Geothermal heat pumps: Costs, types & benefits

Updated

A new geothermal heat pump installation costs between $12,000-$45,000. Prices between $20,000 and $30,000 are most typical. Those with larger houses can expect to pay between $30,000 and $45,000.

In addition to costs, in this blog we’ll look at other important aspects of geothermal heat pumps: how they work, what affects their cost, their benefits, and if they’re worth it. 

We then try to answer the most crucial question for you: is it worth getting a geothermal heat pump for your home?

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    How do geothermal heat pumps work?

    Geothermal heat pumps (GHPs) take advantage of the relatively constant temperature underground to provide heating and cooling year-round. These systems are also called ‘ground source heat pumps’ or ‘geoexchange heat pumps’.

    The ground has a relatively constant temperature of between 50 and 60°F at all times. Heat, as you may remember from physics class, always flows from higher temperature substances to lower temperature substances. GHP systems take advantage of this principle, using the ground as a heat sink in the summer, and as a heat source in the winter. 

    GHPs perform the heat transfer via fluid-filled tube loops to exchange heat with the soil. In the winter, the heat collected from underground is extracted by the heat pump, concentrated, and then transferred to the building via the ductwork.

    GHP systems are very efficient, with a temperature coefficient of between 3 and 5. This means that if you input 1 kilowatt (kWh) of electricity, the system will generate the equivalent of between 3 and 5 kWh of heat energy.

    In the summer, the process works in the reverse. Heat from the house is now transferred to water, which passes underground, releasing its heat through the cooler ground. 

    diagram shows how geothermal heat pumps work

    In the summer, heat is extracted from the home, and is discharged into the earth. In the winter, the process is reversed.

    Geothermal heat pump costs

    Geothermal heat pumps can cost between $10,000-$45,000. This cost range is the installation cost for a complete GHP system of between 1 to 5 tons (12,000- 60,000 BTU/hour). 

    GHPs are much more expensive than other HVAC systems for one simple reason: the hard work required to install the underground infrastructure. The drilling, trenching, and installation of GHPs typically account for two-thirds of the overall costs. 

    Many consumers are surprised by the large price range for GHPs. The reason is that there are many factors that determine the cost of GHPs - we take a look at them below. 

    Geothermal heat pump cost factors 

    • Size of the home: The larger the home, the more equipment will be required, both above the ground and underground. Larger homes tend to have costs in the $30,000-45,000 range.
    • Type of system:
      • Open loop systems connect to a water source, either a nearby water body like a pond or an underground well. These systems are less expensive to install (but usually require more maintenance).
      • Closed-loop systems, where the pipes are run underground, can be installed vertically or horizontally. Vertical systems are more expensive because they require drilling down to a depth of between 100 and 500 feet. Horizontal loops, on the other hand, are installed at a shallow depth, so are cheaper to install (however they do take up greater acreage).
    • Soil conditions: The ground underneath your home will need to be assessed for its soil thermal conductivity and suitability for drilling. The former refers to the soil’s capacity to exchange heat - the higher it is, the less loop size will be required. Meanwhile, the density and rock content of the soil will determine how hard it will be to drill through, which, again, can influence installation costs.
    • Home insulation levels: Homes that take advantage of passive heating, or are well insulated, can use smaller GHP systems, lowering costs.
    • Rebates and incentives: Homeowners can get $7,800 knocked off the price of a $30,000 system thanks to the federal tax credit, and other incentives can reduce the price further. We explain GHP rebates further in the next section.  

    Incentives & rebates for geothermal heat pumps

    Homeowners who install geothermal heat pumps should be able to chip off a substantial amount of the upfront cost through the use of incentives and rebates. Here’s what to look for: 

    26% federal tax credit 

    The largest incentive available for anyone installing a geothermal heat pump is the 26% federal tax credit known, otherwise known as the renewable energy Investment Tax Credit (ITC).

    The 26% credit applies to the total cost of the installation, meaning equipment and labor costs are both covered. You can claim the amount back when you file your taxes and if any part of the credit exceeds your tax liability for the year, you can claim the remaining credit in subsequent years’ taxes. 

    The credit is currently worth 26%; from 2023 it will reduce to 22%, before disappearing entirely the year after that. 

    It’s worth noting that this 26% federal tax credit applies to other forms of renewable energy, as well. Its most common application is for solar panels - of which there are well over 2 million installations. We explore the use of the federal tax credit for solar, in detail, in this blog).

