The neglected demand side of the green equation
A new whitepaper from Danfoss, the Danish family-controlled engineering group, titled ‘The neglected demand side of the green equation’, delves into the details of how energy efficiency is an enabler of electrification.
Kim Fausing, CEO Danfoss says:
“If we don’t curb our demand for energy, the build-out of renewables will not be even near sufficient. We simply will not have enough green energy to meet the demands of a growing population. One overlooked fact is that renewable energy comes in peaks and is used in peaks. Energy efficiency allows us to shave these peaks, for instance by reusing the excess heat from industries, supermarkets and data centers to heat our homes. Energy efficiency is fundamental for a full electrification of our society.”
Let’s close the gap between promises and action
Human-induced global warming has reached approximately 1.2 degrees above pre-industrial levels and with current policies warming will hit around 2.8°C by the end of the century. 2022 was the year of sustained droughts resulting in widespread wildfires, declines in food production and heatwaves from the United States and Africa, to China and Europe. Glaciers are melting in the Andes and the Himalayas, taking with them the source of drinking and irrigation water for thousands of people. And in the Arctic, sea ice is melting much faster than scientists predicted. Climate change is an immediate, not a future, crisis.
The good news is that we have the solutions at hand, and we don’t need to wait. In fact, most of the global reductions in carbon emissions through 2030 needed for the Net Zero by 2050 Scenario developed by the International Energy Agency (IEA) come from technologies readily available today. We are seeing a massive build-out of renewable energy to tackle the supply side of the green equation. This is indeed necessary, and we need even more. But if we don’t, at the same time, pay attention to the demand side of the green equation (the acceleration in energy consumption) the build-out of renewables won’t be even near sufficient.
As the IEA has pointed out, energy efficiency can take us one-third of the way to net zero. Energy efficiency simply means using less energy to perform the same task – that is, eliminating energy waste. In this paper, we explore why energy efficiency plays such a significant, yet politically overlooked, role in the battle against climate change. The greenest, safest and cheapest energy is the energy we don’t use.
Cooling is essential for life across the planet. It is essential for storage and transport of food and medicine.
The need for cooling is increasing rapidly around the world, particularly in developing countries. The increase is caused by economic development and adaptation to a warmer planet due to climate change. The years from 2013 to 2021 ranked among the 10 warmest on record and in 2022, intense and prolonged heatwaves were experienced across the globe.
At the same time, 13% of all food produced globally is lost due to a lack of cold chains, the continuous series of refrigerated transport and storage that keeps food at the correct temperature. This is particularly significant in developing countries where access to refrigeration is much lower than in developed countries. It is estimated that this lost food could feed 950 million people a year.
Lack of cold storage and refrigerated transport also contributes to 1.5 million vaccine-preventable deaths.
With the potential to impact health, well-being, productivity and food security the need for cooling is clear. It is a necessity, not a luxury. But cooling consumes large amounts of energy and this energy use could increase rapidly without targeted actions to increase efficiency.
In terms of space cooling, the energy use of the roughly 2 billion AC units in operation is already having a significant impact on both overall and peak energy demand. Energy demand for space cooling in buildings could more than triple by 2050 – consuming as much as all of China and India today.
Despite improvements in efficiency and less carbon-intensive energy production, CO2 emissions from cooling continue to rise. Emissions from space cooling more than doubled to 1 Gt between 1990 and 2020.
This leads to a vicious feedback loop: as the world gets warmer, demand for cooling increases and this drives yet further warming. The question is, how do we break the cycle so that the world has access to affordable cooling and still becomes climate neutral in 2050? The short answer is that we employ energy efficient cooling solutions that make it possible.
Energy efficient cooling
Available cold chain technology can reduce food loss by up to 40% in developing countries according to Danfoss’ estimates. Packing, storing and transporting perishables at the right temperature extends their lifetime.
The energy performance of air conditioning units can vary up to 70%. We can almost halve global energy consumption for cooling simply by choosing efficient options.
District cooling is another promising solution. Singapore has the world’s largest district cooling system, and the nation has reduced its energy bill by 40% and the country’s emissions by the equivalent of 10,000 cars per year. District cooling also offers the potential to replace dangerous refrigerants with efficient and climate-neutral alternatives, for example, natural refrigerants such as propane.
We already have the technology available to cut the energy demand of cooling technology. Investments in energy efficient cooling solutions will reduce emissions, energy bills and pressure on the electricity grid.
