Where Industrial Heat Pumps Actually Work - Part 1: Finances

Written By Clay Monahan

Industrial heat pumps are talked about a lot more than they are installed. Why? Because success depends on specific site conditions and many facilities just don’t make the cut – especially here in the US.

A heat pump (or any single decarbonization technology) isn’t a universal solution. So let’s dig into what makes a project actually work—and where these systems are a good fit.

What Exactly is an Industrial Heat Pump?

An industrial heat pump is a system that uses electricity to transfer heat from a low-temperature source to a higher-temperature process stream, providing efficient heating for industrial applications.

When someone says “heat pump,” it conjures an image of a sleek, skid-mounted unit. But that’s only part of the story.

The real purchase includes:

- Piping and controls
- Tie-ins to your system(s)
- Electrical upgrades
- Tanks and thermal storage
- Structural changes
- A whole lot of design and integration engineering

The result? Project economics get sensitive fast. The cost of the pump itself might only be a small fraction of the total project cost.

The Economics Depend on a Few Key Variables

 1. Electricity vs. Fuel Prices (Spark Spread)

This is a major driver. If electricity is cheap and natural gas is expensive—or penalized via carbon pricing—you’re in better shape. We define the ratio of Electricity Cost to Natural Gas Cost as the Spark Spread:

It is important to make sure the units of Electricity and Fuel are the same (in the US we normalize to dollars per kWh, but any currency is fine). Or you can just use our calculator here. It is also important to use an average over time. We recommend using your last 12-24 months.

Look across your sites: Where is electricity relatively cheap and gas relatively costly? Start there.

Don’t forget to use the loaded fuel price:
- Carbon taxes or cap-and-trade
- Offsets
- Value of lower carbon intensity (state incentives, product premiums, etc.)

This is why heat pumps are more common in Europe—higher electricity prices are offset by even higher fuel costs and carbon taxes.

2. Coefficient of Performance (COP)

The coefficient of performance (COP) is a measure of a system’s efficiency, defined as the ratio of useful heating or cooling provided to the energy input required. For a heat pump providing a heating benefit, COP is defined as:

High COP means more useful heat per kWh of electricity. While thermodynamic efficiency varies slightly between heat pumps,  the main driver for system COP is your site temperature conditions.

To get good performance, you want to minimize “lift”, which is the difference between the process temperature and the heat source temperature:


The lower the lift the less electrical energy is required to heat the process fluid.

Typical COP values for different heat pump types will be explored in our next post, as well as what factors to consider when selecting a heat pump.

3. Load Factor

This one’s simple: the more hours you run, the better the economics.

Heat pumps love 24/7 operation. Seasonal use or single-shift plants rarely hit acceptable payback. An ideal heat pump application has both a consistent waste heat source and heating demand.

4. Grants and Incentives

Even when the numbers look good on paper, you often need help to reduce capital costs.

Programs like NYSERDA’s Heat Recovery Project Development support early design work and can make a huge difference.

Do your homework: Identify your project and complete conceptual engineering before grants open up because application windows can be very short.

Incentives are available through state or utility programs, but they can be difficult to navigate. An internal expert or outside consultant can help secure the best incentive for your project. For large projects, the cost of a consultant can be well worth it.

So Where Do Heat Pumps Work?

When you can check at least a few of the boxes below, it’s time to bring in the engineers:

  • COP is greater than Spark Spread (check using our tool)

  • Steady and large demand for hot water or low-pressure steam

  • 6+ days/week of operation across multiple shifts

  • Processes involving evaporation, drying, distillation, or heat treatment

  • State or utility incentives available

  • Waste heat source is currently cooled with chillers or cooling towers

  • Added value from fuel reduction (e.g. LCFS credits, Scope 1 reductions)


Next up:

I’ll dive into the technical side—what integration really looks like, why it’s often the hardest part of the project, and what factors to consider when selecting a heat pump.

Want to talk specifics?

Clay Monahan