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A device that extracts heat from beneath the Earth is called a Geothermal Heat Pump (GHP). The GHP functions based on the principle that heat will move from higher to lower temperature materials, by either conduction or convention (air currents). These pumps absorb energy from both the ground and bodies of water and uses it to provide space and water heating. This is able to occur because the Earth absorbs 50% of the suns heat that reaches the Earth's service.

Taking advantage of the earth's ability to store thermal energy, ground source heating and cooling is inexpensive and environmentally friendly while still providing lots of heat. These pump systems can either pump heat from the ground into a building, or in warmer weather, from the building back into the ground. It doesn't take much electricity to run the pumps and fans, along with a compressor.

GHPs utilize the relatively constant temperature of the ground or water several feet below the surface as a source of heating and cooling and are appropriate for both retrofit or new homes. In addition to space heating and cooling, geothermal heat pumps can provide hot water with virtually no additional energy requirements because GHPs don't create heat; they merely move it from one area to another. This is a relatively new technology that can save homeowners money.

It can cost several times to install a geothermal heating and cooling system, compared to the traditional kind. However, those costs are recovered over the next five to ten years, in the form of saving on energy costs. The interior components of these systems can easily last twenty-five years, and the piping in the ground can last fifty years. These systems are practical in most areas, and about 50,000 new systems are put in every year. They heat in the winter, and cool in the summer.

Many new residential systems are equipped with desuperheaters which transfer excess heat from the geothermal heat pump's compressor to the home's hot water storage tank providing very efficient water heating. However, the desuperheater will not provide hot water during the spring and fall when the geothermal heat pump system is not operating. But because the geothermal heating system is so much more efficient than other means of water heating, some manufacturers are offering 'full demand' systems that utilize a separate heat exchanger to cost-effectively provide for hot water needs.