The following article recently published in QSR, an online publication for the quick-service restaurant industry. You can access the original article on the magazine's website here.

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AI's Impact on Commercial Energy Bills and Navigating the Future

Artificial intelligence (AI) is revolutionizing industries across the globe, creating efficiencies and driving innovation. However, its growing adoption also brings an often-overlooked consequence — massive energy consumption. 

The resulting increased energy demand could signal rising energy bills for business owners. Restaurants, already challenged by narrow profit margins, could find rising power prices particularly burdensome. The good news is that there are strategies that can help mitigate energy costs.

Understanding AI-driven energy demand

AI systems, especially machine learning algorithms, require significant power. Training these models involves vast amounts of data and continuous processing, and the data centers that fuel this tech require massive amounts of energy as well. 

Earlier this year, the International Energy Agency (IEA) released its  forecast for global energy use through 2026, including, for the first time, projections for power consumption related to AI, data centers and cryptocurrency. The organization estimates that electricity consumption from these uses could double in less than two years. 

The ripple effect on energy bills

To understand how demand affects your energy bills, it’s important to understand what goes into the cost of electricity. Energy and capacity are the most influential cost components when it comes to overall electricity costs with energy representing about 60 percent of a bill and capacity representing about 25 percent. 

• The energy component is subject to significant price fluctuation throughout the day, often in response to natural gas prices. Prices may differ depending on the customer’s energy source (fossil fuel or a green source, like solar).
• The capacity component of your bill ensures there’s enough generation at a single point in time to meet your unique peak demand at the highest power consumption hours. 

Overall, when electricity prices rise, it’s due to several key factors:

1. Market dynamics: As demand rises and the supply-demand balance tightens, market volatility is more likely, as is scarcity pricing.
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. Investments in the grid: 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 will require additional infrastructure investment.

Smart strategies you can implement now  

While AI’s energy demands may be inevitable, businesses can adopt several strategies to manage their energy usage effectively.

Strategy 1: Work with your energy partner to create the right strategy for your business

An experienced energy supplier can customize an electricity supply strategy that meets your team’s specific needs today. You may choose a strategy that includes fixing or floating cost components or a hybrid approach. By crafting a customized plan, you can balance market opportunity with price predictability.

Strategy 2: Put energy efficiency to work

With so much that’s out of your business’s control, like market volatility, the weather and rising energy demand across the board in the U.S., the right approach is to focus on what you can control. Demand-side management programs and energy efficiency measures can help mitigate potential price increases. 

Demand-side management involves shifting energy use to off-peak times when electricity rates are lower. This can be particularly effective for businesses that run around the clock, like restaurants. Automated systems can help schedule energy-intensive tasks for off-peak hours.

Energy-efficient improvements, including LED lighting, smart HVAC systems, and other equipment upgrades, can significantly reduce overall electricity usage. While these investments may have upfront costs, they typically pay off in the long term as you and your team reduce energy waste.

Here’s a 3-step guide to getting started with energy efficiency: 

1. Run an energy audit. For help in gathering and analyzing this data, it can be beneficial to consult with an expert, ideally your energy supplier. Having a benchmark for energy usage today is necessary to make future efficiency upgrades.
2. Get to know your peak demand. One of the most effective ways to save on power costs is to reduce your organization’s peak demand. Peak demand is simply the time when your energy usage is highest. This data is key to making effective decisions around your efficiency strategy. 
3. Make upgrades based on your findings. Any improvement to your baseline energy usage today will be helpful in supporting your bottom line in the future. 

Looking Ahead

The increasing use of AI is a double-edged sword. It offers unprecedented efficiencies while driving up energy demand. However, by implementing energy efficiency measures and demand-side management programs, businesses can mitigate rising energy costs and continue to thrive.