A geothermal resource that consists of hot water at moderate temperatures (below 125 degrees C) underlies many areas in the central and eastern United States. Programs funded by the Department of Energy have revealed that this resource is definable and economically competitive with conventional fuels for use in direct heat applications. The resource, therefore, has the potential for reducing our dependence on the imported oil used for space heating. However, front-end costs and risks to explore, drill, test, and evaluate the magnitude of the resource have inhibited development. The question is, therefore, how much federal stimulation will be needed to convince private capital to exploit this widespread low-quality energy source.