Geothermal systems use the earth as a heat source and heat sink. In order to transfer heat to or from the house, heat exchangers (ground loops) are installed in the ground. These consist of high density polyethylene plastic pipes. The loops are then connected to the heat pump and fluid is circulated between them transferring the heat between the heat pump and the earth.

This type is used mainly in commercial buildings or where space is limited. Vertical holes 100 to 400 feet deep are drilled in the ground, and a single loop of pipe with a U-tube at the bottom is installed. The borehole is then sealed with grout to ensure good contact with the soil. The vertical ground loops are then connected to a horizontal underground header pipe that carries fluid to the unit. The earth's temperature is more stable farther below the surface which is an advantage for the system. Vertical ground loop fields may be located under buildings or parking lots. The life expectancy is in excess of 50 years.

This type of design is cost effective on smaller projects or where there is sufficient space for the loop. Trenches, three to six feet deep, are created and a series of parallel plastic pipes are laid inside them. These loops are manifolded and connected to the heat pump. The fluid is then circulated, absorbing or rejecting heat to the earth depending on the mode of operation. A typical horizontal loop will be 400 to 600 feet long for each ton of heating and cooling but will vary according to the soil type and the layout of the piping.

This type of design is economical when a project is located near a body of water. Fluid circulates through polyethylene piping in a closed system, just as it does through ground loops but in this case underwater. The pipes may be coiled in a slinky to fit more surfaces into a given amount of space. The lake needs to be a minimum size and depth depending on the load. Lake loops have no adverse impact on the aquatic system.

This type of installation is only possible if there is sufficient ground water available in a well, a lake or river in the area. The water must be of good quality. Local codes may limit the use of this system in certain areas. The system is open which means that water is pumped directly into the geothermal unit and then discharged either into a return well or a body of water. The water quality is unaffected other than a change in the temperature.