    The ITC covers all investments aimed at adding renewable energy capacity at your home. It was first introduced in 2006 and has been extended several times. 

    State and utility incentives 

    In a bid to encourage updates of this energy efficient source of heating and cooling, several states and local governments offer incentives that help offset part of the cost. 

    Connecticut’s Energize CT program, for instance, offers a rebate of up to $10,000 for homeowners who install a geothermal heat pump system. 

    Similarly, a rebate of $3,000 for new geothermal installations is available in both Maine (Efficiency Maine) and Maryland (Residential Clean Energy Rebate Program). 

    There are also many instances of utility companies offering rebates, such as the $800-$1,000/ton rebate from Minnesota Power. 

    Your local geothermal company should be able to provide you details for all incentives and rebates where you live.  

    Geothermal heat pump benefits

    • Works in all climates: Since the ground source heat pump draws on the steady year-round temperatures underground, it is capable of operating efficiently even during extremes of hot and cold. (Air source heat pumps, by contrast, become less efficient at cooling when temperatures are very high and less efficient at heating when temperatures fall very low).
    • Long life: Geothermal heat pumps are unique because of their extremely long lifespan. The underground infrastructure can be expected to comfortably last 50 years. The equipment above ground - the heat pump and exchanger - will need to be replaced sooner, probably after two decades or so.
    • Highly efficient: GSPHs have a coefficient performance of between 3 and 5. This is more efficient than any other type of heating or cooling system and EnergyStar says they are 45% more efficient than traditional HVACs.
    • Low operating costs: Due to the aforementioned operating efficiency, geothermal heat pump systems require very little electricity to run, and thus substantially reduce energy bills.
    • Quick payback period: Thanks to the utility bill savings, GHPs have a payback period of 2-10 years, according to Energy.gov.
    • Environmentally friendly: Ground source heat pumps don’t burn any fuel during their operation. They require relatively little electricity - if you can source your power from clean sources, then a GSHP can operate with zero emissions. 
    See what it would cost to power a ground source heat pump and your home with solar panels 

    Is a geothermal heat pump the right option for you?

    Homeowners who install geothermal heat pumps will typically see high savings as compared to propane or oil heaters, or even natural gas heaters. Geothermal heat pumps are also more efficient than any other heating and cooling system, and thus help to reduce energy bills and carbon emissions at the same time. 

    There are, however, some big disadvantages to be aware of. The biggest of these is the high upfront cost, which may discourage homeowners on a budget or those who don't anticipate staying in the same place for very long. Besides that, there needs to be enough space on your property - both to install the underground tuning and to provide access to the necessary rigging equipment. Given the space requirements, even for vertical systems, it's rare to see geothermal installed in heavily built-up areas. 

    If these disadvantages aren’t a dealbreaker for you, i.e. you have the budget and the space to install them, then geothermal heat pumps are definitely worth your consideration. A good first move is to upgrade the energy efficiency of your house. This will help reduce the size of the geothermal system required, lowering costs. 

    Learn more: 8 ways to increase your home’s energy efficiency

    Of course, in order to make a final decision be sure to talk to a qualified installer and come up with a detailed cost estimate based on the type of system and installation that meets your needs.  

    Once you have a clearer idea of costs, you may want to compare the figures against an air source heat pump, which is a bit less efficient but comes with a much lower price tag.

    Key takeaways

    • Geothermal heat pumps (GHPs) take advantage of the relatively constant temperature underground to provide heating and cooling year-round.
    • Geothermal heat pumps can cost between $10,000-$45,000. Prices between $20,000 and $30,000 are most typical.
    • Many factors that influence the cost of geothermal heat pump systems, including the size of the home, the type of system being installed, and the availability of incentives and rebates.
    • The 26% federal tax credit, available through the end of 2022, will see you get back over a quarter of the cost when you do your taxes. State and utility incentives may also be available.
    • GHPs have many benefits: they work in all climates, they last a very long time, and their high efficiency means lower energy bills and a smaller environmental impact.
    • GHPs are an option if you have a substantial budget and adequate space on your property. You might also want to consider air source heat pumps, which are also energy efficient but have lower upfront costs.
     - Author of Solar Reviews

    Zeeshan Hyder

    SolarReviews Blog Author

    Zeeshan is passionate about promoting renewable energy and tackling climate change. He developed these interests while studying at beautiful Middlebury College, Vermont, which has a strong focus on sustainability. He has previously worked in the humanitarian sector — for Doctors Without Borders — and in communications and journalism.

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