The Role of AI in Energy Procurement and Management for Real Estate Portfolios

Artificial intelligence (AI) dominates the global technology agenda; its use cases are revolutionizing countless industries, from healthcare to customer service. Real estate is no different, but you may still be wondering how it will grow to impact a traditionally change-resistant commercial sector. 

Though consumer-facing products like OpenAI’s ChatGPT and Google’s Gemini limit most people’s understanding of AI, a world of highly advanced and data-driven property software is on the market. Programs that will not just make your commercial real estate (CRE) portfolio operate more efficiently but also help reduce costs and meet long-term ESG targets and environmental regulatory compliance targets.

Energy procurement has become increasingly competitive for CRE businesses, with gas and electricity costs for companies soaring amid rising political and climatic temperatures. Yet, securing the best contract for your business in today’s turbulent market can make a huge difference to your bottom line. Not only can it save money, but procuring green energy sources can also reduce greenhouse gas emissions. 

AI is already demonstrating that it has a role in commercial firms’ energy procurement. Still, it also has a much broader role to play in driving efficient resource management within buildings and CRE portfolios. From demand response systems to cutting-edge energy control systems that integrate with a comprehensive proptech system, facilities managers will find it easier to use AI to save money and reduce power consumption.

This article will explain how your business can utilize this technology to optimize energy use at the source.

The Evolution of Energy Procurement in Real Estate

For many years, CRE businesses had little say in energy procurement. In most countries where gas and electricity were nationalized, firms simply relied on fixed-rate contracts with local utility companies. Regional and national governments subsidized much of this, leaving little negotiating power for those powering their offices and establishments. 

After the turn of the millennium, lawmakers in Europe and North America liberalized energy procurement rules, deregulating the sector and creating a competitive market for businesses and consumers to choose their suppliers. In 2003, the European Union opened up its internal energy market for residential and commercial properties, giving energy brokers room to analyze and negotiate the best contracts for CRE organizations.

Renewables and the Age of AI

Since 2010, the adoption of renewable energy has further invigorated procurement culture. Governments have become more forthright in incentivizing green power: wind turbines, solar panels, and heat pumps all yield tax breaks and are supported through finance initiatives. 

This has also led to a surge of Power Purchase Agreements (PPAs), a mechanism used by renewable generators to mutually agree on electricity rates with their buyers and lock in prices for the long term.

Today’s global energy market is more unstable than at any point since deregulation. The political shift across Europe away from cheap Russian gas supply is reinvigorating the protectionist tendencies that prevailed before 2000. While larger companies may benefit from greater energy security, smaller organizations need to utilize the tools at their disposal to find the best procurement terms for their energy needs.

AI is set to shake this up and support CRE in a highly competitive energy market, with businesses now able to utilize advanced algorithms and machine learning capabilities to make better-informed market decisions.

How AI Transforms Energy Procurement

CRE portfolio managers should now start to see AI as a strategic tool to secure renewable energy on terms that suit them, leveraging the technology in line with carbon reduction targets to find the cleanest suppliers and maintain agility in the market. 

AI algorithms can analyze vast amounts of data, helping CRE businesses to identify trends and anomalies in energy usage, which provide valuable insights with accurate data-backed figures that enable companies to procure the right amount of energy at the right time, avoiding overspending or shortages.

They can also evaluate different energy procurement options, including fixed-price contracts and PPAs, recommending the most cost-effective and suitable procurement strategy while weighing them against potential market risks, such as price volatility, supply disruptions, and regulatory changes.  

AI procurement tools can also integrate with building management systems (BMS). If your portfolio has a digital infrastructure that can manage flexible power consumption, the tool can react to find the best prices based on real-time data.

In the long run, this can help businesses incorporate sustainability goals into their energy procurement strategies, analyzing renewable sources and carbon emissions data to recommend low-carbon options.

The Future of AI-Driven Energy Management

Emerging technologies have broader use cases in proptech beyond energy procurement. AI’s capabilities extend to energy management, making optimizing power consumption and flow across your commercial portfolio more manageable than ever. With these innovative solutions constantly scanning building data and matching it to historical trends, it can quickly identify cost-reduction opportunities while meeting regulatory compliance standards.

Let’s explore the three pillars of AI-led energy management and see how they can benefit your CRE business.

Energy Optimization and Cost Reduction

AI systems work best when integrated with a digital building management and automation system, complete with an IoT sensor network with portfolio-wide installation. Data can be collected from your building’s systems, from security to HVAC, and every room, including its occupancy statistics. 

With all of this information being fed into your BMS, the AI can identify trends to predict future energy demand, identify inefficiencies, and optimize energy usage in real time without intervention. Your proptech solution can automatically adjust HVAC systems, lighting, and other energy-consuming equipment to match actual needs, minimizing waste.

Predictive maintenance is another key aspect of building optimization, and AI can offer significant cost savings. Real-time analysis of HVAC and other core equipment can spot potential issues before they become disruptive. Instead of sudden breakdowns causing untold disruption, AI can alert maintenance teams to potential faults. 

According to E.ON, AI-based predictive maintenance can increase the uptime of your equipment by up to 20% while reducing inspection costs by a quarter (25%) and annual maintenance fees by up to 10%.

Sustainability and ESG Compliance

Data-led proptech solutions are the future of commercial property; smart building management backed by software and machine learning algorithms will help organizations decarbonize their operations and promote a more sustainable business model. By incorporating AI into the mix, studies show that the sector can cut its energy consumption by up to a fifth (19%) by 20250.

The EU’s Corporate Sustainability Reporting Directive (CSRD) is reshaping environmental priorities, making decarbonization an essential aspect of operating European commercial property. However, With an optimized energy footprint from HVAC to lighting, AI energy management simplifies the steps needed to meet ESG compliance targets and lower scope 2 emissions to fall within EU and international reporting standards.

Tenant Experience and Comfort

With AI using its data to create an optimal environment to reduce emissions, CRE managers can take this a step further to promote social value and tenant well-being across their portfolios. HVAC systems can be adjusted to cut power consumption and improve building air quality. Lighting can be adjusted to save money and create a more comfortable atmosphere for tenants. 

Not only do these minor tweaks improve the lives of tenants and building occupants, they also lead to increased rents – between 4% and 7% in major US markets. When combined with environmental benchmark certifications such as LEED or BREEAM, our research finds a price premium of more than a third (37%) on the rental market.

Implementing AI Energy Solutions with ProptechOS

At ProptechOS, we realize and have been at the forefront of the AI energy revolution taking place within the sector. ProptechOS and Partner applications help your CRE business develop a comprehensive box of tools designed to optimize and ultimately drive long-term energy savings across your portfolio.  This includes Advanced Supervisory Control (ASC) systems, which optimize energy usage in real-time, learning from data patterns to improve performance and continually adapting to changing conditions and demands.

With ProptechOS as your all-in-one proptech solution, your CRE business stands to save up to a third (33%) on its energy reduction targets, while AI-led facilities management and predictive maintenance tools reduce costs by €5-15 per m2 across your portfolio. 

Your CRE business can sign up for a free trial of ProptechOS today.