Of the nearly 40 states with mandates for renewable energy credits, Maryland is officially the first to recognize geothermal heat pumps as an accepted technology for meeting credit requirements, thanks to the state’s new Renewable Energy Portfolio Standard—Renewable Energy Credits—Geothermal Heating and Cooling bill.

The bill passed earlier this month and includes a $3,000 tax credit incentive for residential geothermal system purchases beginning next year.

According to Maryland’s Renewable Energy Portfolio Standard, all electricity suppliers must generate at least 20% of the power in their rate-payer systems from renewable sources by 2022.

The hope, says Ted Clutter—communications director at the Geothermal Exchange Organization (GEO), a national trade association for the geothermal heat pump (GHP) industry that lent support for the bill—is that the inclusion of geothermal systems will spark utilities to provide rebates or financing for homeowners to have systems installed. Fostering the use of GHPs would earn utilities credits, which could then either be applied to meeting the 20% mandate or sold to undercomplying utilities.

With or without the 20% mandate, however, Clutter contends that GHPs offer the most cost-effective method for heating and cooling homes thanks to tax incentives that substantially reduce the cost. "When you look at power production plants … you’re talking millions of dollars of investments," he says. GEO estimates that an average residential geothermal system costs $20,000 to purchase and install. "There’s a 30% federal tax rebate right now, which would reduce the cost by $6,000. Maryland has an additional $3,000 rebate, bringing the cost down to $11,000, which is how much a traditional heating and air conditioning system would cost anyway. Add to that the fact that energy bills will be cut by between 40% to 70%, making the total payback time as little as three to seven years, depending on the house."

GEO is working on similar efforts to get geothermal recognized in Illinois and California, and to have GHPs included in a federal bill currently floating around the Senate that would mandate clean energy purchases nationwide.

Claire Easley is a senior editor at Builder.

Learn more about markets featured in this article: Greenville, SC.