Preparing for Rising Energy Prices

The following article recently published in Advanced Manufacturing. You can access the original article on the magazine's website here.

For more insights from IGS Energy, visit our Energy Resource Center.

3 Steps to Prepare for AI's Impact on Energy Prices

Artificial intelligence (AI) requires a lot of power, and there’s no sign that this demand will decrease any time soon. The International Energy Agency (IEA) recently projected that the demand for AI, data centers and cryptocurrency-related power consumption could double by 2026. You don’t need a deep understanding of how AI works to recognize that a sharp increase in demand is likely to lead to volatility in the energy markets.

If your business is located in the region of the U.S. served by PJM, the regional transmission organization that coordinates the movement of wholesale electricity throughout 13 states and Washington, D.C., you might have seen headlines about the capacity auction that cleared at an all-time high on July 30. This auction, for the June 2025 to May 2026 capacity year, resulted in a significantly higher clearing price of $269.92 megawatts (MW) per day for most of the PJM footprint, compared to $28.92 MW per day for the June 2024 to May 2025 capacity year.

To maintain reliability, PJM uses a capacity market auction through which generators bid to meet peak demand. The winning generators receive the auction’s clearing price as revenue throughout the year, and all customers on the electric grid share these costs.

This change in cost will affect millions of PJM customers, likely resulting in an average residential customer’s monthly bill increasing by around $15 a month and impacting commercial customers uniquely based on their peak usage.

While AI-driven demand is only one cause of higher prices, there are power plant retirements and market design changes at play as well. It’s certainly worth noting that its continued adoption is likely to have long-term implications for consumers.

What can businesses do to more effectively manage energy spending when prices rise? There are a couple of options.

You can connect with your energy supplier to make sure your business has a true strategy in place, not simply a process for paying the bill. An experienced energy supplier can help a business navigate market volatility while minimizing risks and maximizing opportunities, based on the business’s unique risk tolerance and needs.

You can also focus on what you can control, like the efficiency with which your facilities run.

Why Manufacturers Should Prioritize Energy Efficiency

Implementing energy efficiency measures and demand-side management programs can help mitigate price increases by reducing overall electricity demand. Given the external factors that are beyond a company’s control, such as market volatility, weather conditions and the overall rise in energy demand across the U.S., focusing on what can be controlled is the right approach.

The following steps are designed to help businesses, building owners and facilities management teams get started with a general plan for energy benchmarking.

Step 1: Set Goals

Goal setting helps identify what data to collect and the insights to look for 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.

Step 2: Collect & Manage Data

Building owners, managers and occupants can manage and improve upon only what’s tracked. For historical comparison purposes, aim to collect a 36-month history of all energy bills—both utility and supplier bills.

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.

Step 3: Make a Strategy & Act on Insights

Take the important pieces of information from your spreadsheet and put your strategy in place. Look at trends over time and see if there are any outliers. Make comparisons between the performance of the buildings in your portfolio. Determine the most and least energy efficient. When comparing buildings, make sure to normalize the data for certain factors including weather, building occupancy and the size of the buildings.

Look at behavior; observe the ways people, processes and mechanical equipment impact each building’s energy usage. Use the practices of the top-performing buildings as a guide to improve the worst-performing buildings. Implement your changes and keep testing to see if energy efficiency improves.

Finding ways to reduce energy consumption should be every organization’s priority, as making any reduction in energy costs can dramatically reduce energy spending. With an understanding of where operations are today, a business can determine when and how they’re using energy, as well as the impact on their bottom line.