The lowest cost unit of energy is not that is not used. 

Workers weld sections of geothermal pipe for a residential installation. The geothermal industry supports a nationwide network of drillers, drill rig equipment providers, and pipe and grout manufacturing workers. Source: iStock

A recent study by Ceres-“Practicing Risk-Aware Electricity Regulation: What Every State Regulator Needs to Know”-concluded that the least cost and least risk for future energy resources is energy efficiency.1 Indeed, the lowest cost unit of energy is one that is not used.

U.S. Buildings are Energy Gluttons

According to the U.S. Department of Energy (DOE), buildings are the largest single sector of total U.S. energy consumption. Indeed, the buildings sector accounted for a whopping 41 percent of primary energy use in 2010.2 The buildings sector consumes one-third more energy than either the industrial or the transportation sectors.3 And since 60 percent of energy used in buildings is for “thermal loads,” some 24 percent of all energy used in the nation is for space heating, cooling and water heating.4 

A unique renewable energy technology with vast potential for energy efficiency and savings stands ready to assist architects, engineers, developers, builders, facilities managers and homeowners in dramatically reducing the thermal energy demands of buildings. That technology is the ground-source-or geothermal-heat pump (GHP).

High Efficiency GHPs Cuts Energy Use

GHPs are today’s most efficient, “green” alternative to traditional heating and air conditioning equipment, offering significant environmental, economic and societal benefits. Using a concept called “geothermal exchange,” they tap the clean energy of the sun naturally stored in the near-surface of the earth, transferring this free heat to buildings in winter and back to the ground in summer.

They work by circulating water through a closed loop of durable, high-density polyethylene pipe installed either horizontally or vertically in the ground beside or even beneath a building. During the winter, GHPs transfer heat energy from the ground to buildings for warmth. In the summer, they provide cooling by rejecting unwanted heat from buildings back to the earth, while providing free hot water. This simple renewable energy concept has profound energy efficiency, cost and environmental implications.

According to the U.S. Environmental Protection Agency (EPA), “Geothermal heat pumps are among the most efficient and comfortable heating and cooling technologies currently available …,” and EPA’s Energy Star program website says that, “… qualified geothermal heat pumps are over 45 percent more energy efficient than standard options.”5

EPA says that GHPs can reduce energy consumption-and corresponding emissions-up to 44 percent compared with conventional air-source heat pumps, and up to 72 percent compared with electric resistance heating with standard air-conditioning equipment.6 Recent advancements in GHP efficiencies only buttress these facts.

More importantly, says DOE, “The biggest benefit of GHPs is that they use 25% to 50% less electricity than conventional heating or cooling systems. This translates into a GHP using one unit of electricity to move three units of heat from the earth.”7  So while a standard electric heater or natural gas-fired combustion furnace can provide no more than 100 percent of the energy it uses, GHPs in heating mode can offer efficiencies of 400 percent and even more.

In cooling mode, GHPs have significantly higher energy efficiency ratings than competing air-source heat pump systems. A recent working paper by Western Farmers Electric Cooperative (Anadarko, Okla.) describes dramatic drops in efficiency for air-source heat pumps struggling in air temperatures exceeding 95 degrees Fahrenheit on hot summer days. By comparison, efficiency degradation of GHPs under the same conditions is negligible.8

GHPs Produce “Negawatts”

A typical 3-ton residential GHP can reduce summer peak electricity demand by approximately two kilowatts (kW).9 Take that times 500 homes equipped with GHPs, and you have a peak power demand reduction of a megawatt. That’s a megawatt of electricity NOT used, which creates what energy experts around the world have called a “negawatt” since famed environmentalist and Rocky Mountain Institute founder Amory Lovins coined the term over two decades ago.10

The idea of a negawatt is cutting electricity consumption through energy efficiency, without necessarily reducing energy usage. And given their efficiencies, one of the best ways to get there is to promote and install more GHPs across electrical power service territories.

Lovins said it best: “There isn’t any demand for electricity for its own sake. What people want is the services it provides. … Nonetheless, most of our utilities have gotten into the habit of thinking they’re in the kilowatt-hour business, so they should sell more. … For some reason, it’s hard for them to get used to the idea that it’s perfectly all right to sell less electricity, and so bring in less revenue, as long as costs go down more than revenues do.”11

Electric Utilities Should Embrace GHPs

GHPs produce negawatts, which have a higher value than any megawatt of costly power generation. Because of their technology, GHPs produce the thermal equivalent of a negawatt at a fraction of installation cost compared to a megawatt of electricity produced by any renewable power source like wind, solar or biomass.12 And that doesn’t consider the fact that GHPs avoid the need for expensive transmission lines required by power plants, whether they be renewable, or fossil- or nuclear-powered.

