Growing energy costs are driving new financial considerations for homeowners and businesses alike, and heat pumps offer an increasingly cost-effective and reliable alternative to dirty, aging gas furnaces and industrial boilers.

Residential heat pumps are outpacing gas furnace sales[1] as the cost, efficiency, and health benefits of the technology become better understood. Industrial heat pumps can also cut costs and reduce pollution, particularly for low-temperature applications. But how do the economics of heat pumps really compare to the economics of gas equipment? And what about the other clean alternatives out there, like hydrogen?

How do heat pumps work?

Heat pumps can be used in a variety of applications to improve heating efficiency, from residential and commercial buildings to low-temperature manufacturing. For homes and businesses, heat pumps provide a safer, cleaner, and more efficient alternative to gas-fired furnaces. In the industrial context, heat pumps can replace gas-fired boilers by providing the steam and hot water needed for low-temperature processes, such as cooking food and drying paper. In total, these low-temperature applications make up about 35 percent of all U.S. industrial process heat demand.[2]

Central to heat pumps’ advantage over gas and other heating alternatives is their efficient use of energy. Heat pumps use electricity to transfer heat energy between a source and a sink, rather than producing heat from electricity or fuel. While even the best boilers and furnaces lose some energy when converting natural gas to heat, heat pumps instead can produce two to five times more heat energy than the electricity they take in— a feat that no other heating source can claim.

States with low electricity prices and high gas prices are an especially attractive market for heat pumps, as are states with high demand for low-temperature industrial heat, including Virginia, North Carolina, Georgia, and Washington.

Heat pump at Princeton University

How do the economics of heat pumps compare to gas?

Although U.S. gas prices remain consistently lower than electricity prices on average, heat pumps are often efficient enough to overcome that cost gap, and reliance on gas for heating comes with many caveats.

Gas equipment relies on volatile natural gas spot markets, leaving the price of fuel — and consumer costs  — vulnerable to geopolitical forces, especially as the U.S. builds more liquid natural gas export facilitates[3] that increasingly ties domestic production to the global market. Gas prices also see dramatic short-term spikes that can be driven by single events. For instance, Winter Storm Uri in 2021 briefly send the Henry Hub spot[4] to $24 per million British thermal units — more than six times the average price for that year.  

Residential Heat Pumps

While heat pumps may require higher upfront costs than gas furnaces, their exceptional efficiency can cut energy costs enough to reduce overall costs — making the technology singular in its ability to make electric heating cost-competitive with gas heating.

Nationwide, residential heat pumps have outsold gas furnaces[5] for four years running, and in September 2025 they passed another milestone when more heat pumps were sold than central air conditioning units. Families are also able to tap state and local government incentives to make heat pumps even more affordable to buy and install.

Industrial Heat Pumps

Heat pumps are poised to boost economic competitiveness and provide other critical economic benefits as well. According to an Energy Innovation simulation,[6] transitioning eligible industrial processes from fossil fuel combustion to heat pumps would increase gross domestic product in the U.S. by more than $42 billion by 2030 and an additional $8 billion by 2050, adding approximately 350,000 jobs across sectors like electricity, construction, finance, and manufacturing over that period.

Switching from gas to electric could also create facility-level cost savings that manufacturers can pass onto consumers.

In the manufacturing sector, heat pumps are best suited for light industries like food and beverage that rely mainly on low-temperature heat (under 200°C, where today’s industrial heat pumps top out). Even though U.S. industry pays around five times more for electricity[7] than for gas[8] on average, research from UC Santa Barbara[9] found that industrial heat pumps can still provide low-temperature heat at lower costs than gas-fired boilers at 12 percent of industrial facilities. And clean energy consulting group E3 found that[10] heat pumps are already cost-competitive enough to replace up to 22 trillion British thermal units of U.S. industrial gas demand, equivalent to the annual natural gas demand[11] of around 390,000 homes. That number would more than quadruple if gas prices were 60 percent higher than the price they modeled.

What about other clean alternatives to burning gas?

Other clean alternatives to gas-fired heating, while promising in other use cases, do not come close to offering the same cost savings as heat pumps.

Electric resistance — Electric resistance is more efficient[12] than gas-fired heat, but heat pumps remain two to five times more efficient than even a perfectly performing electric resistance furnace or boiler. Without the immense efficiency benefits of heat pumps, resistance equipment fails to overcome comparatively higher electricity costs in the same way that heat pumps do.

Renewable natural gas — RNG can be a drop-in replacement for fossil gas in gas-fired equipment with no facility modifications required, making it a seemingly attractive low-carbon alternative. But RNG supplies remain limited: Converting all waste and residue stocks in the U.S. to fuel would meet just 15 percent of national gas demand, while landfill gas[13] would only replace three percent of demand. The outlook for RNG prices remains murky, given limited fuel availability and uncertain demand forecasts.

