By Michael Stowe, Stowe & Sons PLLC
Industrial process heating has always been a major energy consumer across manufacturing sectors, but the landscape around how utilities support efficiency and electrification has changed dramatically in recent years.
Rising energy costs, decarbonization commitments, and grid modernization pressures have pushed utilities to expand incentive programs aimed at helping industrial customers reduce load, improve performance, and adopt cleaner technologies. For IHEA members, understanding these programs — and how they apply specifically to process heating — can unlock meaningful financial value and accelerate long term energy management goals.
Why Utilities Incentivize Industrial Process Heating Improvements
Utilities have a clear motivation: Industrial loads are large, predictable, and often operate continuously. Any reduction in energy use or peak demand from process heating systems directly supports grid reliability and helps utilities meet regulatory efficiency targets. At the same time, utilities are under pressure to demonstrate progress toward greenhouse gas (GHG) emission reduction goals. Electrification of thermal processes, adoption of high efficiency equipment, alternative combustion fuels, maintenance best practices, and implementation of strategic energy management (SEM) practices all contribute to these objectives.
As a result, incentive programs today are more flexible, more generous, and more aligned with industrial realities than they were even five years ago.
Common Utility Incentive Pathways for Process Heating
1. Prescriptive Incentives for Standard Equipment Upgrades
Prescriptive incentives are the simplest and most familiar. Utilities offer fixed dollar amounts for qualifying equipment upgrades — typically tied to proven efficiency improvements. For process heating, prescriptive incentives may cover:
- High efficiency electric ovens, furnaces, or dryers.
- Advanced controls such as variable frequency drives (VFDs) on fans and blowers.
- Heat recovery system installation.
- Insulation improvements for ovens, kilns, and thermal distribution systems.
- Infrared heating technologies with documented energy savings.
These incentives are attractive because they require minimal engineering analysis. However, they often apply only to well defined technologies and may not capture the complexity of custom industrial heating systems.
2. Custom Incentives for Process Specific Projects
Custom incentive programs are where industrial process heating projects typically see the greatest benefit. Utilities evaluate the actual energy savings of a proposed project — either through engineering calculations or measurement and verification — and provide incentives based on dollars per kWh saved and/or dollars per kW reduced.
Examples of qualifying custom projects include:
- Conversion from gas fired heating to high efficiency electric systems.
- Optimization of multi zone ovens or furnaces.
- Upgrades to thermal oxidizers.
- Process redesigns that reduce heating time or temperature requirements.
- Integration of advanced controls, automation, or real time monitoring.
Custom programs reward innovation. If a project reduces energy use or demand, utilities are increasingly willing to support it — even if the technology is unique or emerging.
3. Electrification Incentives for Thermal Processes
Electrification has become a major strategic priority for utilities. As they shift toward cleaner generation portfolios, they are incentivizing customers to convert fossil fuel based heating systems to electric alternatives.
Electrification incentives may include:
- Upfront rebates for electric process heating equipment.
- Support for feasibility studies and engineering assessments.
- Incentives for load management controls to reduce demand peaks.
- Infrastructure support for service upgrades or distribution improvements.
For IHEA members exploring electric ovens, induction heating, infrared systems, or other electric technologies, these programs can significantly reduce capital costs.
4. Demand Reduction and Load Management Programs
Utilities increasingly value demand flexibility. Industrial heating systems — especially batch processes — can often shift load or reduce peak demand through scheduling, controls, or thermal storage.
Programs may offer incentives for:
- Peak shaving strategies.
- Automated demand response controls.
- Load shifting to off peak periods.
- Curtailment participation during grid events.
These incentives can be layered on top of efficiency or electrification programs, creating additional value.
Strategic Energy Management (SEM): A Growing Opportunity
Beyond equipment incentives, utilities are expanding Strategic Energy Management programs — structured, multi year initiatives that help industrial customers build internal energy management capabilities.
SEM programs typically include:
- Energy coaching support.
- Workshops and peer cohorts.
- Development of energy baselines and performance metrics.
- Identification of low cost operational improvements.
- Incentives for documented behavioral or operational savings.
For process heating operations, SEM can uncover opportunities such as improved startup/shutdown procedures, optimized temperature setpoints, better maintenance practices, and enhanced monitoring of thermal performance.
SEM is especially valuable because it creates a continuous improvement culture — not just one time project savings. Utilities now offer SEM incentives annually, allowing companies to earn rewards for sustained performance.
How Industrial Heating Companies Can Maximize Value
To fully leverage utility programs, IHEA members should consider these strategic steps:
- Engage early. Utilities prefer to review projects before equipment is purchased. Early engagement ensures eligibility and maximizes incentives.
- Document baseline performance. Accurate energy data strengthens custom incentive applications and SEM participation.
- Explore bundling opportunities. Efficiency, electrification, demand response, and SEM incentives can often be combined.
- Use utility funded engineering support. Utilities will pay for feasibility studies, energy assessments, or third party engineering analysis.
- Think long term. Incentives can support multi year modernization plans, not just isolated upgrades.
Conclusion
Utility incentive programs have become a powerful tool for industrial process heating companies seeking to improve efficiency, reduce emissions, and modernize operations. Whether through prescriptive rebates, custom incentives, electrification support, demand management programs, or SEM initiatives, utilities are increasingly willing to invest in the industrial sector’s success. For IHEA members and their customer base, understanding these programs — and integrating them into capital planning and energy management strategies — can accelerate progress and deliver meaningful financial and operational benefits.
