From the March 2009 issue of Investment Advisor • Subscribe!

News Flash: There's Heat Down There

One alternative energy concept that is still relatively undeveloped in the U.S. is geothermal heating and cooling. Although in Iceland more than half the population heats its homes with hot water from geothermal fields near Reykjavik, one doesn't have to be located near one of the earth's hot spots, such as Yellowstone National Park, to take advantage of geothermal energy.

"We like things going on in geothermal heating, particularly for home and office buildings," says Chat Reynders, chairman and CEO of Reynders McVeigh Capital Management in Boston. Many people don't realize, says Reynders, that six feet below the surface of the earth, anywhere on the planet, the temperature is a constant 55 degrees and that constant temperature can be used in heating systems for homes and commercial buildings.

"There's a small company, Water Furnace Industries (Ticker: WFI), that makes the heat exchange units for home geothermal systems. Business has been booming for them, despite the slowdown in the housing market."

A big part of the company's business of late has been in Canada, which recently increased a tax subsidy for geothermal. Reynders says subsidies and tax credits in this country are also increasing, which bodes well for future growth.

"Economically and environmentally it makes a lot of sense," he says. "It's a bigger business than people realize. The oldest church in Boston, which is right in the center of downtown, is heated and cooled by a geothermal system.

"It takes about one-third the energy to heat and cool a home than other systems do, because you're utilizing the earth's heat. It's a very simple process and a very efficient process and it can be done anywhere."

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