Hydrogen — Gas utilities are more frequently including hydrogen blending in the distribution system for buildings in their clean energy proposals, but the fuel has no meaningful role[14] as a heating alternative for residential customers due to significant health and safety risks, high costs, and limited emissions reduction potential. While gas utilities use the prospect of hydrogen to justify continued investment in gas pipelines, current systems cannot safely handle a blend of more than 20 percent hydrogen by volume with natural gas. Hydrogen is also an inherently less efficient fuel than gas, only able to deliver roughly one-third of the energy of its natural gas counterpart per unit of volume. Together, these facts mean that even if hydrogen is produced without emitting any greenhouse gases, blending it into the natural gas distribution system would reduce climate pollution by less than seven percent.

Health and safety risks associated with hydrogen can also lead to higher costs for both the consumer and the provider. The highly flammable fuel carries a higher risk of explosions and damaging appliances, and it emits higher rates of the harmful respiratory pollutant nitrogen oxide.

Finally, the high costs of hydrogen simply don’t pencil out for consumers. A meta-review of 54 independent studies[15] found that none of the research supported the possibility of heating with hydrogen at scale, and the evidence overwhelmingly finds hydrogen heating is more costly and less efficient than alternatives — including heat pumps. Overall, the review found hydrogen heating would lead to 86 percent higher consumer costs.

The future of heat pumps

As energy costs rise, heat pumps stand out as a practical, cost-effective alternative to gas across homes, buildings and industry. Their superior efficiency and clear economic benefits make the technology an increasingly compelling choice.

Other low-carbon options may have a role to play in specific applications, but none currently match the scalability and cost advantages of heat pumps. In the absence of federal action, states with ambitious climate goals should look to supporting heat pumps as part of their efforts to enable cleaner air and cheaper energy bills.

[i] Alison F. Takemura, “Heat Pump Sales Dipped In 2025. They Still Beat Gas Furnaces.,” Canary Media., (2026): https://www.canarymedia.com/articles/heat-pumps/heating-cooling-sales-us-gas-furnaces

[ii] Jeffrey Rissman, “Decarbonizing Low-Temperature Industrial Heat In The U.S.,” Energy Innovation, (2022): https://energyinnovation.org/report/decarbonizing-low-temperature-industrial-heat-in-the-u-s/

[iii] U.S. Federal Energy Regulatory Commission, “U.S. LNG Export Terminals – Existing, Approved Not Yet Built, And Proposed,” U.S. Federal Energy Regulatory Commission, (2026): https://www.ferc.gov/media/us-lng-export-terminals-existing-approved-not-yet-built-and-proposed

[iv] U.S. Energy Information Administration, “U.S. Natural Gas Prices Spiked In February 2021, Then Generally Increased Through October,” U.S. Energy Information Administration, (2022): https://www.eia.gov/todayinenergy/detail.php?id=50778&

[v] Alison F. Takemura, “Heat Pump Sales Dipped In 2025. They Still Beat Gas Furnaces.,” Canary Media., (2026): https://www.canarymedia.com/articles/heat-pumps/heating-cooling-sales-us-gas-furnaces

[vi] Jeffrey Rissman, “Decarbonizing Low-Temperature Industrial Heat In The U.S.,” Energy Innovation, (2022): https://energyinnovation.org/report/decarbonizing-low-temperature-industrial-heat-in-the-u-s/

[vii] U.S. Energy Information Administration, “Electric Power Monthly: Table 5.6.A. Average Price of Electricity to Ultimate Customers by End-Use Sector,” U.S. Energy Information Administration, (2026): https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a

[viii]  U.S. Energy Information Administration, “Table 3. Selected National Average Gas Prices, 2020-2025,” U.S. Energy Information Administration, (2026): https://www.eia.gov/naturalgas/monthly/pdf/table_03.pdf

[ix] UC Santa Barbara The 2035 Initiative, “The Clean Heat Climate Opportunity: A Roadmap for Electrifying Low- and Medium-Temperature Industrial Heat,” UC Santa Barbara, (2026): https://www.2035initiative.com/clean-manufacturing

[x] Center for Applied Environmental Law and Policy, “Decarbonizing Industrial Heat: Measuring Economic Potential and Policy Mechanisms,” Center for Applied Environmental Law and Policy, (2024): https://www.ethree.com/wp-content/uploads/2024/10/CAELP-E3-Industrial-Electrification-Report.pdf