By providing essentially free renewable energy from the earth, GHPs can work wonders in lightening the load on our oft-strained electrical grid. This is especially true for those sweltering days with looming blackouts when consumer demand soars for air conditioning and power generation is maxed out. For electric utilities, geothermal heating and cooling reduces summer peak demand and actually builds load (and power sales) in the winter-while providing comfort levels that foster happy customers.

Another benefit of GHPs is carbon emission reduction. This is an especially important policy consideration as concerns grow about climate change caused by burning fossil fuels to produce electricity. According to Oak Ridge National Laboratory, one ton of GHP capacity over a 20-year operating cycle avoids CO2 emissions of 21 metric tonnes.13  A thousand homes would therefore reduce carbon emissions by 63,000 metric tonnes over a 20-year period.

Renewable Energy Policy Should Promote GHPs

Thirty states and the District of Columbia have enforceable Renewable Energy Portfolio Standards (REPS) that mandate a certain minimum share of electricity offered by utilities come from specified renewable resources.14 To date, only two of those states include the thermal load avoided by GHPs as renewable.  All the others have definitions of “renewable” that state “energy generated” and exclude the term “thermal load avoided.” 

States with REPS need to recognize the value of negawatts and amend their standards to include the thermal load avoided by GHPs. Utilities should be allowed to receive credit for negawatts, and in turn they should offer financial incentives for the installation of GHPs by their customers.

The socioeconomic benefits of producing negawatts are too many to list here. Homeowners spend a majority of their energy costs to heat, cool and produce hot water. A GHP can significantly cut that cost, and at the same time yield more disposable income. Innovative dealer payment options and utility on-bill financing programs can actually reduce monthly energy outlays while paying for GHP systems on the installment plan.

The Kaiser Foundation (Tulsa, Okla.) financially supports the installation of GHPs in Habitat for Humanity homes in an effort to help break the cycle of poverty through energy efficiency. The average energy cost for such homes is less than a dollar a day.15 Both residential consumers and business owners alike can save energy and increase their bottom lines by utilizing GHP technologies. 

And unlike the conventional heating and air conditioning industry, the GHP industry employs far more people than those working in factories and installation. That includes a nationwide network of drillers, drill rig equipment providers, and pipe and grout manufacturing workers, to name a few. Negawatts generated by GHP installations create thousands of jobs right here in the USA.

Our ability to use the earth for geothermal energy exchange is limitless. The technology is waiting to be used, and it’s proven to be the most energy efficient means to satisfy the thermal loads of buildings. Their geothermal exchange of renewable energy from the earth produces negawatts, the cheapest units of energy produced and consumed. We must forge new public policies that recognize this fact, for the benefit of the environment, our economy and the nation.  ND


1Binz, R., et al. “Practicing Risk-Aware Electricity Regulation: What Every State Regulator Needs to Know: How State Regulatory Policies Can Recognize and Address the Risk in Electric Utility Resource Selection.” April 2012. Ceres.

2U.S. Department of Energy, Energy Efficiency and Renewable Energy. Buildings Energy Data Book, Chapter 1 – Buildings Sector, Table 1.1: Buildings Sector Energy Consumption.

3U.S. Department of Energy, Energy Efficiency and Renewable Energy. Buildings Energy Data Book, Chapter 1 – Buildings Sector.

4U.S. Department of Energy, Energy Efficiency and Renewable Energy. Buildings Energy Data Book, Chapter 1 – Buildings Sector, Table 1.1.4: 2010 U.S. Buildings Energy End-Use Splits, by Fuel Type (Quadrillion Btu).

5U.S. Environmental Protection Agency, Energy Star website.

6U.S. Department of Energy, Public Services, Science & Innovation website.


8Faulkenberry, M., and Kelley, K. “The Importance of SEER and EER in Utility Air Conditioning Demand Side Management Programs.” January 2012. Western Farmers Electric Cooperative, Anadarko, OK. Working paper (internal document).


10Lovins, A. Keynote address: 1989 Green Conference, Montreal, Quebec. Quoted by Stahl, J., “Welcome the Negawatt Revolution,” article on Slate website, Nov. 28, 2012.


12Graph of “levelized” renewable energy costs by international investment bank Lazard Group, LLC, modified by a major GHP manufacturer to include GHPs. GEO PowerPoint presentation deck. Geothermal Exchange Organization.

13Liu, X. Oak Ridge National Laboratory. Personal communication (email) Nov. 5, 2012: “Based on my previous study, one ton of GHP capacity over a 20 year life cycle reduces about 21 metric tonnes of CO2 emissions.”

14U.S. Energy Information Administration, Today in Energy website, “Most States Have Renewable Portfolio Standards.” Feb. 2012.

15Paine, A., and Smietana, B. “Habitat goes green and saves new residents some green,” USA Today, Jan. 4, 2012.