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.

Ground source heating and cooling provides high-comfort and cost-effectiveness with an environmentally friendly technology that makes use of the Earth's capacity to store energy in the form of heat. Geothermal Heating Systems move heat from the earth or water into a building, or from a building back into the earth. A small amount of electricity is used to operate pumps, fans, controls, and small 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.

Even though the cost of installation of a geothermal system can be several times that of traditional heating and cooling system, the additional costs are returned in energy savings in 5 to 10 years. The life of such a system is estimated at 25 years for the interior components and 50 or more years for the ground loop piping. Approximately 50,000 geothermal heating systems are installed in the US each year. Geothermal heat pumps are practical in most areas. They can use the Earth as a heat source in the winter and a heat sink in the summer.

Quite a number of new residential systems come with desuperheaters, by which excess heat is transferred to the home's hot water storage tank from the geothermal heat pump's compressor, providing a highly efficient means of heating water. But in the spring and autumn, during which the geothermal heat pump system does not operate, the desuperheater will not provide hot water. However, because of the geothermal system's significant advantage in efficiency compared to other water heating methods, 'full demand' systems using a separate heat exchanger to meet hot water needs cost-effectively are now being offered by some manufacturers.