As industrial electrification gains momentum, heat pumps are emerging as an effective solution to reduce fuel consumption and improve energy efficiency. The pharmaceutical sector, in particular, is increasingly adopting heat pumps to lower operating costs and enhance profitability.

Green financing platform TW.O Capital has upgraded the hot water system at a pharmaceutical manufacturing facility by replacing a natural gas-fired boiler with a heat pump system under a five-year performance-linked contract. The facility produces active pharmaceutical ingredients (APIs) and generic medicines.

The gas-based boiler system had a high steam consumption of 16 million kg/year at a cost of ₹3.9 (~$0.041)/kg. This resulted in annual hot water-related costs of ₹62.4 million (~$654,952). The new heat pump system has a capacity of 700 kW.

According to TW.O Capital, the transition from a natural gas-based boiler to a heat pump system reduced the facility’s operating costs by 68%. Under the performance-linked agreement, the company committed to delivering annual savings of ₹43 million (~$451,330) to the client.

The client sought to modernize its hot water infrastructure with a heat pump system to lower energy costs and improve efficiency. However, capital constraints had delayed the upgrade, creating an opportunity for a performance-linked financing model.

Under the arrangement, the client will make annual lease payments of ₹22 million (~$231,000), equivalent to about 50% of the savings generated by the project. The upgrade is expected to increase the client’s net operating income by approximately ₹40 million (~$419,841) annually. Over the equipment’s lifetime, TW.O Capital estimates total savings of ₹215 million (~$2.25 million).

TW.O Capital also provides preventive maintenance, AI-enabled optimization, and performance guarantees to ensure sustained efficiency over the system’s lifetime. These services are delivered through a collaborative framework involving the client, the heat pump OEM, and TW.O Capital, helping mitigate performance degradation and operational risks.

The OEM is responsible for supplying the heat pump system and providing installation and annual maintenance services, while TW.O Capital delivers performance and savings guarantees under the agreement. TW.O Capital also believes the project offers significant scalability, with the potential to expand capacity by up to three times in the future.

In an exclusive interview with Mercom India, Manya Ranjan, Co-Founder at TW.O, stated that heat pumps are gaining relevance as industries shift toward electrification and energy efficiency. Low-grade heating applications are increasingly shifting from conventional fuel-based systems to electric heat pumps, but adoption in India remains in its early stages and needs to scale.

However, the International Energy Agency reported that global heat pump sales fell approximately 2% in 2025. Sales in China were broadly stable, with reversible air conditioners accounting for roughly 50% of the market. Europe’s heat pump sales rose 11%, the first year witnessing growth since 2022. Heat pump sales in the U.S. fell approximately 13%. However, they outsold gas boilers for the fourth consecutive year.