Transforming the role of data centres in the energy transition: Policy learnings from Danfoss’ technological solutions

Three people walk through a brightly lit corridor at a Danfoss data centre facility, lined with rows of equipment enclosures. Overhead cable trays, power infrastructure and networking systems run the length of the facility, highlighting the scale and complexity of the digital infrastructure.

As global demand for artificial intelligence and data processing surges, data centres are becoming highly energy- and resource-intensive hubs. This unprecedented growth presents significant challenges, placing immense strain on electricity grids, water resources and broader energy infrastructure. This pressure on local resources has spawned backlash against their deployment in most areas.[1] Therefore, operators are increasingly seeking solutions that can improve resource efficiency, reduce operating costs and make better use of existing infrastructure. 

Danfoss is positioning itself to meet this demand through bringing fast-scaling and market-ready technologies to support the sustainable expansion of data centre capacity.[2] The goal is to transform data centres from energy-intensive resource consumers into strategic and flexible assets that contribute to energy security, decarbonisation and economic competitiveness.[3]

The key challenge: policy and market barriers to low carbon solutions

Systemic barriers have so far stifled the adoption of low carbon solutions in the deployment of data centres. Data centre operators struggle with severe grid constraints, delays in grid access and volatile energy prices.[4] Furthermore, inconsistent policies and a lack of long-term regulatory frameworks has deterred focused investments in green technologies.[5]  At the same time, operators must reconcile growing compute demand and stringent reliability requirements with energy and water efficiency objectives, reinforcing the need for solutions that improve resource efficiency without compromising performance, while maintaining their ‘social licence to operate’.[6]

The solution: technology and cross-sector innovation

To embed resource efficiency into operational reliability, Danfoss deploys a portfolio of market-ready technologies with a compelling business case, including an award-winning Turbocor oil-free compressors, low-water cooling technologies, variable speed drives and advanced heat reuse modules.[7] This helps transform the data centres from passive electricity and resource consumers into active contributors to local energy systems and its resource landscape. This can also help strengthen social and community acceptance of these projects.[8]

An example of this efficiency being leveraged is at the company’s own 250,000m² headquarters in Nordborg, Denmark. The data centres there capture and reuse excess heat, contributing to the campus’ overall heating needs and playing a key role in achieving carbon neutrality and higher efficiency for the site’s energy system.[9]

Another demonstration of this is Bitten, a national AI supercomputer inaugurated in Sønderborg, Denmark, built in partnership with Hewlett Packard Enterprise (HPE) and the University of Southern Denmark (SDU). Using advanced liquid cooling and full heat recovery, the supercomputer delivers high-performance AI computing while seamlessly integrating its waste heat into the local district heating network, actively supporting the municipality’s carbon-neutral ambitions.[10] This project is a prime example of how public-private partnerships can accelerate the adoption of proven sustainable and energy efficient solutions. 

Collaboration across the value chain

Systemic challenges require system-level solutions. To generate demand and derisk innovation investments, Danfoss co-founded the Net Zero Innovation Hub for Data Centers in Fredericia, Denmark, alongside other tech corporations like HPE, Google, Microsoft and Schneider Electric.[11] This pan-European initiative brings together operators, utility providers, regulators and researchers to remove technical, commercial and financial risks. By collaboratively validating pilot projects at scale, the Hub accelerates the commercial lift-off of net-zero solutions, ensuring they are ready for the competitive market.

The business case: energy efficiency and lower system costs

For operators, Danfoss’ solutions deliver substantial cost savings by cutting energy waste and water usage.[12] Furthermore, where suitable heat off-takers and infrastructure exist, recovered waste heat can create new economic opportunities, while improving the overall efficiency of the energy system. Danfoss has successfully strengthened market demand for clean solutions, proving that leading in sustainability directly enhances market competitiveness.

Policy recommendations 

Use the IAA to stimulate clean lead markets by incentivising procurement and deployment of digital solutions that improve energy efficiency, demand flexibility, and system-wide decarbonisation. This will enable the creation of clean lead markets, to effectively grow decarbonised energy systems.

The following are the key policy learnings across CLG Europe’s key priority areas based on Danfoss’ case:

  • Modernising data centre performance standards: Policymakers must shift from single-metric performance standards (like Power Usage Effectiveness) to multi-indicator frameworks that capture systemic benefits, such as the Energy Reuse Factor (ERF). This provides a clear, long-term direction for sustainable investments.
  • Derisking investments in high-efficiency technologies: Reduce financial barriers and derisk commercialisation by offering targeted incentives for projects that use advanced cooling and waste-heat recovery technologies, offsetting higher upfront capital costs.
  • Expanding district heating and grid infrastructure: Significant public and private investments must be directed towards grid modernisation and the expansion of district heating infrastructure, creating the necessary physical destination for captured waste heat. This includes streamlining the permitting processes for such projects. 
  • Integrating data centers into the wider energy system: policy frameworks should recognise and reward resource efficient data centers that deliver wider energy-system benefits.

