Committed to the transition

The energy demand is increasing, due to population growth, improved living standards in the emerging countries and digitalization. At the same time, today’s energy supply needs to transition into a clean energy supply. Replacing all fossil energy over a few decades and at the same time increasing the energy capacity is a massive challenge, maybe the biggest in the history of mankind. In 2024, the energy transition faced set-backs due to geopolitical tensions, electoral uncertainties, and economic issues such as inflation, rising interest rates and lack of funding mechanisms.

Nevertheless, the Energy Division is fully engaged in leading the energy transition forward where the focus areas are energy efficiency as the first fuel, electrify everything that can be electrified and develop clean molecules at scale, such as hydrogen, for the hard to abate sector. These initiatives will be strong business drivers for many years to come, even in more challenging years as in 2024 where the division still was able to keep order on a stable level. Service, Data centres and the Clean fuel-power-chemicals segments showed strong growth and to an extend where it more than compensated for the slow down in the HVAC segment.

Energy efficiency is the solution of today

Sales of products and services related to energy efficiency account for more than 80 percent of the division’s business and is evident in all industries. Annually, it contributes to 100 GW energy savings and 50 million tonnes CO₂ in emission savings. The need for more advanced and energy efficient solutions drive demand for new equipment as well as for services and expertise.

The importance of energy efficiency in reducing emissions is driving increased demand for services and ensuring the smooth operation for customers during the lifetime of their equipment. Service offers a significant growth potential with continuous expansion, including the development of new service models and partnerships with customers to support them in reducing emissions. Product sales are increasingly linked to long-term maintenance agreements that include energy audits to identify energy savings in the customer’s equipment to ensure optimal usage.

Europe has focused on electrifying heating by replacing boilers with heat pumps, with heat exchangers crucial for efficiency. The market surged in 2022 due to rising gas prices and supportive subsidies, leading to increased installations. However, the sudden removal of subsidies in mid 2023 caused a market collapse, leaving high inventory levels and low demand. Despite these challenges, the business unit BFB has handled the situation well and delivered a solid profitability level during the year. Alfa Laval is well-positioned to support future growth in this sector with its global presence, capacity and diverse product offerings.

The digitalization is proceeding at full speed. More people are coming online, streaming services are booming, and AI has made a big entrance in 2024. This has led to a significant increase in the demand for data centres, but also a need for servers with much higher capacity especially for AI applications, meaning more energy intense servers as well. These types of data centres cannot use air cooling as traditional data centres do and need to be designed with liquid cooling. This new cooling design broadens Alfa Laval’s scope of supply and significantly increases the market potential into this growing industry, giving Alfa Laval an even more important role in making the data centres as energy efficient as possible.

Accelerating the energy transition

The shift to alternative fuels and new energy solutions is fundamental to reduce emissions. The challenge today is that the alternatives to fossil fuels are significantly more expensive, and costs must come down. The cost curve must be bended for these clean energy solutions to reach an acceptable premium level, and this will need the deployment of flagships projects, technology development and commitments across entire value chains. Heat transfer optimization and separation are key enablers to optimize the system, and the Energy Division was part of many flagship projects during the year. These projects were in areas like hydrogen production, e-fuels, carbon capture, energy storage, industrial heat pumps, green chemicals and recycling. There will be important learnings in each project which will enable the bending of the cost curve and accelerate the path to scaling of each solution. The high degree of Alfa Laval technologies in all these new cleantech applications has also led to a record year in the clean fuels-power-chemicals segment with 42% growth in order intake.

New technologies will also be a key success factor to reach the acceptable premium level and the focus on innovation is high in the Energy Division. This resulted in a large amount of product launches during the year and the heat exchanger product portfolio now represents the most comprehensive range of heat exchangers in the company’s history. Investments in innovation will increase significantly going forward and can be categorized into two primary focus areas:

– The first one covers incremental as well as more radical innovations of the existing portfolio and will also include optimization in the supply chain and manufacturing landscape.

– The second focus area addresses certain technological and scalability gaps in the transforming energy landscape. The hydrogen market is one example where there are high innovation needs. New products for hydrogen applications are under development in the new business unit Electrolyzers & fuel cells in collaboration with industry leaders. Drawing upon the company’s extensive expertise in heat transfer, metallurgy and industrialization, Alfa Laval is uniquely positioned to accelerate the hydrogen economy and has already technologies in piloting phase with customers.