IPPEC's Energy Efficiency Centre
Heat pumps or geothermal as it is sometimes known are popular in countries where elctricity is very cheap. Countries like Norway, Sweden and Montana in the have hydroelctricity. That is electricity generated from water dams.

Heat pump schematic c/o Viessman Coefficient of Performance COP = Heat into building / Electrical power consumption = 3

How does it work?
The evaporating gas passing through the expansion valve and takes the heat from the ground at the evaporator. Then the compressor turns this gas into liquid which releases its heat into the house at the condensor.
A large amount of pipe is required in the ground outside to to absorb heat from the cold ground and consequently drops the ground temperature around the pipe by one or two degrees. Then a relatively small amount of water is heated to 35 degrees C in the house when the gas is compressed to liguid by the compressor at the condenser. the heated water is stored into a cylinder which becomes the water heat source in the building.

Points to watch
1- Heat pumps use electricity to drive compressor and the water pumps. Electricity is a an expensive fuel in the UK. This is because it is mostly generated from oil, gas or coal.
2- COP of 3.5 is required to break even on electricity fuel costs compared to gas central heating.
3- A large piece of land, a lake, a pond or a well is required to generate enough heat for a heat pump.
4- The capital cost of heat pumps, including outside ground equipment installation, is high.
5- They require sophisticated controls such as weather compensation to keep water temperature down and to keep running cost low.
6- They work at their best efficiency at low temperature and are therefore best suited with low water temperature underfloor heating systems. Such as the Pexatherm UFH systems.
Please visit Energy Saving Trust for more information.