made up about 72 percent of the company's $3.3 billion in total revenue in the quarter ended June 30.

"It's our belief that helping customers use energy more sustainably and more intelligently is more good business for us and for them," said Michael D. Smith, Constellation's senior vice president of green initiatives.

But while the renewable energy business has grown exponentially, questions remain about the pace of switching from fossil-fuel-dependent energy sources and about the economic viability of renewable energy without subsidies.

Travis Miller, an analyst at Morningstar Inc., said that renewable energy is a key part of Constellation's strategy, but that state and federal energy policies could determine its future. He said if Congress were to establish a national renewable energy standard, for instance, that "could lead to stronger growth in the renewable segment for Constellation and thus, could produce material earnings."

Even now, renewable energy depends heavily on government assistance, he noted. "The renewable sources out there, primarily wind and solar, are far from being economic on a standalone basis relative to other sources of generation, which is coal, natural gas and nuclear," he said.

Constellation seeks to "mix and match" its green energy products and services for customers, whether it's providing energy-efficiency programs, building on-site solar electricity generation or selling renewable energy certificates, Smith said. The certificates, which can be bought and sold, allow electricity customers to claim they are purchasing energy generated from renewable resources and help some customers meet state mandates on renewable energy.

Nationally, the use of renewable energy, including wind, solar, biomass, hydroelectric and geothermal, is growing. Renewable energy's market share reached 8 percent of total U.S. energy consumption last year as renewable energy usage rose 5 percent. Meanwhile, total consumption from all energy sources fell, according to preliminary figures from the U.S. Energy Information Administration.

Constellation's NewEnergy division generated $42.9 million in profit in the most recent quarter. The company does not provide a financial breakdown for NewEnergy, but the renewable portion makes up about 10 percent to 15 percent of the division's gross margin. The company also reports that its solar business has grown 942 percent since 2007, but it doesn't disclose sales figures.


Of Constellation's 9,000 megawatts of electricity generation, about 4 percent comes from renewable energy plants owned by the company. The company also buys more than 700 megawatts of renewable power from other sources annually.

To add to its green power portfolio, Constellation is developing one of the nation's largest solar photovoltaic facilities in Frederick County as well as a $140 million, 70-megawatt wind facility in Western Maryland.

Constellation also has installed various solar projects for manufacturers, retailers and other companies across the country, including the Patriot Place, the shopping and entertainment complex adjacent to Gillette Stadium in Foxborough, Mass.

Besides McCormick, Constellation has solar facilities at the

and the Maryland Environmental Service. Under the agreements, Constellation covers the upfront costs to build and own the photovoltaic facilities and sells the electricity generated by the systems to the customer under a 15- or 20-year fixed-price agreement.

"The value proposition is to bring the rate to less than what the customer is paying now," Smith said.


At its Hunt Valley plant and spice mill, McCormick said, it saved 30 percent in electricity costs in 2009, the first year the solar facility was operational.

Earlier this year, McCormick announced plans to add a second solar photovoltaic power system at its distribution center in Belcamp by the end of the year. This project is expected to save McCormick $3.4 million in costs over the 20-year agreement and avoid the production of 1,600 metro tons of carbon dioxide emissions annually, according to Constellation.

"The solar power partnership with Constellation has proven to be an outstanding success," said Jim Radin, McCormick's vice president of global supply chain operations. "Sustainability efforts have been a part of how we, at McCormick, have conducted our business for many, many years. And with the solar power system, Constellation has provided access to technology which makes our efforts more visible to the community."