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Unlocking the power of geoexchange: What every developer needs to know  

Geoexchange systems can decrease a building’s energy use by 33%, greenhouse gas (GHG) emissions by 47%, and are as much as 400% more efficient than conventional HVAC systems 

Besides transportation and electricity supply, one of the main challenges of decarbonizing a city is the heating and cooling of buildings. Outside of a manufacturing facility, heating and cooling systems are the top contributor to a building’s carbon footprint. In Canada alone, buildings take up nearly 30% of all energy consumed and are responsible for 26% of greenhouse gas (GHG) emissions.

Fortunately, the way buildings are being constructed in Canada is changing for the better. With the strengthening of Municipal building codes, real estate/condo developers have increased their focus on energy efficiency. If a developer is looking to meet (or exceed) city or building energy code requirements, implementing a geoexchange system is one of the best ways to do it.

What is the difference between geothermal and geoexchange?

The term “geothermal energy” points to a wide range of technologies. For example, when people talk about conventional geothermal technology they’re often referring to deep-drilled geothermal systems that extract high-temperature heat from kilometers below the earth’s surface – usually seen in industrial geothermal power plants.

Conversely, geoexchange is a form of shallow geothermal technology typically used to heat and cool commercial and residential buildings and houses.

How does a geoexchange system work?

Geoexchange systems use ground-source heat pumps to tap into temperature differentials just below the earth’s surface, typically at a depth between 45 to 120 meters (150 to 600 feet). During the winter, heat (energy) travels through a series of fluid-circulating pipes in contact with the ground.

The pipes use fluids (like water or glycerol) to carry heat from the Earth to the building, providing warmth through a duct system. In the summer, the heat of the building is transferred to the ground and then dissipated through the system’s loops, generating cool air in the process.

What are the benefits of a geoexchange system?

Geoexchange systems use the earth’s temperature to distribute heating and cooling, therefore they don’t require the burning of fossil fuels or any materials to operate. Once installed, the piping doesn’t need maintenance and the above-ground portions of the system require less maintenance than traditional systems.

These systems offer not only environmental benefits but also ensure safety with their odorless, flameless, and carbon dioxide-free operation, eliminating any fire hazards. The comfort of tenants is also enhanced since they provide a well-balanced distribution of heating and cooling, eliminating the common issue of uneven temperatures experienced with conventional systems.

What’s more, a geoexchange system can decrease a building’s energy use by 33%, greenhouse gas (GHG) emissions by 47%, and are as much as 400% more efficient than conventional HVAC systems – which translates into lower electric bills every month.

Breaking the cost barrier

One of the main reasons why geoexchange systems aren’t more commonly implemented is traditional HVAC systems are cheaper to install. Or at least they are initially; given the energy savings, geoexchange systems pay for themselves over time with demonstrated paybacks of between 5 to 7 years.

Targeted financing from the government and government agencies in Canada can also help pay for geoexchange projects. In Toronto, for example, the Toronto Green Standard Development Charge Rebate is available to projects that achieve higher levels of energy and carbon performance. For developers that want to own and finance their system, the Government of Canada provides business income tax incentives under Classes 43.1 and 43.2 in Schedule II of the Income Tax Regulations.

If developers wish to avoid the cost of installing the system altogether, they can engage clean energy utilities or third-party providers like Subterra Renewables, a leading low-carbon district energy developer, to be the owner/operator of the system.

Partnerships to unlock geoexchange potential

Through a construction financing partnership with Forum Equity Partners and Vancity Community Investment Bank (VCIB), Subterra Renewables has supported multiple geoexchange systems in the Greater Toronto Area.

“Despite the clear benefits, residential-scale geoexchange projects are usually too small to attract infrastructure financing from banks or pension funds who are searching for deals of $20 million or more,” explained Alfred Lee, Manager of Climate Finance at VCIB.

“Specialized suppliers of geothermal energy are essential, and we’re stepping up with the financing to help them succeed.”

After financing a half-dozen geoexchange projects, VCIB is a leading Canadian financier for a maturing market that’s ready to take the spotlight.

Financing for every stage of the geoexchange life cycle

VCIB’s financing covers geoexchange projects across a range of asset classes, types, and geographies — from new builds to refinancing successful projects as they move into the next operational life cycle, and from single-family homes and subdivisions to large condo complexes.

Trish Nixon, Managing Director of Climate Finance at VCIB, comments; “We’re seeing a large growth in interest for residential geoexchange as a way to improve residents’ homes. To reduce construction costs, many developers opt for a third-party financing model where a geo utility owns and operates the system.”


For more information about geoexchange systems, including common barriers and misconceptions, read this recent study by Urban Equation for Sustainable Buildings Canada. If you’re a real estate developer or clean energy utility looking to finance a geoexchange project, get in touch.

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