Geothermal Is Gaining (Under)Ground

Is this green energy resource an answer for multifamily properties?

Lendlease's The Riverie project
The Riverie, located on the Brooklyn, N.Y., waterfront, has a geo-exchange system comprising 320 boreholes. Image courtesy of Lendlease

Has geothermal technology proven itself to be a reliable solution for efficient energy production? And is it a solution that multifamily owners and managers should consider? Most would say so.

One of its largest plus sides is that it can provide non-stop electricity generation, heat production and storage without reliance on weather or other external factors. Further, geothermal systems offer resilience against climate-related challenges due to their underground position shielding them from the elements, hurricanes, extreme heat, droughts and hail.

“These technologies are built to last, with systems expected to last twice as long as traditional air-based heat pumps, with an estimated lifespan of twenty years,” Chris Gray, CEO of EcoSmart Solution, a subsidiary of Taurus Investment Holdings, told Multi-Housing News.

The percentage of heat energy extracted from a geothermal reservoir in relation to the comprehensive use of a project, known as the utilization rate, is one useful way to track geothermal’s impact. In 2023, global geothermal capacity had a utilization rate of more than 75 percent, well above the 30 percent share for wind power and less than 15 percent share for solar photovoltaic, according to The International Energy Agency’s report, The Future of Geothermal.

Although geothermal currently meets some 1 percent of global energy demand, and is used in only a few locations, things are looking up capacity-wise. Geothermal investment is growing, attracting governments, oil and gas companies, utilities companies and real estate developers. The latter pool is sustained by various stakeholders, such as equity providers, financial backers, developers and building owners, all looking for energy-resilient multifamily communities with longevity.

Real estate developers joining the geothermal crew are typically companies that have shown prolonged interest in sustainability practices. Among them are Lendlease, Taurus Investment Holdings and LCOR, each of which has notable multifamily projects under construction that feature geothermal systems.

Gray noted that “energy efficient building and decarbonization has always been central to the firm’s purpose.”

Meanwhile, Lendlease is advancing successfully toward its Mission Zero commitment to achieve absolute zero carbon by 2040, including Scope 3 emissions—the toughest to eliminate considering they are generated by collaborators and activities up- and downstream.

Overcoming challenges

The legislative environment plays a major role in the adoption of geothermal technologies. Around the country there are requirements around lower building energy usage and all-electric construction, building emissions disclosures and mitigation mandates. Further, constrained electrical grids and demand-based pricing, electrification incentives and rebates and grants from state and local municipalities all factor in as well.

New York City’s development scene specifically has changed significantly under Local Law 97. Buildings, which account for more than two thirds of greenhouse gas emissions in NYC, are required to meet further emission limits. Specifically, large existing buildings must reduce their emissions by 40 percent by 2030 and 80 percent by 2050.

Changing laws and regulations such as LL97 have altered the course of several projects, including Lendlease’s The Riverie, an 834-unit, all-electric project underway along the waterfront in Brooklyn’s Greenpoint neighborhood.

“Although we broke ground on The Riverie prior to the first compliance period, we anticipated the shifting regulatory landscape and prioritized a geothermal system—in addition to an all-electric design and other sustainability strategies—to enhance the building’s marketability and improve operational performance,” noted Meg Spriggs, Lendlease’s managing director of development for the Americas.

Even with the anticipation of shifting regulations, timing still made the development of The Riverie tricky. During the time that Lendlease was drilling the 320 boreholes for the project’s geo-exchange system, New York state legislation limited drilling to a depth of 499 feet without obtaining a mining permit.

That limit was raised in the fall of 2023 to allow for deeper geothermal drilling, which should lower the barrier to entry for geothermal in future projects. While so far the change has been implemented only in New York, it will likely serve as an example for other governments to consider dedicated geothermal permitting regimes separate from minerals mining.

The deeper developers are permitted to drill for geothermal, the more heat resources such as geothermal energy yield. According to an IEA report, thermal resources at depths below 5 miles can deliver almost 600 terawatts of geothermal capacity for 25 years. With such significant capacity, amendments to such pieces of legislation will be even more critical moving forward.

Regulations and incentives

One of the main challenges to accelerating geothermal deployment lies in lengthy, complicated permitting, which ultimately translates to higher project and financing costs. According to the IEA report, the permitting of geothermal projects can take five to 10 years in many projects and reaches as much as 20 years in extreme cases.

