Comverge and Constellation Combine Their Demand Response Businesses

Comverge and Constellation merger set to improve demand response service to commercial and industrial customers.
Published: Fri 10 Oct 2014

Comverge and Constellation have reached an agreement to combine their demand response businesses to create a standalone business. This newly formed business has been set up to improve and deliver a full spectrum of demand response offerings to commercial and industrial customers across the US.

Creating one of the largest demand response providers

Constellation intends to promote demand response services to its power and gas customers through the new company. The companies say the merger will create one of the largest demand response service providers in a rapidly-evolving industry.

According to Comverge and Constellation, the decision to merge their demand response businesses will not mean any change for their customers as the two companies work through the process of closing the deal. After the transaction has been closed, Constellation will continue to promote demand response services to its power and gas customers through the new company. This ongoing relationship will ensure that demand response products will remain a component within Constellation’s suite of retail products.

HIG Capital will hold a majority ownership interest in the new company, and Constellation will retain a minority ownership interest. The deal is expected to close in the fourth quarter.

“After this transaction, Comverge will now focus exclusively on delivering world-class solutions to help electric utilities deploy successful demand response, energy efficiency, and customer engagement programs targeting residential and small business customers," said Comverge chairman, president and CEO Gregory Dukat. "This is where we have developed considerable expertise over our successful history working with many of the largest and most innovative utilities.

New demand response company – a formidable presence

“By combining these two businesses, the new company’s size, focus and years of expertise helping C&I customers successfully participate in demand response programs make it a formidable presence in the market. Both companies have distinguished themselves in this market by building enduring relationships with their customers with strong reputations as trusted advisors,” says Dukat.

“This move will allow our customers to benefit from a company solely dedicated to DR products and services,” said Mark Huston, president, Constellation Retail. “The new company will be able to meet increasingly technical demands while maintaining best-in-class offerings to support a holistic energy strategy for customers.”

Focus is on demand management

The market opportunity to deliver innovative demand response, energy efficiency and customer engagement solutions to electric utilities is growing quickly because today’s electric utilities are placing more focus on using demand management programs to solve operational challenges such as:

  • Meeting renewable energy mandates

  • Complying with regulatory requirements and environmental policy.

  • Improving the customer experience.

Navigant Research predicts that the total number of worldwide residential demand response sites is expected to grow from 6.8 million in 2014 to 64.8 million in 2023. There are nearly 11 million households globally that are currently enrolled in demand response programs. With a compound annual growth rate (CAGR) of 11.6%, that number of households is forecast to more than double, to over 23.5 million, by 2018.

According to Navigant Research’s Brett Feldman, Comverge saw an opportunity to substantially add to its commercial and industrial demand response book. He explains, “The wholesale demand response markets are all about scale these days, with players who can afford the credit requirements and aggregate large portfolios together to manage risk. There are no big incremental costs to operate a bigger demand response business so the move should improve the company’s profitability.”

Further reading

Navigant Research – Contrary to Trends, Constellation Spins Off Its Demand Response Unit