
Installing a geothermal heat pump system can be a smart way to save energy and money. Unlike other types of heating systems, which convert fuel to heat, a heat pump is designed to move heat from one place to another. Even at relatively cold outdoor temperatures, a heat pump is able to extract heat from outside to heat the home. In the summer the system reverses the direction of heat movement to cool the home.
In the past, most heat pumps were the air-to-air or air source type. Air source heat pumps rely on outdoor air for their heat source. Geothermal heat pumps extract heat from the ground or from water, either below or on the surface. Because ground and ground water temperatures are a constant 7° - 13° C (45°-55° F) year-round, this type of system is much more efficient.
There are two basic types of geothermal systems, open loop and closed loop. An open loop system uses a conventional well as its heat source. Water is pumped from the well through the heat pump's heat exchanger, where heat is extracted and transferred to a refrigerant system. The heat is then transferred to the air in the home. The water is then returned to a pond, stream, or second well. Local conditions such as quantity and quality of available water can affect the use of this type of system. Local water use and disposal regulations may also limit the use of open loop systems.

Closed loop systems circulate a heat transfer fluid (usually a water/antifreeze solution) through a system of buried or submerged plastic piping, arranged either horizontally or vertically. Ground-based horizontal loop systems draw their heat from loops of piping buried 1.8 to 2.4 metres (six to eight feet) deep in trenches. The piping for water loop systems is installed below the winter ice level in pond or lake, or below low tide level in the ocean. Vertical loop systems use holes bored 45 to 60 metres (150-200 feet) deep with U-shaped loops of piping. They work the same as horizontal loop systems, but can be installed in locations where space is limited due to size, landscaping or other factors.

Another type of geothermal heat pump is called a "Direct Exchange" or "DX" system. This type of system uses a much shorter loop of piping buried below ground, through which the refrigerant itself is circulated, replacing the heat transfer fluid used in other geothermal systems because the heat is transferred directly between the refrigerant and the ground, the amount of piping can be drastically reduced. This type of system is ideal for situations where the amount of space for the piping loop is very limited.