Rising Electricity Demand’s Impact on Commercial Energy Bills

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 are also involved, but it’s worth noting that the continued adoption of AI is likely to have long-term implications for consumers. Overall, the surge in power consumption has a significant impact on the energy industry, our power grids and consumers’ energy bills.

At IGS Energy, Tom Roberts offers insights into how the increasing electricity demand could affect commercial energy bills and offers solutions for mitigating the financial burden 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:

1. Market dynamics: As demand rises and the supply-demand balance tightens, market volatility and scarcity pricing are more likely.
2. 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.
3. 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.

What Facility Managers Can Do To Better Manage Energy Spend
The good news: There are steps facility managers and their teams can take to help mitigate the risk of potentially volatile energy markets.

1. 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.

2. Consider Your 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. You should 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, consumers can adjust their energy consumption patterns, reducing strain on the grid and lowering their energy bills.

4. Develop a Strategy and Act on Insight

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 determine when and how they use energy – and understand the financial impact.

Tom Roberts is Director, Commercial Energy Services Engineering, Systems & Special Projects, at IGS Energy.