A conventional gas or electric furnace generates heat directly and works at the same efficiency no matter the climate outside. A water furnace, however, is dependent on climate. When the ground is very cold in winter, the heat pump has to work much harder to remove heat from it, using more energy. If the ground gets quite warm during the late summer, the heat pump will likewise have to work harder to cool the house.
Water furnaces are designed for routine heating and cooling needs but may not work when they are most needed. A relatively small system will cool efficiently in moderately cold weather but may fail to provide warmth when the temperature plummets during a severe cold snap. People who live in very cold climates often install a backup furnace, such as a natural gas or an electric furnace, to use when the weather gets very cold.
Water furnaces rely on a ground loop to provide cooling. This ground loop has hundreds of feet of buried tubing. The tubing must either be buried in a deep vertical hole beneath the ground or a long shallow trench about 6 feet under the ground. Installing such a system may mean digging up patios, trees and other landscape fixtures. The system is also quite expensive to install compared to a conventional heater. According to Consumer Energy Center, as of 2006, the cost of buying and installing a typical ground source system could run well over $30,000.