[xi] U.S. Energy Information Administration, “Residential Energy Consumption Survey: 2020 RECS Survey Data,” U.S. Energy Information Administration, (2024): https://www.ethree.com/wp-content/uploads/2024/10/CAELP-E3-Industrial-Electrification-Report.pdf

[xii] Center for Applied Environmental Law and Policy, “Decarbonizing Industrial Heat: Measuring Economic Potential and Policy Mechanisms,” Center for Applied Environmental Law and Policy, (2024): https://www.ethree.com/wp-content/uploads/2024/10/CAELP-E3-Industrial-Electrification-Report.pdf

[xiii] Center for Applied Environmental Law and Policy, “Decarbonizing Industrial Heat: Measuring Economic Potential and Policy Mechanisms,” Center for Applied Environmental Law and Policy, (2024): https://www.ethree.com/wp-content/uploads/2024/10/CAELP-E3-Industrial-Electrification-Report.pdf

[xiv] Dan Esposito, “Blending Hydrogen Into Gas Pipelines Would Enrich Utilities And Harm Californians,” Los Angeles Times, (2026): https://www.latimes.com/opinion/story/2026-02-16/hydrogen-california-natural-gas-pipelines

[xv] Jan Rosenow, “A Meta-Review of 54 Studies on Hydrogen Heating,” ScienceDirect, (2024): https://www.sciencedirect.com/science/article/pii/S2949790623000101?ref=pdf_download&fr=RR-2&rr=9e4ff8214d7b93a4

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Residential heat pumps are outpacing gas furnace sales as the cost, efficiency, and health benefits improve with the technology.
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An energy park is an affordable, quick solution to meet rising energy demand, particularly a clean energy park. This type of energy park pairs various clean energy generation sources like solar or wind, paired with energy storage solutions like batteries, all developed alongside electricity consumers like factories or data centers.

Bundling diverse energy generation with storage to in proximity to large, flexible loads ensures cheaper and more reliable access to clean electricity output, while avoiding grid connection or development barriers to help meet rising power demands.

Energy parks are connected to the grid at one location, or in the same general area, so they can power themselves during normal operations or provide power to the larger grid during high demand, creating a grid asset instead of a grid liability. 

Energy parks can also replace inflexible, large, single-source power plants with a “speed-to-power” solution that solves problems for grid operators by quickly meeting large new sources of demand without cutting into power supply for the host grid or requiring big new upgrades to the grid.

Are energy parks clean?

Energy parks can theoretically be powered by any generation source, including fossil fuels, but doing so exposes customers to higher price risks than clean energy. While natural gas prices have fallen in recent years due to America’s fracking boom, it is a commodity traded on global markets subject to price spikes whenever wars or extreme weather reduce supplies – for instance the Iran war raised gas costs almost overnight, which threatens America’s industrial sector. Coal has been proposed as another way to meet rising demand, but the cost of generating power at existing coal plants in the United States has risen faster than inflation due to a combination of aging power fleets and increased fossil fuel prices – making them incredibly uncompetitive.[1] Aging plants means coal is also increasingly unreliable.[2]

Renewable energy makes clean energy parks modular, meaning that they are well-suited to come online quickly. A combination of renewable generation sources, such as wind, solar, geothermal, and hydropower, plus battery storage or industrial technologies like thermal batteries, offers consumers variety and reliability. In addition to cutting air pollution, renewable energy is the quickest and cheapest way to expand generation capacity.[3] In 2025, batteries and renewables composed more than 90 percent[4] of all new generation capacity added to the U.S. grid.

Pairing clean energy and battery storage can reduce greenhouse gas emissions and increase productivity. Google, for example, recently announced plans to invest $20 billion[5] in clean energy parks over the next five years, and just announced it would power a new data center[6] with a massive battery storage facility.

Energy parks create good economic benefits

Cutting costs is a big part of what makes behind-the-meter or on-site energy generation so alluring. By co-locating large energy customers alongside clean energy generation, consumer can reduce infrastructure expenses, tap all available tax credits, and optimize their generation and storage capacity.

Sourcing electricity from renewable projects is the cheapest and quickest way to generate power. The cost of wind, solar, and battery storage has declined significantly in the past decade. The International Renewable Energy Agency recently reported “renewables maintained their price advantage over fossil fuels, with cost declines driven by technological innovation, competitive supply chains, and economies of scale.”[7] 

Building behind-the-meter power in proximity to large energy demand is important because generating power closer to the consumer helps avoid transmission and distribution costs, which vary depending on local utilities. It also can avoid grid interconnection queues, which can take years to resolve, and reduces the need to build new transmission lines. And it unlocks the potential for energy parks to store excess energy when production exceeds demand or sell it to the larger grid when demand is highest.

