The Inflation Reduction Act offers HVAC owners tax credits up to half the cost to install geothermal heat pumps, also known as ground-source heat pumps, enticing building owners to adopt the traditionally costly systems. 

In late September, New York governor Kathy Hochul signed a law easing regulations that held back the use of geothermal heating and cooling, including the need for a mining license for deep wells. And new technology is bringing down costs. 

One by one, the obstacles that have kept the technology – which draws heat from the earth’s core to provide low-carbon heating in the winter and transfers hot air underground for cooling in the summer – are falling away.

The latest sign: Los Angeles-based Bedrock Energy this week raised $8.5 million in a seed round led by Wireframe Ventures to pilot technology that taps into the temperate upper layers of earth to power geothermal heat pumps in commercial and industrial buildings. That means less drilling and less cost. 

Humans have used the heat of the earth to regulate temperatures for thousands of years, from using thermal springs to warm themselves and cook to more recent industrial uses. The approach is gaining more attention as cities look to reduce the hefty emissions generated from their building stock. 

 “There is not deep science risk here,” Bedrock’s Joselyn Lai told ImpactAlpha. “We are ready to scale geothermal heat pumps across cities around the world.”

Straight from the ground

Bedrock is one of a growing crop of startups looking to commercialize geothermal-powered heating and cooling. In New York, Dandelion Energyis installing geothermal heat pumps for single-family residential homeowners. It raised $70 million in November last year from investors including Breakthrough Energy Ventures and Collaborative Fund. 

In the UK, Kensa Group plans to install 50,000 geothermal heat pumps yearly by 2030, with a focus on social and terraced housing and non-domestic buildings. 

On the other end of the spectrum Fervo Energy, based in Houston, uses the horizontal drilling methods of frackers to tap into geothermal energy. The company raised $138 million last year to build geothermal power plants in Nevada. 

Bedrock is carving out the middle-market space, helping small commercial building owners retrofit aging HVAC systems to decarbonize their buildings. Its first commercial project is being constructed in Austin. 

“We’ve spent a good amount of time with the city of Austin’s planning development to say, ‘Hey, we’re doing a geothermal system. It’s not very common, but it’s very well established,” Lai said. “We’re communicating clearly on what we’re planning to do so that the folks in the city are comfortable with what we’re doing and we can get this HVAC upgrade over the line.”

Retrofitting Germany

Germany has set ambitious targets to electrify and decarbonize the country’s building stock by 2050. This week, Berlin-based VARM raised early funding to train workers to install confetti-life “blown in” insulation in single-family homes in Germany for energy-efficient upgrades. Also Berlin-based, Purpose Green scored €3.3 million ($3.5 million) from Speedinvest and Atlantic Labs to help building owners map out energy retrofits.