Despite research showing that Europe has reduced its energy use by almost 30% over the last two decades, and could cut 70% of its remaining natural gas demand by 2040, a Danish engineering and manufacturing firm with operations in more than a dozen countries is still seeing a gap in the way energy efficiency is seen and adopted, compared to new sources of energy supply.

The shift to electrification has helped Danfoss Climate Solutions’ business in heating, refrigeration, power systems, and industrial automation, said company president Kristian Strand.

But “we still have this challenge today that energy efficiency is not looked at the same way as energy supply,” Strand told The Energy Mix in a feature interview on the sidelines of the International Energy Agency’s (IEA) recent energy efficiency conference in Montreal.

“There’s a lot of focus on how to supply energy, but not really on how to use it more efficiently, which is a bit of a paradox,” he added. “If you think about one kilowatt saved, it’s totally immune to any price [change], any supply disruption. So it’s actually a very smart way to do things.”

During the conference, Danfoss cited new research by Oxford University energy and climate policy professor Jan Rosenow, showing that Europe has already cut its energy consumption by nearly 30%, and could reduce its remaining gas demand 70% by 2040 through a mix of energy efficiency, electrification, and clean energy adoption. Those moves would save the continent up to €2 trillion (C$3.22 trillion) on fossil fuel imports.

But to tap into those gains, countries will have to “scale up and really get traction” on projects that aren’t often as high on investors’ radar, and can stumble on the need for cooperation between public sector grids and private businesses.

“We look at reduce, then we look at reuse, and then we look at reset,” Strand said, adding that Danfoss applied the same principle to its own targets for carbon neutrality by 2030 and net-zero carbon by 2050. “We cannot go and advocate for this if we don’t show the way,” he said, “and that’s the main value proposition that we’re offering the market.” And “energy efficiency is very important for us to reach our own target for decarbonization.”

He cited one project in a Danish supermarket that reduced energy consumption by 63%.

Data Centres Can Help Utilities

The same practices can apply in data centres, where concern about energy consumption and a host of other local impacts have been supercharging public opposition across North America and beyond.

“We have the same opportunities there to do peak shaving, to leverage the load and the excess heat,” he said. But “somebody has to put the requirements to the data centres, the centre has to agree to it, and somebody needs to take the excess heat from the data centre.”

Danfoss is already doing that for its data centre customers, predominantly in the United States, with a highly efficient, fossil-free, high-RPM centrifugal compressor “that has become a kind of de facto standard” for the industry, Strand said. Scaling up on that potential from theory to practice begins with legislation.

“Somebody needs to put an energy efficiency requirement to the data centre, the building, or the supermarket,” he said, while making the case that the incremental costs will be manageable—especially with buildings that can use artificial intelligence to learn their occupants’ usage patterns.

It’s Different for Energy Importers

In contrast to North America, where the natural gas lobby can often be seen trying to stymie local electrification and efficiency measures, Strand said Russia’s invasion of Ukraine in 2022 focused European governments’ attention on energy resilience.

“We import a lot of fossil fuels,” he said, so “what holds us back is more the fear that costs will go up” as a result of energy efficiency projects. Building codes are still often subject to last-minute changes at the national level after they’ve been enacted by the European Commission, even though “this is actually an opportunity to be very competitive and strong.”

When it comes to payback times on efficiency investments, “seeing is believing,” he said, and “I think that’s the most frustrating thing. I could understand [the resistance] if it were super expensive. But it’s not.”

With high or volatile gas prices as the motivator, and subsidies sometimes available, Strand said heat pump sales have been booming in Europe, as homes and businesses convert to more energy-efficient heating and cooling systems.

Danfoss has also been diversifying its production and supply chains across the globe—particularly since the COVID-19 pandemic—with a research centre in Tallahassee, Florida, and a large production footprint in Mexico. The new strategy is to boost the company’s resilience by ensuring that all its products are manufactured on at least two continents.

Growth Potential in Canada

With about 40 staff in Canada, $200 million in annual turnover, and no manufacturing capacity, Strand said he sees lots of potential for growth, based on the size of the economy and the country’s industrial capacity. “The technologies we offer can fit well into a market like Canada, where there is a need to build awareness on what we can use all of that waste heat for,” he said.

Canada is also an attractive location for local supply, particularly in today’s international trade environment. “There’s no reason to ship from our warehouse in the United States and then incur a tariff on it,” he said. “It’s driving us to be more flexible in our approach and set up more resilient supply chains.”

Danfoss is also on the lookout for data centres in Canada that are open to optimizing their efficiency—as long as the solution is electric.

“It depends on the customer,” Strand said. “We don’t offer gas generators,” but “there are grid technologies now where you go to 800-volt DC directly into the data centre so that it’s more energy-efficient.”

Notwithstanding the fear or perception that data centre development will continue to swamp existing power grids, he said there’s great potential to adjust temperatures and shift loads, including the large language model learning that is so energy-intensive, to off-peak hours. Global data centre operators can also shift tasks across regions to avoid periods of high demand.

There are technologies for peak-shaving and it’s very interesting, because you don’t need the data centre to flexible for more than 1% of the time to actually be able to deploy all the data centres that are planned through 2030,” Strand told The Mix. “It isn’t simple, but there are ways to do it.”

And once those systems are in place, “suddenly it’s like having a big electrical battery sitting on your grid,” with a data centre showing up in power system modelling like “a 60-gigawatt [capacity resource] that you can flip on and off.”

Energy Efficiency Investment Needs Certainty

But scaling up energy efficiency investment and deployment will depend on longer-term certainty for the industry, Strand said. That begins with governments sticking to the codes and standards they adopt and enforcing them, even if they’re worried about short-term impacts in an economic downturn.

Those decisions will get easier as more people get to see the benefits of energy efficiency first hand.

“It’s about building understanding,” he said. “We can [show results] in a building here or a hospital there. But we need some way to scale it and put it all together.”

As an example, he cited Danfoss’ industrial hub in Sønderborg, Germany, population 80,000, where the company and the municipality have been working for more than a decade on an action plan to make the region energy neutral by 2029. The IEA recognized Sønderborg’s work, he said, when it chose the community to host its annual energy efficiency conference in 2022.

“We’re well on the way, and we’re going to achieve it,” he said. “Everybody’s working on it,” and the community hasn’t seen a decline in quality of life or a major increase in costs.

The changes have been gradual, with retailers changing out light bulbs and getting heat pumps, local buses and ferries electrifying, and the district energy system expanding to take advantage of waste heat from the company’s operations. The plan is working because it began with everyone—the municipality, the company, and the public—developing a long-term strategy together.

“Everyone agreed from the beginning and kept to what was agreed,” said Kasper Elbjørn, Danfoss’ senior vice-president of communications and public affairs. In contrast, “if you go with these back-and-forth, stop-and-go policies, you can’t do it.” For companies to know that it’s safe to invest, “you need to set a long-term plan and stick to it, even when it’s difficult.”