The power demands of artificial intelligence (AI) are growing exponentially, with no signs of slowing down. The International Energy Agency (IEA) suggests that by 2026, power consumption related to AI, cryptocurrency, and the data centers necessary to power our increasingly automated world could double.
AI-driven demand is only one cause of rising energy prices. Power plant retirements and market design changes also play a role. However, the continued adoption of AI will likely have long-term implications for consumers. Overall, the surge in power consumption has a significant impact on the energy industry, power grids, and consumers’ energy bills.
As electricity demand continues to rise, businesses face growing energy costs. This article explores practical strategies to help commercial enterprises mitigate the financial impact of high energy usage.
What Impacts Energy Prices?
On a macro level, rising energy demand is unavoidable, so it’s important to understand how it affects energy prices. There are several key factors at play:
- Market dynamics: As demand rises and the supply-demand balance tightens, market volatility and scarcity pricing are more likely.
- Fuel costs: The price of electricity is influenced by the cost of the fuels used to generate that electricity, and as demand for these fuels also increases, prices are likely to climb.
- Grid infrastructure investment: To meet rising power demand, utilities will need to invest in costly investments in new generation capacity, transmission lines, and distribution infrastructure, as well as smart grid technology to support rising power consumption. Rising electricity demand often coincides with a push toward renewable energy sources, the integration of which requires additional infrastructure investment.
The good news is that there are things facilities managers and their teams can do to help mitigate the risk of potentially volatile energy markets.
First, they can connect with an experienced supplier. Before doing anything else to manage your organization’s energy spend, connect with an experienced energy supplier to ensure your business has a true strategy in place, not simply a process for paying the bill. An experienced supplier can help a business navigate market volatility while minimizing risks and maximizing opportunities based on the business’s unique risk tolerance and needs.
Second, facilities managers can consider their options for running facilities more efficiently. Implementing energy efficiency measures and demand-side management programs can help offset price increases by decreasing your organization’s total electricity demand. With so many uncontrollable external influences, like market volatility and rising nationwide energy demand, focusing on manageable elements is a wise course of action.
The following steps provide a basic guide for energy benchmarking for businesses, building owners, and facilities management teams:
1. Establish targets: Setting targets helps determine the type of data to gather and the insights to seek when starting an analysis. Common energy benchmarking goals for those just getting started might be to validate savings from energy efficiency projects, evaluate the performance of an energy efficiency program, or measure a facility’s environmental impact.
2. Collect and manage your usage data: Tracking energy usage allows for better management and improvement. Aim to keep a 36-month record of all energy bills and use the tools available from ENERGY STAR, which provides a spreadsheet in which energy data can be entered manually and then sent to be uploaded into the Portfolio Manager benchmarking tool. From here, work with your energy supplier if they have energy data management and analysis resources.
3. Consider demand response: Demand response programs encourage consumers to shift their electricity usage away from peak hours when demand and prices are highest. By offering incentives, these programs motivate consumers to adjust their energy consumption patterns, reducing strain on the grid and lowering their energy bills.
4. Develop a strategy and act on insights: Analyze the data, identify trends, and evaluate your building’s performance. Observe how people, processes, and equipment affect energy consumption. Implement changes and measure their impact on energy efficiency.
Reducing energy use must be a priority for all organizations. By understanding their current operations, businesses can identify when, how, and what the financial impact of their energy use.
Tom Roberts is the director of commercial energy services engineering, systems, and special projects at IGS Energy.