Cooling is just one example of the risk of neglecting the demand side.
The solutions exist
Overall, experts agree on the three fundamental steps in combatting climate change and reaching net zero:
- we must make electricity green by substituting fossil energy with renewable sources;
- we must electrify everything possible across all sectors;
- and then we must remove the small remaining emissions stemming from processes that cannot be electrified (for instance, by carbon capture and storage or by reforestation).
Renewable energy is a theme well covered and in most places politically unquestioned. However, to grow the role of electricity in the energy mix, it is a fundamental yet often overlooked fact that we need to reduce demand for energy in the first place. In other words, energy efficiency is an enabler of electrification.
Let’s take a deep dive into the relationship between energy efficiency, electrification and sector integration.
Save energy
Energy efficiency simply means using less energy to perform the same task – that is, eliminating energy waste.
Even though efficiency measures are often associated with heating and cooling in buildings, a long list of technologies exist that can reduce energy waste across sectors – in buildings, transport and industries.
We can improve the fuel economy of machines and reduce demand for diesel. Energy efficiency and electrification can reduce the energy waste in some excavators by 75%.
In buildings, we can use both simple and smart technologies to curb emissions significantly. Electronic thermostats, model predictive controls and hydronic balancing can reduce energy consumption significantly, while at the same time improving indoor climate.
Replacing fossil fuel boilers with high-efficiency heat pumps can reduce energy use by up to 75%. The technologies that can immediately reduce the energy demand for cooling buildings can also be implemented right away.
Simple measures to improve the energy efficiency of our industries can reduce the energy consumption of electric motors – already exist and are cost-effective.
In short, energy efficiency, that is learning to do more with less, is crucial for meeting our net zero targets. Energy efficiency technologies can be implemented and will have an impact right away. This is why, according to the IEA, a step-up in action on energy efficiency could reduce CO2 emissions by an additional 5 Gt per year by 2030, compared with current policies.
Electrify
Electrification means fully or partially switching from technologies that directly use fossil fuels to those that use electricity. As most people know, electrification is one of the most important levers driving the green transition. One obvious reason is that electrification makes it possible to replace fossil fuel energy with renewable electricity generation. Electricity is also one of the only carbon-free carriers of energy: after electricity is generated there are no emissions related to its use.
Adding to that there is one crucial, but overlooked, reason that electrification is key in all decarbonizing strategies: electrification saves energy consumption due to the higher efficiency of electric technologies.
However, the relationship between electrification and energy efficiency is more profound than the simple fact that electric technologies are more energy efficient than fossil technologies. Energy efficiency is an enabler of electrification.
Grid stability is another reason why energy efficiency is an enabler of electrification. Energy efficiency can level out the peaks of energy supply and demand. It thereby provides the stability to the grid necessary for full electrification of society.
In addition, by shaving peaks energy efficiency also shaves carbon emissions. Fossil fuels are often used as the residual fuel to supplement renewables when the amount of clean energy is insufficient. By reducing the amount of energy needed in peak periods, energy efficiency directly reduces the amount of fossil fuels needed in the energy mix.
One of the key challenges in decarbonizing our grid and increasing electrification is ensuring that supply matches demand. Energy efficiency can make the use of energy more flexible and reduce peaks.
Integrate
Energy is being wasted everywhere. Figure 1 illustrates the energy consumption in the US. Of all the energy consumed, only one-third is actually used to generate services, and as much as two-thirds of the energy is rejected, meaning pure waste.
Sector integration is the final main lever in decarbonizing our energy system because it makes it possible to reuse the rejected and otherwise wasted energy. Sector integration is about maximizing synergies between sectors, connecting energy consumers with energy producers, and converting and storing energy.
Sector integration enables the full potential of energy efficiency and electrification, and the three solutions together are fundamental to reaching net zero.
Policy recommendations
- Save energy and electrify everything across transport, industries and buildings.
- Look at the energy system holistically and push for more systematic use of wasted energy.
Begin to consider waste as an energy resource. - Remove both financial and legislative barriers.
The current design of the energy market is, in many places, a barrier to sector integration technologies, either by hindering the participation of sector integration technologies in specific markets or by not internalizing all positive and negative externalities of respectively low and carbon-intensive technologies. Aspects such as cost-reflective energy price signals, adequate carbon pricing, market accessibility and liquidity, and appropriate network tariff structures should be considered.