Defining the Energy Efficiency Market: Big Dogs and Fish with Legs

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Trader at Constellation

Defining the energy efficiency market is a bit like trying to walk dogs, birds and fish at the same time. Some companies walk well, some just want to fly, and some don’t even have legs (yet).

In short, the industry encompasses companies of many kinds and size that have little in common except their energy-saving intent: green home builders, shipping companies, lighting manufacturers, independent energy companies, old-world utilities, tech start-ups, and makers of things – from industrial motors to bikinis that charge cell phones.

Some of the companies are very small and getting bigger (two men and a truck); and some are very big and honing their gaze on energy efficiency, a pinpoint within the larger energy arena. This article is about one of those big companies: Constellation.

EnergyEfficiencyMarkets.com recently toured Constellation’s energy trading floor in Baltimore. Fittingly, it was the day before the energy giant won a big award for energy efficiency: a 2013 Platts Global Energy Award.*

Constellation is unquestionably a big dog with legs, especially since its merger with Exelon last year, a Chicago-based energy company with 2012 revenue of $23.5 billion. The merged companies do upstream exploration and production of natural gas in seven states, operate a 35 GW fleet of power plants, and serve 6.6 million utility customers through Baltimore Gas & Electric, Commonwealth Edison, and PECO.

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Constellation’s energy trading floor in Baltimore

Seeing its vast trading floor gives perspective to those numbers. In a large, mostly open office, 300 traders, analysts, weather forecasts and dispatchers make decisions that keep on the lights and influence energy prices for a big swath of America.

Constellation produces and sells a lot of energy. So the efficiency award highlights one of the oddities of today’s energy industry.  Big energy makers are increasingly discouraging people from using so much of their main product.

No company would do this, of course, unless it offered business value. For Constellation that value emerges in its competitive retail division –the area where the company works directly with business and institutional customers.

Constellation was one of the early cultivators of this model, which allows independent, non-utility companies to sell electricity and gas. At first. it was all about beating local utilities on price. Now, competitive suppliers offer more sophisticated packages to help companies with various aspects of their energy use. Gary Fromer, Constellation’s senior vice president, energy management programs, describes this as “managed services.”

The company won the Platts award for its Efficiency Made Easy program for commercial and industrial customers.  Available in competitive electricity markets, the program allows businesses to fund energy efficiency upgrades as part of their electricity supply bill.

“Finding the capital to implement energy conservation measures is a common hurdle for customers,” Fromer said. “Efficiency Made Easy helps Constellation and its fulfillment partners make energy efficiency projects viable, allowing customers to reduce energy costs and implement sustainable business practices.”

The program works by using the relatively common model of covering the cost of the efficiency installment through the energy savings achieved.  Constellation calls the approach “in-electric rate funding” in a white paper downloadable from its site. Its approach focuses on rapid payback measures like lighting, electric motor and drive replacements, water conservation and building automation.

Through the program customers saved about 84 million kWh from January 2012 to September 2013, an average 21 percent reduction per customer.

Some in the energy efficiency markets – especially the birds and the fish – see the presence of a big company like Constellation as a threat. Constellation, however, says its program benefits the smaller players. When an independent contractor proposes efficiency upgrades, the customer often balks at the upfront capital required. By working through the Constellation program, the contractor is more likely to persuade the customer, since the customer makes no out-of-pocket payment.

What do you think? Who are the winners and losers when big energy companies operate in energy efficiency markets? Post your thoughts on our LinkedIn group.

*Others in the energy efficiency space that won Platts’ awards this year included Opower as ‘Rising Star Company’ and EnerNoc for ‘Lifetime Achievement.’

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Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

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