Energy suppliers are no strangers to shifting demand patterns. However, the surge in power consumption we have seen from the burgeoning data centre estate is unlike anything the industry has faced before. These facilities are in many ways the backbone of the entire digital economy and are expanding at a staggering pace, consuming more electricity than entire cities. The rapid acceleration of artificial intelligence (AI) has only exacerbated the trend, pushing energy usage to unprecedented levels.
According to Goldman Sachs, AI-driven data centres could increase global power demand by 165% by 2030. In the U.S. alone, data centre electricity consumption is expected to double, reaching up to 8% of national power demand. Because of this, suppliers are having to rethink how they forecast and manage load. All the while protecting their already tight margins.
The complexity of this challenge lies in the unknowns. Unlike traditional commercial users, data centres don’t follow predictable consumption patterns. One thing is for sure, suppliers that fail to adapt to the shifting landscape risk exposure to volatile pricing, forecasting missteps, and supply shortages. It is, therefore, imperative that they can hedge effectively against this growing demand.
Why data centres are different
Unlike traditional commercial customers, data centres present unique forecasting challenges that make them a difficult load to manage. The biggest issue is that historical energy consumption does not always reflect future demand. Many data centres are built with massive expansion plans in mind, meaning their early energy usage numbers may be deceptively low. Suppliers that base contracts on these initial figures may find themselves scrambling to adjust when actual demand surges beyond expectations.
Another factor is the base load stability of data centres. While they operate with relatively steady energy demand that is not fettered to weather fluctuations, it is not risk-free. If a supplier commits to a fixed-price contract without fully understanding the customer’s ramp-up plan, they could face financial losses.
Then there is the fact that data centres are less flexible participants in demand response programs compared to other large energy consumers as they are limited in their ability to shift usage to off-peak hours. They need the energy, when they need the energy.
Complicating matters further, many suppliers assume that once a data centre is online, it becomes a set- and-forget customer. Yet, while base load stability means scheduling adjustments are minimal, financial risk remains if usage patterns do not align with forecasts. Because of this, suppliers need to take a more nuanced approach when pricing and hedging these contracts.
Forecasting with confidence
As traditional methods based upon historical data won’t work, energy suppliers must adopt more sophisticated forecasting and risk management strategies to navigate the challenge of data centre energy usage. To protect the bottom line, they will need to integrate real-time interval data (IDR) and advanced metering systems (AMS) to refine their projections and make smarter hedging decisions.
One of the most effective risk management strategies is block hedging, which allows suppliers to minimise exposure to sudden demand fluctuations. Demand response programs can be useful tools for some data centres but are only viable in situations where workloads can be scheduled for off-peak hours. And, as we have seen, many data centres require continuous uptime, meaning that demand response participation is not always plausible.
The structure of energy contracts also plays a crucial role in mitigating risk. Fixed-price contracts can be dangerous if demand projections are inaccurate, while index pricing offers flexibility but exposes suppliers to market volatility. The best approach, therefore, often involves a hybrid strategy, where a portion of the load is hedged at a fixed rate, yet allowing for market-based adjustments to cover potential fluctuations. The key is for the supplier to ensure it prices its products in a way that accounts for the unpredictability of data centre ramp-up periods and usage patterns.
Steps towards a more secure future
One of the most important steps suppliers can take is to strengthen collaboration with the operators of data centres themselves. By improving communication around expected usage patterns and expansion plans, means suppliers can better anticipate demand shifts and structure contracts accordingly.
Regulatory adaptation will be another crucial factor. As policies are adjusted to accommodate AI-driven energy demand, suppliers must stay ahead of emerging compliance requirements to avoid unnecessary penalties or pricing disadvantages. This ability to quickly adjust to new regulations will quickly become a key differentiator in this evolving market.
As data centres continue their rapid expansion, they are no longer niche energy consumers. They are crucial to modern infrastructure, and their impact on energy markets will only intensify as AI-driven applications require to be underpinned by ever-increasing computational power. The growth in data centre energy usage is driving the need for continuous energy expansion, straining grid capacity, and forcing utilities to adapt to a more volatile demand landscape. The suppliers that develop smarter forecasting models, adapt their pricing strategies, and refine their risk management approaches will be the ones that are best positioned to secure greater profitability, market stability, and long-term competitiveness in the data centre boom.
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