In recent years, home energy, and how it is likely to grow in importance to homeowners as time goes on, has become a topic of much discussion. There’s been speculation that the proliferation of EVs, the electrification of homes, and the prevailing interest in sustainable building practices would help drive interest at a consumer level. However, I want to posit another possibility: that being that the popularity of AI and it’s ravenous energy usage is going to help drive attention and interest in the home energy category the most as it currently stands.
Luxury Clientele Are Taking Notice of Their Electricity Bills
Let’s take a trip back. At the now distant Spring Conference for HTSA, I had the opportunity to speak to a plethora of dealers about what they saw as being the next big category for integration. Perhaps unsurprisingly given the outspoken presence it had at Lightapalooza and before that, CEDIA Expos 2023 and 2022, I heard plenty say that home energy and all things electricity related was the next big ticket.
Still, I was taken aback by this. HTSA members commonly work with more luxury clients, and the common consensus when it comes to home energy solutions has been they’re money savers with the middle and lower markets being far more interested. Luxury clients don’t need to worry about the electric bill, I always heard people say. They make too much money to care.
That’s where I was politely corrected. Utility billing and costs have changed across the U.S., and while luxury clients may have once been aloof to the whole situation, they are now very aware of how expensive electricity has gotten. It’s not that electricity has gotten more expensive that’s driving them to do something about it, however, it’s that, in their eyes, the quality of the service just isn’t worth the rising cost.
Wait. Why is the cost still going up?
AI’s Energy Usage Has Largely Contributed to Utility Inflation Since Its Inception
It’s inflation, of course, but pandemic-era inflation, the stuff most people get fixated on, is largely gone. Prices can still rise as supply is unable to match demand, but where is all that demand coming from? Electrification and EVs were being speculated to likely cause grid strain as they become more widely adopted, but those efforts have largely stalled (especially EV adoption). So, what else could be generating that energy demand?
AI.
AI has been a driving trend since around 2022, and AI uses a staggering amount of energy to process queries, so much so that entire data centers need to be built in order to properly contain the processing power these models demand.
In a rough estimate pulled together by Alex de Vries, a data scientist at the central bank of the Netherlands, in 2027 the AI sector could theoretically consume between 85 to 134 terawatt hours each year. That’s the same level of consumption as the Netherlands itself realized in just five short years.
And it’s not just de Vries–who has been a vocal critic of AI, Blockchain and other technologies that thrive off energy consumption–who has noticed this.
AI and Industrial Onshoring Will Continue to Increase Utility Costs
In a report by the Bank of America Institute, a think tank utilizing proprietary data to develop insights into consumer behavior and the economy, year over year inflation for U.S. electricity prices now sits at 5.9%, up from 3.8% in January and more than twice the current rate of inflation for consumer product prices.
In the report, the researchers note that while electric vehicles and heat pumps are driving consumer energy demand higher, it’s the current trend of industrial onshoring (the construction of U.S.-based manufacturing facilities) and data centers meant to power AI that are applying the most substantial price pressure to utilities because of their energy usage. And they will continue to do so moving forward at a much larger scale.
Grid operators are now expecting an annual demand growth of 5% to 6% because of this, and I think it’s safe to assume these demands aren’t going away any time soon. AI is everyone’s economic darling right now, and while I see it taking shape the same way the internet did in terms of initial expectations versus final result, there’s still a lot of exploration that needs to be done to find out how well AI will perform, exploration that will consume a ton of energy along the way.
Quoting the BofA analysts, “Electricity demand is actually increasing, pressuring supply, and it may continue to do so for a long time as industrial onshoring and the AI revolution are both turbo-charging the need for generating capacity. This demand for significant investment in generation and related distribution infrastructure could be a headwind to consumers’ utility bills for the foreseeable future.”
Better Home Energy Usage is a Consumer’s Only Out to AI’s Electricity Inflation
Where integrators come into the equation is that there’s not a whole lot consumers can do to fight against these trends. Electricity isn’t a luxury commodity, and most products that use electricity in the home usually don’t have an economy option. Also, assuming that heat waves are only going to get worse as time goes on, it’s more likely homeowners are going to be using more electricity themselves rather than less.
The real solution is ramping up energy generation infrastructure in the U.S., but until that gets addressed, homeowners seeking relief aren’t going to be able to build a localized nuclear power plant to drive down the prices. They can, however, invest in smart energy solutions.
Whether that entails making the home grid more efficient, or developing a supplementary solar battery to help wean reliance on expensive grid electricity, home energy solutions are going to offer far more attainable relief to the growing pain point that is the electricity bill. And, as the HTSA conference revealed to me, that’s something everyone, no matter the price bracket, is starting to feel.
Middle market clients see the gauge as something that’s eating into their already stretched paycheck. Luxury clients see the increasing cost coming from a service that, overall, simply isn’t worth it in terms of overall quality. Both demographics see it as an unnecessary waste of money, and that is going to be what drives all homeowners to want to do something about it.
The question is, are you going to be the one to offer that solution?
In Summary
Though I only spoke of homeowners in this particular article I do also want to stress that utility companies are becoming more sensitive to this topic as well, as in the more competitive parts of the U.S., the quality of their service will make or break their business.
I’m not saying that AI’s energy usage is going to cause a flashpoint of awareness like the pandemic did with indoor air quality. Most people are likely never going to be aware of the exterior demands that are jacking up the electricity bill each month, despite their consumption habits not changing that much. Instead, it’s going to be that upward pressure, that rising cost that seems to be outpacing every other cost that’s going to make homeowners a lot more sensitive towards their energy bill, if they aren’t feeling that way already.
I’m also not saying that AI is going to be the sole contributing factor to getting people to pay attention. As with anything, it’s a collective of factors that end up influencing the trend at the end of the day, and for the time being, it seems as though AI’s popularity could have a role to play in this burgeoning category.
