Constellation CEO: Existing power plants are the 'cornerstone' for powering data centers

Constellation Energy President and CEO Joseph Dominguez said that although the Taxpayer Protection Pledge requires planned data centers to build their own new power generation facilities, existing plants will still play an important role in powering them.

"If we have to wait for new plants to be built before connecting any data centers, we will never be able to build this economic system," Dominguez said on Thursday's earnings call. "In my view, the building blocks for at least the early stages of the data center economy will rely heavily on existing generation capacity."

Dominguez noted that there is substantial available capacity in the transmission and generation system that can serve consumers for more than 99% of the hours in a year.

"What we face is a peak capacity problem, not an energy problem," he said. "The key is to address the few peak hours where there are reliability concerns while utilizing the idle capacity that exists in every other hour of the year."

Dominguez said peak hours can be managed through battery storage, demand response, and peaking resources.

"(Potential customers) still need to address not only the peak issue, but also what they will do in every other hour of the year," he said. "That is where our generation fleet is extremely valuable, because they are fixed-price, clean energy resources that customers can rely on for decades."

The Baltimore-based independent power producer has approximately 55 gigawatts of installed generation capacity, including about 22 gigawatts of nuclear capacity.

Key figures at a glance

• $860 million: The price at which LS Power plans to acquire Constellation's 606-megawatt Brazos Valley gas plant in Texas.
• Approximately 1.1 gigawatts: The potential power uprate headroom in Constellation's 22-gigawatt nuclear fleet.
• $2.55 per share: Second-quarter adjusted operating earnings, up from $1.91 per share in the same period last year, driven mainly by the Calpine acquisition, higher capacity revenues, and other factors.

Dominguez said Constellation has multiple data center-related projects affected by the suspension of Texas's Batch Zero interconnection process.

The company believes the state's audit of proposed data centers will not take too long.

"All these individuals, especially with midterm elections approaching, want to respond to voter concerns, and Governor Greg Abbott has requested some fairly reasonable information in Batch Zero," Dave Dardis, Constellation's head of external affairs and growth, said on the call.

With large load interconnection requests, mainly data centers, totaling about 474 gigawatts, Abbott has asked proposed data centers to provide information such as their power supply, expected electricity and water usage, and the amount of public financial assistance.

Dardis said this information can be provided quickly, and Constellation does not expect "meaningful delays."

"We view this as a temporary measure that the industry can handle," he said.

Meanwhile, Dominguez said Constellation expects ERCOT's currently low wholesale power prices to recover as data centers begin to come online.

He said battery storage and other resources coming online ahead of expected load are pulling down power prices.

"As data centers are built, the market will begin to tighten, and you will see the market move toward some kind of balance," Dominguez said.

Also in Texas, after a bidding process, Constellation sold its 606-megawatt Brazos Valley gas plant to LS Power for $860 million, or about $1,420 per kilowatt.

"It was clear from the competitive process that buyers recognize gas assets have long-term value and that utilization could potentially increase further," said Constellation Chief Financial Officer Shane Smith.

He added that, once approved, the sale of the plant will satisfy Constellation's divestiture obligations in the Calpine acquisition.

Under the agreement with the U.S. Department of Justice, the assets Constellation must divest are expected to generate total proceeds of approximately $5.9 billion.