Lennar Taps Into Geothermal To Power New Colorado Homes
Many homebuyers prioritize eco-friendly homes, actively seeking out properties equipped with renewable energy and sustainable features. They are driven by a desire for lower utility bills and a smaller climate footprint.
Could it signal a decisive shift in the residential real estate market?
Lennar Corp., one of the largest U.S. homebuilders, will find out in Colorado when it incorporates geothermal heating and cooling systems into scores of new homes over the next two years.
Success there could boost sweeping adoption for systems that now serve a small share of the home market.
Lennar Corp. partnered with Dandelion Energy, a portfolio company in the builder’s venture arm LenX, to install geothermal systems in more than 1,500 new homes the builder will construct in Colorado. This marks one of the most significant such residential projects in U.S. history.
In a press announcement, Dandelion CEO Daniel Yates described the partnership as a "new benchmark" for affordable and energy-efficient home heating and cooling.
Stuart Miller, Lennar’s executive chairman and co-CEO, added in a statement that geothermal technology future-proofs the investment people make when buying a new home.
It supports our broader commitment to making high-quality, attainable housing more accessible,” Miller said.
Construction has broken ground at Lennar's Ken Caryl community in Littleton, Colorado.
Benefits of Geothermal Technology
According to the companies, these systems are expected to save homeowners approximately $30 million in energy costs over 20 years compared with air-source heat pumps while offering the lowest typical monthly energy bills.
Generally, these systems are durable, with underground loops lasting up to 100 years and heat pumps lasting 20 to 25 years, requiring little maintenance. They provide consistent, quiet comfort year-round, with the added benefit of reducing water heating costs through waste heat recovery.
Geothermal heating and cooling technology has a long history. In the U.S., geothermal started with a plant built in 1921 next to The Geysers in California to produce electricity. By the 1940s, the technology expanded to commercial buildings, the first in Portland, Oregon.
Residential use came shortly after, getting a boost during the 1970s oil crisis as people sought alternatives to fossil fuel.
The upfront cost has been a major impediment to broader adoption. The sales point, however, is that long-term energy and maintenance cost savings and reliability make geothermal systems worth the investment.
An Energy Department January report titled "Pathways to Commercial Liftoff: Geothermal Heating and Cooling" notes that the national median cost for residential installations is $19,000 for a typical home.
Other impediments include having suitable land to drill and regulations that delay permitting.
Dandelion’s founders sought to change the cost factor, accessibility, and installation complexity when they began research with funding as part of Google’s X Moonshot Factory a decade ago. Dandelion Energy spun out in 2017 to become an independent company. LenX co-led a $70 million funding round in 2022.
By leveraging economies of scale in production environments, Dandelion may reduce installation costs substantially.
Federal and State Incentives
To encourage greater adoption of installing energy-efficient systems, the federal government offers incentives such as the Residential Clean Energy Credit, which equals 30% of the costs of new, qualified clean energy property installed in a home. The credit is law and can be changed only by Congress.
In the Lennar-Dandelion deal, Colorado’s tax credits for geothermal systems and utility company Xcel Energy’s programs for all-electric new construction will help significantly reduce upfront costs.
Dandelion and Lennar are leaning into a market for geothermal systems that is expected to grow and become a larger share of the HVAC market. According to the Energy Department’s report, annual commercial and residential additions exceed 100,000 annually.
Their partnership garnered strong endorsements from Colorado officials.
Geothermal energy - the heat beneath our feet - is a clean energy option that will help save Coloradans money and protect our state for future generations,” Colorado Governor Jared Polis said in the announcement.
Colorado Energy Office Executive Director Will Toor highlighted the role of geothermal heat pumps in achieving net-zero emissions by 2050.
U.S. Senators Michael Bennet and John Hickenlooper and Congressman Jason Crow said in a joint statement,
Colorado is proving that we can fight climate change, create good-paying jobs, and ensure a healthier future for all.”
With endorsements like that and success selling the homes, the large-scale deployment could position Lennar as an innovator in sustainable construction, potentially setting a precedent for making geothermal systems more prevalent in home developments nationwide.