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The choice of deploying a function app with a Consumption plan and SendGrid binding is ideal for minimizing compute costs while effectively providing email notifications from IoT data in Azure Cosmos DB.

A function app operates on a serverless architecture, where you only pay for the processing time consumed when the function is executed. The Consumption plan scales automatically and charges based on the number of executions and runtime duration, which is efficient for scenarios with variable workloads, such as processing IoT data.

By integrating with SendGrid, the function app can send out email notifications seamlessly when certain triggers from the data in Azure Cosmos DB occur. This combination allows for a cost-effective solution because it leverages the serverless capabilities, ensuring that costs are kept low during periods of inactivity, while still providing the necessary functionality to handle incoming data and send notifications.

Other options involve logic apps or configurations that may incur higher costs due to always-on resources or payment models that do not scale as efficiently as the Consumption plan provides in this scenario. Function apps offer a more scalable and economical way to handle the dynamic nature of IoT data notifications.