The Lowdown on Networked Geothermal for States

As states, utilities, and local governments across the United States pilot networked geothermal projects, there are important questions around cost, ownership, regulation, and equity that they are only beginning to address.  

Networked geothermal—also referred to as “ambient loop systems,” “community geothermal,” or “fifth generation district heating & cooling,” among other terms — is a system of interconnected ground-source heat pumps. These heat pumps connect to underground pipes that utilize the ground as a thermal energy source and sink. The pipes are installed below the frostline where the underground temperature is relatively constant, meaning heat can be transferred away from buildings to cool in the summer and into buildings to heat in the winter. Linking ground-source heat pumps into a network allows buildings to share infrastructure, and it maximizes efficiency by balancing heating and cooling loads across the network, allowing communities to recycle wasted heat energy instead of burning fossil fuels. 

Geothermal networks are the most efficient technology available for heating and cooling homes, and they solve many problems faced by traditional heating and cooling systems. They largely decarbonize the process, only requiring electricity for heat pumps, and they reduce peak demand by relying on stable underground temperatures instead of the air. The infrastructure is also more resilient due to being underground and modular; research shows it may last half a century or more, outliving conventional systems by decades. Moreover, the core of the skilled labor required for geothermal network installation significantly overlaps with that of gas utilities, promoting economic development and the just transition of the gas utility workforce. 

In a recent white paper, CESA Project Director of Federal Initiatives Anna Ziai answered twelve foundational questions about networked geothermal to support early understanding and decision-making by CESA Members and other state officials. Here are some highlights: 

How much does networked geothermal cost? 

The short answer is that costs will vary widely depending on geology, scale, density, labor, and regulatory context; more data from pilot projects is needed to determine typical cost ranges. In comparison to conventional heating and cooling systems, upfront costs are usually higher for networked geothermal, but the infrastructure lasts significantly longer. Lifecycle cost comparisons are limited due to the early stage of deployment, but several projects suggest long-term cost competitiveness when accounting for avoided fuel price volatility and gas infrastructure investments. Costs are expected to decline as experience with geothermal networks grows, and there are cost recovery options, including utility rate-basing, special assessment districts, and service subscription fees. 

Who owns and operates networked geothermal? 

Ownership structure is a key consideration for projects, as it influences financing, risk allocation, and regulatory oversight. The three ownership models for networked geothermal are utilities (gas and/or electric), campus-owned systems, and public-private partnerships. Several states, such as Colorado, Minnesota, New York, and Massachusetts, are embracing the utilities approach, passing state climate legislation that allows or requires utilities to pilot networked geothermal systems. Massachusetts deployed the first utility-led geothermal network pilot, developed by Eversource Energy in Framingham. It includes 140 retrofitted buildings with an upcoming expansion set to double the network’s size. 

What policy and regulatory issues do states need to understand? 

Networked geothermal raises several regulatory questions, and because these systems do not fit neatly into existing utility frameworks, statutory clarification may be required. 

A key regulatory issue is utilities’ “obligation to serve”—the legal requirement that gas utilities provide service to customers in their territory. Networked geothermal and other thermal energy networks challenge this framework by offering a pathway to replace gas service altogether. California has begun to address this, passing a law (SB 1221) allowing utilities to be relieved of their obligation to provide gas service in a project area if adequate replacement energy service is available. The law also allows projects to proceed if a supermajority (approximately two-thirds) of affected customers or property owners agree, helping address the challenge of customer consent in network-scale transitions. 

How can networked geothermal advance equity and affordability efforts? 

Equity outcomes will depend heavily on program design. States can promote a just deployment by incorporating geothermal into affordable housing developments, targeting high energy burden communities, and ensuring transparent pricing structures. Additionally, if a network is utility-owned, regulators must consider and attempt to remedy cost allocation impacts on non-participating customers. 

For more details on networked geothermal and information on how states can support early projects and pilots, read the CESA white paper here.