How the Warmth Underground Could Heat and Cool Your Home

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Heat pumps are hot right now. They're the technology that can take the energy-intensive, largely fossil-fuel powered business of keeping your home, office and business comfortable and turn it into something that can run, potentially, on clean electricity.

But heat pumps aren't all created equal. There are air-source heat pumps, which, at the risk of oversimplification, function kind of like reversible air conditioners. They're perfect for replacing a gas or oil-powered furnace with something powered by electricity, which could be provided by solar panels or a clean energy supplier.

Then there are geothermal heat pumps, which cost quite a bit more to install but can operate more efficiently. It's in this technology where the heat pump startup Dandelion sees the future. Dandelion CEO Dan Yates compared it to the transition from gas-powered cars to electric vehicles. 

"It's the same transition for heat that we need to make," Yates told CNET. "The solution is heat pumps, and there isn't yet a Tesla of heat pumps. Dandelion is leading the charge to say that a Tesla of heat pumps is going to be a geothermal company."

Dandelion, a company that spun out of Google's Project X "moonshot factory," has grown from offering a geothermal heat pump in the Northeast to now offering it nationwide through an installer network. But it's far from the only company offering this technology, which, while revolutionary, isn't all that complicated. 

A report from the Department of Energy's Geothermal Technologies Office estimated a market potential for 28 million geothermal heat pumps nationwide by 2050, and that doesn't include more than 17,000 district heating systems, in which one system can heat an entire neighborhood. 

So how, exactly, does this technology use the heat underground to keep your home comfortable?

What makes a geothermal heat pump different?

The inherent technology behind a heat pump is pretty basic: The machine circulates some kind of refrigerant (sometimes water) in tubes where it absorbs thermal energy from one place and transmits it to another. When you want it to be hotter inside, it uses that energy to heat the indoors. When you want it to be colder inside, it moves heat in the opposite direction. The same concept powers your refrigerator.

But geothermal heat pumps, instead of tapping the volatile and inefficient air outside for that thermal energy, use the much more consistent temperature a few feet underground.

That gives geothermal heat pumps a few advantages in terms of operations compared to air-source units. Yates said Dandelion's Geo heat pump is able to produce a hotter heat compared to an air-source unit, meaning it can work more efficiently and warm houses better at lower temperatures. It also doesn't lose efficiency as significantly when temperatures outside drop.

Yates said the Dandelion Geo is twice as efficient as an air-source heat pump during normal conditions, and up to four times as efficient on the hottest or coldest days. That's allowed Dandelion to grow in the Northeast, where a heat pump that can handle the winter is the only viable option.

Fortunately for people who live in colder areas, plenty of manufacturers are working on products, including air-source heat pumps, that are more efficient and effective in colder temperatures. That's gotten a boost from a challenge by the US Department of Energy to create more cold-climate heat pumps. 

Geothermal heat pumps and the grid

The energy efficiency of geothermal heat pumps makes them a powerful tool for addressing the problem of growing electric demand on the grid. Electrification, whether it's your home or your car, is one of the big reasons why US energy demand is growing for the first time in decades. (AI, cryptocurrency and other technologies that employ massive server farms are also partly responsible.) But a technology that reduces energy demand while electrifying can actually help support the grid.

If 70% of buildings in the US adopted geothermal heat pumps, that has the potential to save the energy system more than $300 billion in grid costs and reduce winter heating bills by $19 billion a year, a study released last year by the Department of Energy found.

Like solar panels, home batteries and virtual power plants, the effect is to lessen the load on the centralized energy grid by employing a lot of small solutions.

"You can think of it as a distributed infrastructure," Yates said.

The challenges of geothermal heat pumps

The advantages of geothermal heat pumps all stem from the fact that they pump a refrigerant underground to take advantage of the ground's relatively stable temperatures. That's also where the biggest challenge comes from. Every geothermal heat pump requires excavation or drilling, which is difficult and expensive.

Consider an example Dandelion provided of the cost of a heat pump for a hypothetical 2,500-square-foot home in Maryland. The company said the equipment might cost $10,000, including the heat pump and other materials. But the installation, which includes electrical work and drilling, could cost up to $35,000. Much of that price comes from the drilling, which can be particularly tricky for an existing home, where deep holes would have to be dug in the basement or large trenches cut into the yard. 

The technology of the heat pump plays a big role in how much drilling is needed. Yates touted Dandelion's ability to concentrate heat, meaning it can function well with less drilling. But those installation costs are still much higher than an air-source heat pump, which might require the same level of electrical and duct work as a geothermal pump, but without the drilling.

The high cost of installing a geothermal heat pump compared to air-source heat pumps is reflected in the fact that the federal government treats the tax credits for them differently. Geothermal heat pumps are covered by the Residential Clean Energy Credit, just like solar panels, meaning the credit covers 30% of the total cost of installation. There's no limit -- if it costs $50,000, you'll get a credit for $15,000. Air-source units, however, are covered by the Energy Efficient Home Improvement Credit, which covers 30% but only up to a total credit of $2,000.

Are geothermal heat pumps the next big thing?

Thanks to the federal tax credit, we have a good idea of how many Americans took advantage of that incentive to get a geothermal heat pump in 2023. 

Data from the Internal Revenue Service shows 80,730 tax returns included a credit for geothermal heat pumps, totaling more than $975 million. That pales in comparison to the number of credits for solar panels (752,300), but more Americans used the credit for geothermal heat pumps than  for home batteries (48,840).

The biggest hurdle in making the switch to a geothermal heat pump is the high cost of drilling. However, these heat pumps may have a bright future in  new builds rather than in existing homes, because installing them in new construction homes could be much simpler. "It's a lot easier to install the system inside the house because you're not having to retrofit or redesign," Yates said.