Water-source heat pumps work the same as any other heat pump in principle, but instead of having a radiator sitting outdoors, a pump pulls water out of some underground water source or lake, runs it through a radiator inside your basement, and dumps it into a second well in the ground or back into the lake. The water underground is cold, but well above freezing and constant all winter long. The entire system is either underground or inside your house. Ground Source heat pumps can pull their heat out of the soil around your house, without seeking out a water source. These two are the only completely reliable, all-year heat pumps on the Canadian market today. They do not require backup heating systems and are extremely efficient. They, too, are air conditioners in the summer.
There are two catches:
-- You have to have an adequate source of ground water or land available and access to it.
-- They are very expensive systems once installed, starting at around $12,000 to $20,000, although very inexpensive to operate.
Their added efficiency is about matched by the added capital cost. It is a good investment if you need a lot of heat, such as to heat a very large house or an historical property that cannot be properly insulated. It is not worth it to heat a well insulated bungalow.
For a new system that is proving to be just as energy efficient as geothermal heat pumps at a fraction of the capital cost, check out Tri-Energy heating.