Key policy takeaway

Danfoss demonstrates that many of the technologies needed to make data centres more energy-efficient, resource-efficient and system-positive are already commercially available. The challenge is now creating the regulatory frameworks, infrastructure investments and market incentives that allow data centres to contribute to wider energy systems rather than simply drawing from them.


 

[1] Scott Jerbi, “AI backlash is brewing – communities must have a real say over how it is developed and deployed,” IHRB, April 27, 2026, https://www.ihrb.org/latest/ai-backlash-is-brewing-communities-must-have-a-real-say-over-how-it-is-developed-and-deployed; Zia Weise, “Power-hungry data centers are expanding in Europe. So is the resistance.” POLITICO, August 31, 2026, https://www.politico.eu/article/power-hungry-data-centers-are-expanding-in-europe-so-is-the-resistance/.

[2] “Data Center Solutions,” Danfoss, accessed September 29, 2026, https://www.danfoss.com/en/industries/buildings-commercial/shared/data-centers/#tab-overview.

[3] Danfoss, Data centers: A new lever of flexibility, integration, and security, Danfoss Impact no. 8 (Danfoss, 2026), https://assets.danfoss.com/documents/latest/582178/BE555340332854en-000201.pdf.

[4] Vincent Jacamon et al., “Overcoming energy constraints is key to delivering on Europe’s data centre goals,” IEA, November 16, 2025, https://www.iea.org/commentaries/overcoming-energy-constraints-is-key-to-delivering-on-europe-s-data-centre-goals; Johannes Trüby et al., “Data Centres: Turning Grid Constraints into a Lever for Europe’s Energy Transition,” Deloitte France, April 9, 2026,

https://www.deloitte.com/fr/fr/services/consulting/perspectives/data-centres.html.

[5] Henryk Wojtaszek, “Renewable Energy in Policy Frameworks: A Comparative Analysis of EU and Global Strategies for Sustainable Development,” Sustainability 17, no. 23 (2025): 10567, https://doi.org/10.3390/su172310567; Kai Ebert et al., “AI, climate, and regulation: From data centers to the AI Act,” Computer Law & Security Review 61 (2026): 106326, https://doi.org/10.1016/j.clsr.2026.106326; Olga Chiappinelli et al., “Too good to be true? Time-inconsistent renewable energy policies,” Energy Economics 112 (2022):106102, https://doi.org/10.1016/j.eneco.2022.106102.

[6] Coco Zhang et al., “How data centres can be better integrated into the energy ecosystem,” ING THINK, November 25, 2025, https://think.ing.com/articles/how-data-centres-can-be-better-integrated-into-the-energy-ecosystem/; “Data centers: the new imperative of social license,” Kearney, May 27, 2026,

https://www.kearney.com/industry/communications/article/data-centers-the-new-imperative-of-social-license.

[7] “Danfoss worked with the Smardt Chiller Group to provide leading solutions for a NEXTDC Cooling Plant in Melbourne, Australia,” Danfoss, May 28, 2026,

https://www.danfoss.com/en/service-and-support/case-stories/dcs/danfoss-worked-with-the-smardt-chiller-group-to-provide-leading-solutions-for-a-nextdc-cooling-plant-in-melbourne-australia/; “How HPE and Danfoss collaborated to build Denmark’s most advanced energy-efficient AI supercomputer,” Danfoss, May 13, 2026, https://www.danfoss.com/en/service-and-support/case-stories/cf/how-hpe-and-danfoss-collaborated-to-build-denmarks-most-advanced-energy-efficient-ai-supercomputer/.

[8] Bryan Coyne et al., “The benefits of low-carbon energy efficiency technology adoption for data centres,”

Energy Conversion and Management: X 20 (2023): 100447, https://doi.org/10.1016/j.ecmx.2023.100447.

[9] “Danfoss headquarters will reach carbon neutrality in 2022”, Danfoss, accessed September 29, 2026, Our Headquarter will be carbon-neutral in 2022 - learn how | Danfoss

[10] “How HPE and Danfoss collaborated to build Denmark’s most advanced energy-efficient AI supercomputer,” Danfoss, May 13, 2026, https://www.danfoss.com/en/service-and-support/case-stories/cf/how-hpe-and-danfoss-collaborated-to-build-denmarks-most-advanced-energy-efficient-ai-supercomputer/.

[11] “About The Hub,” Net Zero, accessed September 29, 2026, https://www.netzerodatacenters.com/about; “Danfoss, Google, Microsoft, and Schneider Electric Join Forces in New Innovation Hub to Accelerate Green Transition of Data Centers,” Datacenter Forum, updated November 12, 2024, https://www.datacenter-forum.com/net-zero-innovation-hub-for-data-centers/danfoss-google-microsoft-and-schneider-electric-join-forces-in-new-innovation-hub-to-accelerate-green-transition-of-data-centers.

[12] “Data center solutions,” Danfoss, accessed September 29, 2026, https://www.danfoss.com/en/industries/buildings-commercial/shared/data-centers/.