Ken Silverstein EnergyBiz Insider Editor-in-Chief

Generating geothermal power via central facilities starts by trapping steam that is below the earth's surface. That steam is then funneled through turbines to generate electricity. While such projects are characterized by high capital investment for exploration, drilling wells and plant installation, they have low operating costs once they are up and running because of the low marginal costs for the fuel source.

"I am surprised at how inappropriate the large centralized energy system is that we have created during our economic planning, especially for a developed country," says Peter Platell, an energy researcher in Sweden. Heat pumps can bring comfort to indoor climates by exchanging heat to and from the ground -- a process that avoids the building of expensive investment in transmission lines, increasing national security and the continual need to keep cutting carbon emissions, he adds.

While it sounds easy enough, there are some difficult hurdles to overcome. For starters, contractors and engineers in this field are in short supply. And then there's the high price of getting started. The U.S. Environmental Protection Agency says that the price to install geothermal systems is about $15,000. While that is a lot more than a conventional heating and cooling system, the payback can occur. If properties are kept for a while, the initial price tag may be worth it.

The industry is working hard to overcome issues relating to qualified professionals and costs. It is training folks who can build out the geothermal energy infrastructure. If the market can expand, prices would come down too.

The federal government, meantime, is helping out. The Energy Policy Act of 2005 provides up to $2,000 for homes that cut energy use for heating and cooling by 50 percent when compared to an existing national benchmark. The law also provides incentives to commercial facilities by giving developers a deduction of as much as $1.80 a square foot for similar energy savings.

According to the U.S. Department of Energy, geothermal systems are less stressed than conventional ones because the earth's temperature is always moderate at 50-60 degrees Fahrenheit. That conserves a lot of energy when compared to units that use centralized air and heat. Monthly savings could total somewhere between 25 percent and 50 percent of current utility bills. And that's why the federal government has a goal of getting 7 million homes and businesses to use geothermal heat pumps by 2010.

Another Arrow

The Geothermal Heat Pump Consortium estimates that more than 900,000 such units are now installed in the United States. While less than 1 percent of the heating and cooling market, the presence is noticeable: The reduction of 4 million tons of carbon dioxide, the association says.

The first U.S. geothermal power plant, which opened at The Geysers in California in 1960, continues to operate. New plants are being pursued in Alaska, Arizona, California, Hawaii, Idaho, Nevada, New Mexico, Oregon and Utah. Although geothermal power plants are concentrated in the western United States, they provide the third largest domestic source of renewable electricity after hydropower and biomass -- producing less than one percent of all electricity in the United States.

Commercial office and public buildings are some of the biggest energy consumers. But a few projects are underway that aim to take advantage of renewable energy. In New Mexico, schools are being retrofitted with geothermal heat pumps that developers say will save as much as 50 percent on energy bills. And the Little Rock, Ark. region is installing geothermal units at several fire stations and one police outpost.

A new fire station in Marion, Ark., for instance, will run pipes 160 feet below ground to capture the heat's energy. The technology will use some electricity to move the underground air while a duct system will circulate the air throughout the building. Mayor Frank Fogelman justified the 20 percent premium over a traditional heating and cooling unit, saying that he expects the city's return on investment to occur in five years. Voters there also approved the project.

"It requires some electrical energy to get it up out of the ground and into the structure, but to extract four units of energy from the earth you only have to expend one unit of electricity in the process," says John Turrel, editor emeritus of the Electric Letter. "The energy thus delivered (into my home for example) is therefore three-quarters renewable."

Geothermal energy is another arrow in the quiver of America's energy arsenal. While such systems compete with conventional heating and cooling sources while carrying a high upfront price tag, they do offer some notable benefits that include lower cost utility bills and cleaner output. With new tax breaks and greater education, more geothermal projects are in the offing.

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