Modular design is one of the best aspects of energy parks

Modularity is a defining feature of a clean energy park – and one of its greatest strengths. New capacity to generate, store and use electricity can be added over time as new demand comes online, meaning the entire energy park project doesn’t need to occur all at once.

This gives stakeholders the opportunity to thoughtfully develop their facilities and raise the necessary capital, removing some risks associated with bringing new projects online. It also acts as a built-in safety net that can shield developers from changing market factors.

Modular design is flexible, meaning each energy park can be customized to meet the unique needs of the industries and consumers it serves. As projects evolve, they can grow with technology innovations or shifting economic realities, for example adding thermal batteries[8] if the energy park has high-heat manufacturing needs.

Transitioning Colorado’s Comanche 3 coal plant into a clean energy park

Pueblo, Colorado’s Comanche 3 coal plant, is an ideal example of how a clean energy park can cut costs and create new economic opportunities. Comanche 3 is set to retire in 2031, and a just transition process involving state officials, the utility Xcel Energy, and local community leaders is considering replacing it with a clean energy park.[9] Doing so could diversify the region’s economy while increasing grid resiliency and cutting toxic air pollution.

Flexible and modular design allows for bespoke development. Local Pueblo industries such as steel and cement manufacturing require high heat. Transitioning the coal plant into an energy park creates opportunities to deploy industrial thermal batteries which store electricity as heat which can be used directly in industrial processes that requires hot air or steam. 

Modeling with a sample portfolio of resources shows an energy park powered by wind and solar generation paired with onsite batteries could begin construction years before other potential generation sources, would generate property tax payments that peak at $40 million annually, and create hundreds of permanent jobs in engineering, business operations, and industrial plant operation. 

A cleaner, cheaper, more reliable future with energy parks

Demand for electricity, as well as the cost of generating it, has risen drastically as data centers come online, and the grid begins to age.

Clean energy parks make industrial facilities considerate neighbors, since they serve the primary function of plugging an energy hole without overburdening the communities that house these facilities. Meanwhile, adding energy sources keep the air and water clean for nearby communities, and electrifying industry with clean energy increases efficiency and cut costs.

They also accelerate project development and economy growth, without saddling the community with higher utility bills. Consumers, utilities and companies are always looking for the newest, cheapest and more secure technological solutions–as far as reliable, secure and cheap energy goes, energy parks are a safe future-facing solution. 

[1] Michelle Solomon, “Coal Power 28 Percent More Expensive In 2024 Than In 2021,” Energy Innovation, (2025): https://energyinnovation.org/report/coal-power-28-percent-more-expensive-in-2024-than-in-2021/

[2] Matthew Zeitlin, “Trump Wants To Prop Up Coal Plants. They Keep Breaking Down.,” Heatmap, (2025): https://heatmap.news/energy/coal-reliability

[3] Energy Innovation, “What Is Clean Energy,” Energy Innovation, (2024): https://energyinnovation.org/expert-voice/what-is-clean-energy/

[4] Energy Innovation, “What Is Clean Energy,” Energy Innovation, (2024): https://energyinnovation.org/expert-voice/what-is-clean-energy/

[5] Maeve Allsup, “Google’s Intersect Deal Is Much More Than A Green Power Play,” Latitude Media, (2026): https://www.latitudemedia.com/news/googles-intersect-deal-is-much-more-than-a-green-power-play/

[6] Lisa Martine Jenkins, “With Form Energy Deal, Google’s Clean Transition Tariff Is Growing Up,” Latitude Media, (2026):https://www.latitudemedia.com/news/with-form-energy-deal-googles-clean-transition-tariff-is-growing-up/

[7] International Renewable Energy Agency, “Renewable Power Generation Costs In 2024,” International Renewable Energy Agency, (2024): https://www.irena.org/Publications/2025/Jun/Renewable-Power-Generation-Costs-in-2024

[8] Jeffrey Rissman and Eric Gimon, “Thermal Batteries: Decarbonizing U.S. Industry While Supporting A High-Renewables Grid,”  Energy Innovation, (2023): https://energyinnovation.org/report/thermal-batteries-decarbonizing-u-s-industry-while-supporting-a-high-renewables-grid/

[9] Michelle Solomon and Eric Gimon, “Flexible, Clean Industry And Sustainable Energy Power Strong Economies: A Case Study In Pueblo, Colorado,” Energy Innovation, (2025): https://energyinnovation.org/report/flexible-clean-industry-and-sustainable-energy-power-strong-economies-a-case-study-in-pueblo-colorado/

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Energy parks can pair with clean energy and battery storage to reduce greenhouse gas emissions and increase productivity.
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