# Building heat recovery: Economics and contracts Fast paybacks in busy hotels, slow ones in quiet homes Source page: https://www.materialinsights.org/energy/e_building_recovery/rc-econ/ What this tab covers Economics and commercial structures: levelised cost of the recovered energy against the fuel it avoids, host-site risk, and service models such as heat-as-a-service. Paybacks are short where hot water or cooling loads are large and steady, such as hotels and hospitals, and long in small homes with low use. #### Levelised cost of heat or avoided cost Favourable A heat-pump water heater saves a family of four about USD 550 a year against an electric tank, with lifetime savings above USD 5,600; running costs fall from USD 400 to 600 or more a year to USD 104 to 160. US DOE puts drain-water units at USD 300 to 500 with paybacks of 2.5 to 7 years depending on use and inlet water temperature, and an Ontario field test found paybacks as short as 3 years on showers. Kitchen demand control paid back in about 5 to 7 years for a 5,000 cfm hood, saving about USD 11,000 a year at one US Army kitchen.^[1](https://www.energy.gov/node/1266061)^[2](https://sustainabletechnologies.ca/?p=5720)^[4](https://energystar.gov/products/ask-the-experts/heat-pump-water-heater-right-your-home)^[7](https://www.wbdg.org/FFC/ARMYCOE/COEECB/ARCHIVES/ecb_2015_3.pdf) HPWH annual saving about USD 550 (family of four)^[4](https://energystar.gov/products/ask-the-experts/heat-pump-water-heater-right-your-home) Drain-water unit cost USD 300-500 (DOE)^[1](https://www.energy.gov/node/1266061) Drain-water payback 2.5-7 years (DOE); as little as 3 years (field test)^[1](https://www.energy.gov/node/1266061)^[2](https://sustainabletechnologies.ca/?p=5720) Kitchen demand control payback about 5-7 years^[7](https://www.wbdg.org/FFC/ARMYCOE/COEECB/ARCHIVES/ecb_2015_3.pdf) #### Host factory credit risk Favourable The host is a building owner or hotel operator, and assets are small and often bundled into the building, so stranding risk is low. The bigger risk is the split incentive: landlords pay for equipment while tenants save on bills.^[4](https://energystar.gov/products/ask-the-experts/heat-pump-water-heater-right-your-home) #### Heat-as-a-service and ESCO models Mixed Most of these devices are bought outright, so subsidies matter. The US 30% federal tax credit for heat-pump water heaters (up to USD 2,000 a year, from 2023) was repealed for installations after 31 December 2025, lengthening US paybacks. Commercial chiller heat recovery is often sold by equipment firms on a performance basis; Alfa Laval reports about a 2-year payback for heat recovery at a hotel in Aurangabad, Maharashtra (company claim).^[4](https://energystar.gov/products/ask-the-experts/heat-pump-water-heater-right-your-home)^[9](https://www.alfalaval.in/media/stories/revolutionizing-energy-efficiency-for-a-leading-hotel-chain-in-india/)^[11](https://nefi.com/news-publications/recent-news/ira-equipment-tax-credits-expire-december-31-2025) US tax credit for HPWH 30%, up to USD 2,000 a year (2023-2025; repealed from 2026)^[4](https://energystar.gov/products/ask-the-experts/heat-pump-water-heater-right-your-home)^[11](https://nefi.com/news-publications/recent-news/ira-equipment-tax-credits-expire-december-31-2025) Aurangabad hotel heat recovery payback about 2 years (supplier claim)^[9](https://www.alfalaval.in/media/stories/revolutionizing-energy-efficiency-for-a-leading-hotel-chain-in-india/) #### Sources 1. [Drain-Water Heat Recovery (Energy Saver)](https://www.energy.gov/node/1266061) US Department of Energy, 2024 2. [Evaluation of Residential Drain Water Heat Recovery Unit (study begun 2010)](https://sustainabletechnologies.ca/?p=5720) Sustainable Technologies Evaluation Program (Toronto and Region Conservation Authority), 2017 3. [Is a Heat Pump Water Heater Right for Your Home?](https://energystar.gov/products/ask-the-experts/heat-pump-water-heater-right-your-home) ENERGY STAR (US EPA), 2023 4. [Engineering and Construction Bulletin 2015-3: Demand control kitchen ventilation](https://www.wbdg.org/FFC/ARMYCOE/COEECB/ARCHIVES/ecb_2015_3.pdf) US Army Corps of Engineers (via WBDG), 2015 5. [Revolutionizing Energy Efficiency for a Leading Hotel Chain in India](https://www.alfalaval.in/media/stories/revolutionizing-energy-efficiency-for-a-leading-hotel-chain-in-india/) Alfa Laval India (company case study), 2025 6. [IRA equipment tax credits expire December 31, 2025](https://nefi.com/news-publications/recent-news/ira-equipment-tax-credits-expire-december-31-2025) New England Fuel Institute (trade association), 2025 ## Other sections - [Summary](https://www.materialinsights.org/energy/e_building_recovery/index.md) - [Overview](https://www.materialinsights.org/energy/e_building_recovery/overview/index.md) - [Correlation](https://www.materialinsights.org/energy/e_building_recovery/correlation/index.md) - [Science and thermodynamics](https://www.materialinsights.org/energy/e_building_recovery/rc-sci/index.md) - [Engineering and integration](https://www.materialinsights.org/energy/e_building_recovery/rc-eng/index.md) - [Impact and additionality](https://www.materialinsights.org/energy/e_building_recovery/rc-impact/index.md) - [What to track](https://www.materialinsights.org/energy/e_building_recovery/tracking/index.md) - [Relationships](https://www.materialinsights.org/energy/e_building_recovery/links/index.md)