The Karval School District in eastern Colorado has begun drilling a ground-source heat pump well field as part of a fully grant-funded HVAC overhaul, positioning the small district as a replicable model for rural school decarbonization across the United States.
Background
Karval School District serves 30 students from pre-kindergarten through grade 12 in one of Colorado's most sparsely populated areas - 80 miles east of Colorado Springs, accessible only via county roads. Like many rural districts, Karval lacks both natural gas infrastructure and a meaningful local property tax base, making large HVAC capital investments difficult without external support.
Colorado now has several dozen schools with geothermal heating and cooling, most in rural areas. The technology has seen iterative improvement: Northern Colorado's Poudre School District was among the first adopters, dating back to 2002. Eleven years into operation, the district's energy manager estimated the geothermal heat-pump system required 50% less energy than its predecessor - a benchmark that continues to attract rural districts weighing long-term operational costs against high upfront capital expenditure.
Project Details and Funding Structure
A test bore for a geothermal well field was drilled at the Karval school in early August. The system's infrastructure mirrors designs used elsewhere in the state: drilling began in late July, with 500-foot wells spaced approximately 20 feet apart, connected by loops in two trenches about five feet deep - totaling roughly five miles of piping.
Financing depended almost entirely on public grants. The Colorado Energy Office awarded Karval nearly $500,000 for the geo-exchange work, while another $3.5 million came from the Colorado Department of Education's Building Excellent Schools Today (BEST) program. Grants cover nearly 100% of the upgrades.
The reliance on grants is not unique to Karval. Aaron Tilden, a mechanical engineer assigned to work with the neighboring Liberty High School - a similarly rural project - stated that without grants, Liberty would very unlikely have had a business case for a ground-source system. Liberty's total project costs stand at $5.4 million.
At the state level, Colorado has positioned itself as a national leader. The Colorado Energy Office announced $7.3 million in awards through the third cycle of the Colorado Geothermal Energy Tax Credit Offering (GETCO) in October 2025. The state has previously awarded a total of $23.2 million to deploy geothermal technology, including $13.8 million from GETCO and $9.4 million from the Geothermal Energy Grant Program (GEGP).
Federal incentives under the Inflation Reduction Act (IRA) add another funding layer. Geothermal heating and cooling tax credits approved under the IRA cover 30% or more of total project costs, according to industry sources. The longer lifespan of geothermal systems compared to conventional HVAC equipment makes geothermal an especially compelling use of available tax credits for school districts.
Refrigerant Compliance and HVAC Retrofit Implications
The Karval project coincides with a sector-wide shift in heat pump refrigerants. Starting January 1, 2025, the EPA's Technology Transitions Rule restricts new air conditioning and heat pump equipment manufactured with refrigerants above 700 GWP, directly affecting all new ground-source heat pump installations. Leading geothermal heat pump manufacturers have moved to R-454B, a next-generation refrigerant with a GWP of 466 - well below R-410A's GWP of 2,088.
A2L refrigerants such as R-454B require technician training, ventilation controls, and leak detection systems to meet evolving safety standards - a practical concern for rural districts where qualified HVAC service personnel may be limited. Retrofitting existing buildings for geo-exchange can prove far more complex than new construction, and ground-source technology should always be evaluated, though replacing boilers and chillers rarely justifies the added costs without grant support.
Outlook
Ground-source heat pumps can reduce building HVAC costs by 25% to 40% compared to traditional systems, with payback periods that - once reached - deliver significantly lower annual heating and cooling expenses for decades. Higher upfront costs generally pay for themselves in approximately 6 to 10 years1Sensible Heating & Cooling | Geothermal Heating and Cooling in Denver, CO, according to operators of established geo-exchange campuses in Colorado.
A total of $35 million in GETCO tax credit reservations is available, with approximately $13.8 million in funding remaining. The Colorado Energy Office will open GETCO applications twice annually through 2032 or until all credits are reserved. For HVAC engineers and contractors working in rural public-sector markets, the Karval project illustrates how stacked federal and state incentives can make ground-source systems financially viable where conventional retrofit economics would otherwise fall short.
