Remote northern communities of Nunavik rely on fossil fuels for space heating and domestic hot water production. The capital Kuujjuaq is characterized by 8500 heating degree days and discontinuous permafrost. Numerical simulations taking into account latent heat effects due to water-ice phase changes demonstrated that the 10-year performance of small-diameter borehole heat exchangers is as valuable as conventional diameters. Moreover, owing to the cold underground, deeper boreholes perform significantly better than shallow ones. A heat extraction rate of 35 W m‑1 can be sustainably maintained by a 300-m borehole. The financial analysis showed that ground-source heat pumps are a viable alternative to fossil fuels. Absorption heat pump is the most interesting technology, but only district-scale applications could justify high drilling and installation costs of vertical ground heat exchangers. Payback time of 15 years was found at the current costs, but less than 10 years can be achieved at 150 CAD m‑1 drilling cost.