Geothermal Heat Pumps
Credit Available  30% of total cost (materials & labor); no maximum
Unused credit may carry over to future tax years
Timeline Must be "placed in service" (ready and available for use)
Jan. 1, 2009 – Dec. 31, 2016
Geothermal Heat Pumps Closed Loop: EER >= 14.1 º COP >= 3.3
Open Loop: EER >= 16.2 º COP >= 3.6
Direct Expansion: EER >= 15  º COP >= 3.5
Same criteria as Energy Star. As of May 31, 2009, all Energy Star geothermal heat pumps qualify for the tax credit.
See summary chart: Stimulus at a Glance

Use of geothermal (from Greek roots geo for Earth and thermos for heat) for heating and cooling has been around for hundreds of years. But public interest in climate issues, the 2009 tax credits, refined equipment and technology, and an awareness on the part of the industry to help consumers understand the technology have helped geothermal heating and cooling to become a real option for many U.S. homeowners.

“It’s how other countries have heated for a long time; we’re just refining it to best suit our market’s needs,” says Brian McVay, general manager of Neil Kelly Designers/Remodelers’ home performance and home repair division, in Portland, Ore. “It’s a fantastic way to heat and cool a house, with huge energy savings.”

The ground just below the Earth’s surface is a fairly constant, comfortable temperature. There are three geothermal systems that can take advantage of that temperature: In a closed-loop system, the ground either heats or cools a water and antifreeze solution held in buried plastic pipes, which is then used to heat or cool the air in a structure; an open-loop system uses water in a pond or well as a heat source; and direct expansion uses a buried coil of copper tubing as the heat exchanger. Any of these systems may be eligible for tax credits as long as it meets Energy Star specifications ( see the chart).

Efficiency Pays

“A geothermal heat pump is twice as efficient as a regular heat pump and [costs] a little under twice as much to install,” says Matt Hoots, owner of The Hoots Group, a green builder, renovator, and performance contractor in Atlanta. “But you’re immediately saving money. It makes sense without the tax incentives and it makes even greater sense with them.” (Systems placed in service in 2008 are eligible for tax credits but are subject to earlier legislation and, therefore, tax credits for that equipment are capped at $2,000.)

Though geothermal requires electricity to run, “it doesn’t use as much electricity as your standard furnace, and it runs at a much lower speed, [thus] conserving energy,” says Kim Hibbs, of Hibbs Homes, a custom home builder and remodeler in St. Louis who has recently installed several systems and has seen an upswing in clients wanting more information.

To really conserve energy, Hibbs says, you could run the system on solar. “When states, as well as the federal government, offer incentives, that’s when it really becomes a viable option to run on solar.”

Professional Installation

As with any home system, before installing a geothermal heat pump, do your homework. “It has to be a tightly controlled installation,” says Doug Selby, of Meadowlark Builders, in Ann Arbor, Mich., whose company installs direct exchange closed-loop systems. “A lot of guys go by ‘rule of thumb’ when deciding what [type of heating system] to install,” he says. “But that guarantees you’re oversizing the system. With geothermal [as opposed to one run on fossil fuels] you can’t do that. It has to be big enough, but it’s critical not to make it too big.”

Selby did extensive research before selling geothermal to clients, and when he couldn’t find good geothermal installers, he hired a knowledgeable person whom he trusted and had him trained by the dealer Earthlink Geothermal, in Ossian, Ind. (The International Ground Source Heat Pump Association in Oklahoma offers training and is the only association solely devoted to geothermal installation.) “We wanted to bring it in-house to control price, availability, and quality,” Selby says. Now he has three people in his HVAC department trained to install geothermal. Since the tax incentives have been initiated, he has seen a significant increase in calls.