# Industrial heat pumps and vapour recompression: Economics and contracts

Cheap to run, costly to buy: the price ratio decides

Source page: https://www.materialinsights.org/energy/e_industrial_hp/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.

Heat pumps win on running cost where electricity is cheap relative to gas or coal, but their high capital cost is the main barrier. MVR is well established in evaporation; energy-as-a-service is emerging to carry the capital.

#### Levelised cost of heat or avoided cost
Mixed

Published capital costs vary widely: literature cited in a 2024 journal paper gives EUR 300 to 1,000 per kW of process heat (average about 400), and a survey of 25 manufacturers cited in the same paper gives EUR 200 to 2,000 depending on technology. A Berkeley Lab study of US paper, textile and car plants found 15 GW of potential for about USD 7 billion, roughly USD 470 per kW (calculated), adding USD 5 to 18 per GJ to heat costs at current energy prices; a Dutch industry consortium targets below EUR 200 per kW through standardisation. The IEA finds that heat pump capital cost alone is almost as high as the full levelised cost of heat from a gas boiler in the US, and from a coal boiler in India. Electric boilers cost about 4 times as much as gas boilers to run in the US and about twice in China, while heat pumps need roughly a third of the electricity of electric boilers. For evaporators, a 2024 dairy study found a three-effect TVR evaporator cheapest for 50% milk concentrate at electricity of USD 0.21 per kWh and steam of USD 20 per tonne; for 35% concentrate the authors say single-effect MVR would beat a steam-driven alternative if power prices fell by about 11% (a figure the checker could not reproduce from the paper's tables).^[15](https://cetjournal.it/cet/24/114/011.pdf)^[16](https://eta-publications.lbl.gov/publications/techno-economic-evaluation-industrial)^[17](https://projecten.topsectorenergie.nl/projecten/cost-reduction-industrial-heat-pumps-27522)^[6](https://www.iea.org/commentaries/can-low-temperature-heat-in-factories-be-electrified-competitively)^[8](https://mdpi-res.com/d_attachment/processes/processes-12-00209/article_deploy/processes-12-00209.pdf)
 Running cost, electric vs gas boiler about 4 times (US), 2 times (China), 2024^[6](https://www.iea.org/commentaries/can-low-temperature-heat-in-factories-be-electrified-competitively) Capital cost range EUR 200 to 2,000 per kW; often about EUR 400^[15](https://cetjournal.it/cet/24/114/011.pdf) US potential, capital and cost 15 GW for about USD 7 billion (about USD 470/kW, calculated); USD 5 to 18 per GJ added^[16](https://eta-publications.lbl.gov/publications/techno-economic-evaluation-industrial) MVR break-even, 35% concentrate (authors' figure) power price about 11% lower than USD 0.21/kWh^[8](https://mdpi-res.com/d_attachment/processes/processes-12-00209/article_deploy/processes-12-00209.pdf)

#### Host factory credit risk
Mixed

A heat pump is matched to one source and one sink, but packaged units are more portable than furnace hardware. Stranding risk comes from host closure or a change in the process. The bigger exposure is energy prices: a rise in power prices relative to gas or coal can erase savings, so contracts should index heat prices to fuel or include price collars.^[6](https://www.iea.org/commentaries/can-low-temperature-heat-in-factories-be-electrified-competitively)
 Electric vs gas running cost ratio exposure about 4 times for electric boilers in the US^[6](https://www.iea.org/commentaries/can-low-temperature-heat-in-factories-be-electrified-competitively)

