Why Multifamily Owners and Operators Should Care about AI Datacenters
Problem: Energy demand continues to skyrocket due to the huge demand for energy from AI datacenters.
Solution: Virtual Power Plants enable owners and operators to reduce energy consumption during peak times, store energy for future use and sell excess energy back to the grid. Learn more about Embue Virtual Power Plant
Energy demand continues to skyrocket due to the rapid adoption of heat pumps and electric vehicles (EVs), and now it’s about to scale up even faster as the use of Artificial Intelligence (AI) takes off, driving huge demand for energy from AI datacenters.
In fact, according to The International Energy Agency, global electricity demand from datacenters could double between 2022 and 2026.
So what does that have to do with multifamily apartment buildings and why should owners and operators care?
How AI Datacenters Drive Up Energy Costs
AI datacenters consume vast amounts of electricity to operate sophisticated hardware, process large datasets, and maintain complex systems. These facilities rely heavily on power-intensive computers and equipment that require substantial cooling to prevent overheating.
Here’s how this impacts multifamily buildings:
Energy Demand Could Increase Costs by 70% on Local Grids
AI datacenters operate around the clock, contributing to higher energy demand, especially in regions with dense datacenter activity. This added strain can lead to higher electricity prices because utilities ultimately pass on increased costs from grid congestion to all users, including multifamily properties. A new report by the Jack Kemp Foundation reported that by 2029, surging energy demand could cause an increase in electricity bills by 70%.
Infrastructure Upgrade Costs
As datacenters expand, utilities need to invest in infrastructure upgrades to accommodate higher loads. This includes building new substations or enhancing grid capacity, and these expenses will ultimately be reflected in higher rates for all electricity users, including apartment buildings.
Renewable Energy Transition Challenges
Many datacenters are committed to using renewable energy, which aligns with sustainability goals, but introduces challenges:
- Intermittency Costs: When renewable energy isn’t available, utilities may rely on fossil fuel backups, driving up costs. Building new fossil fuel generation capacity doesn’t make economic sense and would require rate increases
- Shared Renewable Investments: The costs of integrating renewable energy sources are often distributed across all grid users
Effects on Multifamily Apartment Buildings
For multifamily properties, the impact of rising electric costs driven by AI datacenters can be significant:
Higher Operating Expenses
In regions like New England with constrained gas supply, electricity demand can drive up the cost of gas because gas-fired power plants are competing for energy with retail gas customers. Owners and operators face rising energy costs for common areas, central HVAC systems, heat pumps, electric vehicles and other shared utilities. This can strain budgets, both in older buildings with less efficient, fossil fuel-based systems and in new all-electric buildings.
Increased Utility Bills for Residents and/or Owners
Tenants will see higher utility bills as a direct result of elevated electricity rates. In buildings where utilities are included in rent, owners may be forced to raise rents to cover these costs.
Demand for Energy-Efficient Upgrades
As electric costs rise, there’s growing pressure for property managers to invest in energy-efficient technologies, such as smart thermostats, LED lighting, and high efficiency HVAC systems, to offset higher rates.
How can Multifamily Owners and Operators Mitigate the Impact?
Multifamily owners and operators can reduce the impact of rising electric costs and increased demand in three critical ways:
Embrace Smart Building Technology
Smart building platforms can help multifamily properties monitor and optimize energy usage, through HVAC system and thermostat scheduling and other measures, peak load management, and real-time energy analytics that can help identify areas to reduce consumption and costs.
Invest in Renewables
Installing solar panels or other renewable energy systems can help offset reliance on the grid and reduce exposure to rate increases driven by datacenters.
Virtual Power Plant Technology
Virtual power plants (VPPs) are a new technology that can immediately reduce energy costs, unlock new revenue streams and improve building resiliency without requiring new infrastructure.
A VPP is a network of connected Distributed Energy Resources (DERs) in a building that work together to optimize energy use and support the grid, dynamically balancing building demand and supply. Examples of DERs include HVAC systems, electric vehicles, solar panels, electric batteries and thermostats. VPPs harness excess energy, storing it during off-peak hours and discharging energy from batteries to either power the building or sell it back to the grid. Buildings with VPPs can participate in demand response programs and manage energy consumption by adjusting and fine tuning HVAC schedules, pausing and sequencing EV charging, and managing energy use in electric batteries or domestic hot water tanks. VPPs enhance a building’s ability to handle outages by using stored energy.
Looking Ahead
As AI continues to evolve, its energy footprint will remain a huge issue, significantly impacting the built environment. Multifamily owners and operators can prepare by adopting technologies that can interact with the grid to mitigate rising costs.