The performance of a dehumidifier dryer is influenced strongly by the operating temperature and humidity. This paper shows how heat conduction and air leakage losses can cause the temperature of a dehumidifier kiln to collapse in a batch drying process, resulting in increased drying time and energy use. By means of a dynamic simulation model it is shown that heat loss due to an uninsulated floor alone may be sufficient to prevent a kiln reaching its normal operating temperature. It is shown that the effect of heat losses is exacerbated when the dehumidifier capacity is modulated for humidity control. Auxiliary heating can prevent temperature collapse in a poorly insulated kiln, This maintains the drying speed but adds considerably to the energy used. To avoid these difficulties the insulation and air seals of a dehumidifier dryer should be appropriate to the power dissipated by the dehumidifier and fans. An example is presented in which sealing and insulating the kiln yields a reduction of 44 per cent in the drying time, a reduction of 32 per cent in energy use, and an increase of 168 per cent in net operating revenue.