#### Heat-as-a-service and ESCO models
Favourable

Skyven Technologies sells its Arcturus steam-generating heat pump under an energy-as-a-service model, so customers pay no upfront capital. In January 2025 Skyven signed a USD 70 million co-development and project finance agreement with Paris-based Kyotherm, combining debt and equity while Skyven keeps majority ownership and operating responsibility. Skyven had been selected in 2024 for up to USD 145 million from the US DOE Office of Clean Energy Demonstrations, but DOE cancelled the award in its May 2025 round of demonstration terminations (reported as a USD 15.3 million grant for a first site at an ethanol plant in Medina, New York). An earlier Skyven deal with California Dairies used a 10-year shared-savings contract with an option for the customer to buy the equipment at the end.^[10](https://dallasinnovates.com/north-texas-skyven-inks-70m-agreement-with-frances-kyotherm-to-advance-industrial-decarbonization/)^[9](https://betterbuildingssolutioncenter.energy.gov/implementation-models/skyven-technologies-decarbonizing-industrial-process-heat-public-private)^[22](https://advancedbiofuelsusa.info/update-department-of-energy-terminates-15-3m-grant-for-medina-decarbonization-project)
 Skyven and Kyotherm facility USD 70 million (January 2025)^[10](https://dallasinnovates.com/north-texas-skyven-inks-70m-agreement-with-frances-kyotherm-to-advance-industrial-decarbonization/) DOE demonstration award to Skyven up to USD 145 million selected (2024); cancelled May 2025^[10](https://dallasinnovates.com/north-texas-skyven-inks-70m-agreement-with-frances-kyotherm-to-advance-industrial-decarbonization/) California Dairies contract 10 years, shared savings^[10](https://dallasinnovates.com/north-texas-skyven-inks-70m-agreement-with-frances-kyotherm-to-advance-industrial-decarbonization/)^[22](https://advancedbiofuelsusa.info/update-department-of-energy-terminates-15-3m-grant-for-medina-decarbonization-project)

#### Sources

1. [Can low-temperature heat in factories be electrified competitively? (commentary, undated; 2024 cost data)](https://www.iea.org/commentaries/can-low-temperature-heat-in-factories-be-electrified-competitively) IEA
2. [Model Based Optimization of Energy Consumption in Milk Evaporators (Tsochatzidi, Arvanitidis, Georgiadis), Processes 12, 209](https://mdpi-res.com/d_attachment/processes/processes-12-00209/article_deploy/processes-12-00209.pdf) MDPI, 2024
3. [Skyven Technologies: Decarbonizing Industrial Process Heat through Public-Private Partnerships (implementation model)](https://betterbuildingssolutioncenter.energy.gov/implementation-models/skyven-technologies-decarbonizing-industrial-process-heat-public-private) US DOE Better Buildings Solution Center, 2024
4. [North Texas' Skyven Inks $70M Agreement with France's Kyotherm to Advance Industrial Decarbonization (trade press report of company announcement)](https://dallasinnovates.com/north-texas-skyven-inks-70m-agreement-with-frances-kyotherm-to-advance-industrial-decarbonization/) Dallas Innovates, 2025
5. [Performance Analysis of a Heat Pump Using Different Refrigerants to Supply Heat to Industrial Processes (Diaz-de-Leon et al.), Chemical Engineering Transactions 114, 61-66 (cites Meyers et al. 2018 and IEA HPT Annex 48 cost ranges)](https://cetjournal.it/cet/24/114/011.pdf) AIDIC, 2024
6. [Techno-economic evaluation of industrial heat pump applications in US pulp and paper, textile, and automotive industries (Zuberi, Hasanbeigi, Morrow), Energy Efficiency 16(3)](https://eta-publications.lbl.gov/publications/techno-economic-evaluation-industrial) Lawrence Berkeley National Laboratory, 2023
7. [Cost reduction Industrial Heat Pumps (ECN/TNO, ISPT and industry partners)](https://projecten.topsectorenergie.nl/projecten/cost-reduction-industrial-heat-pumps-27522) Topsector Energie (Netherlands), 2021
8. [Update: Department of Energy terminates $15.3M grant for Medina decarbonization project](https://advancedbiofuelsusa.info/update-department-of-energy-terminates-15-3m-grant-for-medina-decarbonization-project) Advanced BioFuels USA (news digest), 2025

## Other sections

- [Summary](https://www.materialinsights.org/energy/e_industrial_hp/index.md)
- [Overview](https://www.materialinsights.org/energy/e_industrial_hp/overview/index.md)
- [Correlation](https://www.materialinsights.org/energy/e_industrial_hp/correlation/index.md)
- [Science and thermodynamics](https://www.materialinsights.org/energy/e_industrial_hp/rc-sci/index.md)
- [Engineering and integration](https://www.materialinsights.org/energy/e_industrial_hp/rc-eng/index.md)
- [Impact and additionality](https://www.materialinsights.org/energy/e_industrial_hp/rc-impact/index.md)
- [What to track](https://www.materialinsights.org/energy/e_industrial_hp/tracking/index.md)
- [Relationships](https://www.materialinsights.org/energy/e_industrial_hp/links/index.md)