Achieving EnergyStar V3.2 certification with geothermal energy is good for the home builders, homebuyers and the overall construction community Earning this certification, however is easier said than done. But geothermal heating and cooling makes it more feasible for builders to achieve this rigorous energy performance standard. By incorporating a geothermal HVAC systems, builders and contractors can unlock Energy Star V3.2 and other higher efficiency certifications for new construction. This can lead to financial incentives, more efficient homes and buildings overall and a more competitive product for consumers. 

Understanding Energy Star V3

Established by the EPA, the Energy Star program helps businesses and individuals save money and protect the environment by identifying energy-efficient products and practices.

To qualify, a building must meet the EPA’s Energy Star efficiency criteria, typically performing in the top 25 percent of similar buildings nationwide. 

Certification under the latest Version 3.2 (Rev. 14), revised January 15, 2025, requires the following:

• Benchmarking energy use through EPA’s Portfolio Manager.

• Enhanced thermal envelope requirements to meet or exceed the 2021 International Energy Conservation Code (IECC).

• Stricter Home Energy Rating System (HERS) Index Score targets lower energy consumption.

• High-efficiency HVAC, insulation, lighting, and water heating systems.

• Third-party verification by a licensed Energy Star rater.

In most markets, the use of geothermal HVAC alone accounts for a HERS reduction of 5-10 points, taking pressure off of other measures that are traditionally needed to attain energy efficiency certification.

How does geothermal HVAC help builders achieve Energy Star certification?

Geothermal HVAC systems significantly improve energy efficiency by using stable underground temperatures to more efficiently meet the heating and cooling loads of the home. 

This helps builders meet Energy Star 3.2 standards in the following ways:

• Lower HERS Index Scores by reducing energy consumption, helping buildings stay within the required efficiency range.

• Stronger thermal performance because of advanced heating and cooling efficiency, pairing well with stricter thermal envelope standards, like those in IECC 2021 compliance. Not only are these guidelines more easily attained with geothermal, but the overall cost of the geothermal system is reduced with its implementation.

• Reduced energy costs because Energy Star prioritizes long-term operating cost savings, which geothermal systems provide.

Simply put, geothermal heating and cooling systems significantly eases the pathway to meet Energy Star 3.2 standards, because of the HERS points reduction associated with the efficient geothermal HVAC system. 

Why it matters

Achieving Energy Star V3.2 Certification isn’t just an altruistic endeavor. It’s often a requirement or a significant advantage when applying for certain programs, including the following: 

45L tax credit: This is a $2,500 federal tax credit available to builders who construct energy-efficient homes.

Zero Energy Ready Homes: This program recognizes homes designed to be so energy efficient that they can potentially generate as much energy as they consume. Attaining Energy Star Certification V3.2 with geothermal provides a great baseline for those seeking zero energy readiness and other high-performance programs locally and nationally, as achieving ZERH increases the 45L tax credit to $5,000.

HUD and USDA: Starting later this year, mortgages backed by the U.S. Department of Agriculture and Housing and Urban Development, including Federal Housing Authority loans, must meet Energy Star 3.2 or IECC 2021 equivalent, as per a rule finalized in 2024.

FHFA loans: The Federal Housing Finance Agency offers green mortgage products with more favorable terms for energy-efficient homes through Freddie Mac and Fannie Mae.

Local state and/or utility incentives: Many utilities offer rebates to builders meeting Energy Star certification for new homes.

Beyond these programs, Energy Star certification provides a competitive advantage in the market, signaling to potential buyers that the home is built to a higher standard of energy efficiency, resulting in lower operating costs and more durable products.

It also allows builders to deliver a more valuable and cost-effective product to their customers.

In several markets with strong regional incentives, a geothermal system installation is comparable in cost to traditional HVAC systems. Even in markets where the initial installation cost of a geothermal system may be higher than conventional heating and cooling, it can still be cheaper to build overall because the lower operating costs over the lifetime of the system can offset the initial investment.

Other incentives

Additionally, there are other incentives to make geothermal homes more desirable and cost-effective for home buyers. For example in addition to the operational benefits, the homebuyers will be eligible for a tax credit the year of purchase.  

Most notably, generous federal tax credits, including the Residential Clean Energy Tax Credit, are part of the Inflation Reduction Act, which offers homeowners the following: 

• 30 percent for systems placed in service after Dec. 31, 2021, and before Jan. 1, 2033

• 26 percent for systems placed in service after Dec. 31, 2032, and before Jan. 1, 2034

• 22 percent for systems placed in service after Dec. 31, 2033, and before Jan. 1, 2035. 

Many states and utilities also offer additional incentives to offset the higher upfront cost of geothermal heat pumps:

For example, Colorado offers a state tax credit of $3,000 per home statewide. Utility company Xcel offers $3,300 per heating ton for geothermal heat pumps. Alternatively, Xcel offers significant incentives between $5,000-$20,000 for all electric homes mee ting certain energy efficiency standards including Energy Star plus an additional $5,000 geothermal heat pump adder. The incentives offer builders in Colorado the opportunity to build geothermal homes at little to no additional upfront cost, while providing a better and affordable solution for the homebuyer.

Meanwhile, Maryland offers sales tax exemption as well as geothermal renewable energy credits that can average $5,000-$12,000 per home. Empower MD, a program in the state that incentivizes energy efficiency and conservation efforts, also offers a rebate to offset the cost of a geothermal heat pump to the builder by $3,000 and offers $400-$1,950, depending on utility, to builders meeting Energy Star certification.

And in Massachusetts, Mass Save, a collaborative of state electric and natural gas utilities and energy efficiency service providers, offers $7,500-$25,000 for all electric new home depending on level of energy efficiency certification, plus a $9,000 adder for geothermal heat pumps.

The use of geothermal heat pumps presents a powerful pathway for builders and engineers to achieve Energy Star V3.2 certification.  

It allows builders to meet energy efficiency standards, unlock valuable incentives, and offer homeowners the best durable and efficient HVAC option on the market.

Wyatt Roberts is the head of new construction for Dandelion Energy (dandelionenergy.com), a leading home geothermal company aiming to make geothermal heating and cooling systems simple and affordable. Roberts, a certified Passive House Designer, is a builder and a building scientist and passionate about reducing the impact of our built world on the global environment. Wyatt is a veteran in the building industry, and prior to joining Dandelion, he specialized in high-performance home construction in upstate New York.