Invest4 publishers3 min readPublished
Three-quarters of Google's 3,590 MW Constellation deal buys output from its existing fleet
Google contracted 3,590 megawatts from Constellation Energy, of which 890 megawatts is new nuclear capacity backed by more than $4.3 billion of uprates. That new slice is built to fit PJM's proposal that data centers bring their own power or face cutoffs at peak.
The Investor · Invest desk
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What happened
- The new capacity comes from turbine, steam generator and digital control upgrades at 11 units in Illinois, Pennsylvania and New Jersey, with the first uprate due in 2028.
- Amazon signed a 20-year Constellation contract the week before for 690 megawatts from Calvert Cliffs, unlocking more than $3 billion of investment in its first funded uprate.
- Constellation will deploy Google Cloud and Gemini Enterprise across its operations under a five-year technology agreement signed with the power deals.
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Why it matters
- exposure If PJM's final rule credits only new generation, about three-quarters of the megawatts Google contracted would not count toward bringing its own power.
- constraint Because the 2,700 MW block is not tied to any plant and Constellation also runs gas units, the deal does not establish a higher value for nuclear plants already on the grid.
- precedent With 1,580 MW of uprates sold to two buyers in consecutive weeks, a 20-year hyperscaler offtake is now the terms Constellation can put in front of the next large PJM customer.
Google describes itself as the funder. "Our agreement with Constellation to fund nuclear reactor uprates will strengthen the PJM grid, which serves 67 million people, all while protecting energy affordability and supporting local union jobs," Amanda Peterson Corio, Google's global head of energy and power, said [6]. The capital is Constellation's, though: the more than $4.3 billion is its commitment, and Google's part is 20 years of buying the output [1]. The commitment works out to at least $4.8 million per megawatt of added capacity, or roughly 81 megawatts at each of the 11 units [15][17]. Amazon's Calvert Cliffs contract implied at least $4.3 million per megawatt [16]. On those disclosed floors, Google's uprates cost about 11% more per megawatt [19].
The larger block is the 2,700 megawatts, about three times the new capacity and 75% of the 3,590 megawatts contracted [14]. Google said that power is not tied to a specific generation source and gives Constellation's operating plants long-term revenue certainty [5]. Constellation is the largest US nuclear operator, but it also owns a major gas-fired fleet [10]. The contract therefore does not show which kind of plant stands behind those megawatts. It runs 15 years against the uprate contract's 20 [4][1], so the existing-fleet supply lapses five years earlier [20].
PJM explains the structure. Its management has proposed that data centers on the 13-state grid bring their own power or face being shut off remotely at peak demand [9]. The deal is built to fit that "Bring Your Own Power" proposal, a framework for large consumers to add new supply without passing costs to residential customers, according to the companies [8]. On that definition, only the 890 megawatts is new supply [1].
The deal can resolve three ways. If PJM's final rule counts contracted output from existing plants, the 2,700 megawatts is the valuable piece, and Constellation has a new class of buyer for plants it already runs. If the rule counts only added generation, Google holds 890 megawatts that qualify, with the first uprate due in 2028 [3]. Any further PJM supply would then have to come from projects like those Google holds elsewhere, a NextEra restart at Duane Arnold in Iowa and upgrades at two Southern Co. plants, according to Bloomberg [7]. If the uprates slip, Constellation carries the spending while Google waits for the power [1].
I think the 890 megawatts buys Google standing under the PJM proposal and the 2,700 megawatts buys Constellation a revenue floor for its running fleet. The opposing view is that Google paid a premium for existing supply. In that case, plants already on the grid are now worth more. The companies did not disclose a price for either contract, so that view cannot yet be tested. Higher reported margins on Constellation's existing PJM output, or a PJM rule that credits contracted existing supply, would prove me wrong.
Under a separate five-year technology agreement, Constellation will deploy Google Cloud and Gemini Enterprise across its operations for site selection, power flow modelling, asset health monitoring and cybersecurity [12]. Joe Dominguez, Constellation's chief executive, said the collaboration "can serve as a model for how technology companies and the energy industry can work together to responsibly develop the digital economy" [11].
What to watch
- PJM's final bring-your-own-power rule, and whether contracted output from existing plants counts as a data center bringing its own power.
- Constellation's reported margins on its existing PJM output, which would show whether the 2,700 MW contract was priced above market.
- Delivery of the first Google uprate, due in 2028, against the more than $4.3 billion Constellation has committed.