It’s been nearly seven years since the federal government first instituted the most recent series of energy tax credits to encourage consumers to install and use energy-efficient alternatives for home heating and cooling. Many of these credits, including tax breaks and Energy Star-approved HVAC systems, will expire by 2012.

However, a few credits on bigger-ticket items like solar equipment and wind turbines will extend through the year 2016. Perhaps the most popular of these tax-credit-friendly options has been the relatively affordable geothermal heat pump, also known as a ground-source heat pump.

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Because the temperature just a few feet below the ground tends to stay at a relatively constant 50 to 60 degrees year round, geothermal heating and cooling systems are able to maintain consistent indoor temperatures with minimal energy use even when outdoor temperatures fluctuate wildly.

According to the California Energy Commission’s Consumer Energy Center, about 70 percent of energy used in geothermal systems is renewable energy directly from the earth. The rest is electric or gas energy used to pump refrigerant or water through the system and heat through the system.

How it works

A geothermal system sinks pipes filled with water or refrigerant a few feet into the ground outside a home or business. A pump moves the fluid into the ground, where it picks up heat in winter or disperses heat in the summer.

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The fluid then continues along its path into a heat exchanger in or under the house, where the fluid imparts heat in the winter or removes heat in the summer. A fan and system of ductwork then distributes the heat through the home or business, much like a standard HVAC system.

If you’re constructing a new home, the relatively high cost of a geothermal system can be integrated into a mortgage. If you’re facing a prohibitively expensive monthly utility bill due to outdated equipment or high current costs of energy, you may be able to recoup the cost of geothermal installation within three to 10 years.

Small solar energy and wind energy systems designed for home installation, as well as fuel cell installations, are also eligible for Energy Star tax credits through 2016. These systems tend to be even more cost-prohibitive than geothermal systems, though, so consider your options carefully.


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This article originally appeared on Angie’s List.