Geothermal systems further include additional costs of drilling boreholes and installing pipes, so financial help is often necessary to sustain geothermal adoption. At The Riverie, it meant roughly a 6 percent premium on total construction costs, according to Spriggs.

“We anticipate that during the first 25 years of The Riverie’s operation, the system will become cost-neutral compared to a traditional building using fossil fuels for heating and cooling,” she said.

Over time, as geothermal becomes more widely adopted and installation processes are streamlined, the overall cost of implementing these systems is anticipated to drop, driving broader use in new projects.

Incentives are providing a boost, too. Tax credits authorized by the Inflation Reduction Act are increasing the appeal of geothermal heat pumps. Geothermal systems most notably benefit from the Investment Tax Credit, which can be up to 40 percent of the total system costs for investing in renewable geothermal heating and cooling. The base tax credit for the system owner is 30 percent of the total system cost, and the addition of the domestic content tax credit could increase the total to 40 percent of the total system cost. 

“This is an immediate tax benefit to the system owner, and the IRA regulations related to transferability of credits and direct-pay concepts make them applicable to tax-exempt owners as well,” Gray said. While it likely takes an experienced team to help structure this in the right way to protect all the tax benefits, the value is obvious when you can recover 40 percent of your project cost in the first year of operation with this credit, he added.

Depending on building location, there are also various local and state incentives available throughout the country. Lendlease secured $4 million in funding from The New York State Energy Research and Development Authority’s Community Heat Pump Systems Program, as well as an additional rebate from the ConEd Clean Heat Program.

Other renewables

  • Geothermal System at NOVO Avian Pointe
  • NOVO Avian Pointe
  • NOVO Avian Pointe

Another plus to geothermal is that it combines well with other renewable energy sources. At The Riverie, geothermal is paired with an all-electric design to enhance the building’s effectiveness.

“Together, these systems create a high-performing building that significantly surpasses the decarbonization standards of conventional high-rises,” said Spriggs.


READ ALSO: When Sustainability Starts Underground


EcoSmart manages, maintains and operates its geothermal-powered properties through EcoNOC, an in-house integrated energy management and monitoring system. Its flagship multifamily new-build project, NOVO Avian Pointe, located in Apopka, Fla., pioneers the use of the Floridan Aquifer with two GeoGrid loops. The 276-unit, six-building community is the first multifamily property in Central Florida to be heated and cooled through a district geothermal system. In addition to geothermal technology, the community integrates renewable energy solutions, including rooftop solar photovoltaic generation and LED lighting, providing residents with a holistic and sustainable living experience.

The project will avoid an estimated 809 tons of carbon dioxide emissions annually. By harnessing on-site renewable energy sources, it will generate more than 410 megawatt-hours per year through rooftop solar photovoltaics. NOVO Avian Pointe will target a 30 percent annual reduction in energy costs compared to conventional new construction projects.

The increasing geothermal appetite

Apopka Mayor Bryan Nelson commended NOVO Avian Pointe as an “amazing concept and impressive operation” with residents saving more than 30 percent on their annual energy bills compared to other newly constructed communities in the area.

“We are also seeing that tenants can afford to keep their thermostats wherever they are most comfortable, even in the hottest parts of the summer,” Gray stated. “We have noticed numerous setpoints below 70 degrees Fahrenheit in the peak of the summer.”

At The Riverie, the integration of geothermal technology aligns with increasing ESG-driven demand from both investors and end users, noted Spriggs. Residents, who spend much of their lives within buildings—especially now with work-from-home options—are increasingly prioritizing the health and sustainability of their living environments. Investors are drawn to green communities due to their ability to consistently outperform traditional investments and their projected long-term value growth.

“Because these projects use the ground beneath our feet for heating and cooling, they can be scaled across the country, no matter the climate,” Gray told MHN. “Geothermal’s resilience, longevity and energy savings make it ideal for the future built environment.”

Appetite for geothermal projects has been increasing in recent years and is anticipated to continue to grow. As developers recognize the dollar value and sustainability benefits of geothermal, demand will spur continued innovation and result in enhanced efficiency, reduced costs and streamlined implementation.

“New York State’s revision to its drilling legislation, which now permits deeper boreholes, demonstrates an evolving understanding of the technology and its benefits among regulators,” added Spriggs. If that sends a precedent for other municipalities, it would enable geothermal to play a more significant role in future developments.