Cost For A Geothermal Heat Pump (+ 8 Key Factors)

The demand for geothermal heat pumps across the USA is growing as more homeowners seek to significantly reduce their heating and cooling costs as energy prices rise.

Geothermal heat pumps are not cheap, with prices ranging from $18 000 – $30 000 or more depending on the size of the home, whether there is existing infrastructure, the size of the heat pump, and the amount of excavation and construction depending on the type of ground loop system required.

To better understand the costs involved, we will look at the following components that make up the cost:

  • What is a geothermal heat pump & how does it work
  • System Permits
  • Indoor section costs
  • Outdoor section costs
  • Geothermal heat pump savings

Whether you are just browsing or ready to take the next step, this guide to geothermal heat pump costs will get you moving in the right direction.

Geothermal heat pump and hot water tank

How Does The Geothermal Heat Pump Work?

For starters, this system is different from a conventional heat pump as it does not draw its heat from the air outside but rather from underground, where the temperature is a lot more consistent and stable.

The temperature underground from around 6ft to 10ft is steady and stable at around 50℉ all year round, and so the heat pump can use this heat for climate control and water heating in the home.

As you go deeper into the earth, the temperature rises accordingly.

The heat pump does exactly what it says, and it pumps heat from one place to another and, in that sense, is similar to your refrigerator as it moves warm air from inside the fridge and replaces it with cold air.


Regular appliances create heat using electricity, and so they use more power to generate heat and cooling than heat pumps do.

A conventional heat pump uses the heat from the air outside, and it can do this even when the temperatures are very low, but heat pumps using the air will struggle or even stop if the temperature gets too cold.

The difference is that geothermal doesn’t burn fuel to create heat. It uses the available heat from the air or ground, so it only requires electricity to operate and uses very little, making the system highly efficient.

Heat Pump Basics

The pipes in the ground are filled with liquid, either water or an anti-freeze solution which draws heat in from the surrounding earth, and this flows to the heat exchanger and through the refrigerant coils.

The heat is then distributed through the forced air system for HVAC or hydronic system for water and underfloor heating.

To cool the home, the process is reversed with the warm air being pulled out of the home and into the pipes to be released back to the earth and cold air being pumped into the home.

What Do Geothermal System Permits Cost?

Many municipalities require a permit to be issued before installing a geothermal heat pump system.

Costs of these permits vary from state to state and municipality to municipality. Still, they would range between $75 and $1000 but expect to pay a few hundred dollars for your permit on average.

This is probably the smallest cost of your geothermal heat pump system. Geothermal heat pump systems have two distinct sections or portions: the indoor and outdoor sections.

The indoor section includes the heat pump itself and the ducting or infrastructure that allows the heat to be distributed through the home.

The outdoor sections are the ground loops; the pipes are laid underground to extract the heat from the earth and move it into and out of the home.

Now, let’s look at the indoor section costs and what they comprise.

What Are The Indoor Portions And Their Cost?

Standard family home of 2000 square feet would require a 5-ton heat pump, and with prices between $1500 and $2500 per ton, this cost would be between $7500 and $12500.

A water-to-air heat pump where the energy is used for climate control would be cheaper and less complex than a water-to-water system, where the heat is used for water heating.

In older homes, the cost to replace existing radiators in the water-to-water system can add costs to the project quickly, as geothermal only delivers water at a temperature of around 120℉, while older systems operate around 180℉.

Before the sizing can be accurately determined, the contractor will use the Manual J, which is the industry standard, to evaluate the home’s existing energy efficiency and the heat load.

The factors that influence the required heat pump size are:

1. The Level And Quality Of Insulation

As most of the heat in a home will escape through the ceiling, a home with poor or no insulation would require a larger heat pump than one with insulation that meets the regional standards.

If you plan to get a geothermal heat pump, it would be advisable to install insulation if you don’t have or upgrade your existing insulation.

2. Number And Placement Of Windows

A good amount of heat and energy escape through windows, and if they are not double glazed or have thermal insulation, you will need a bigger heat pump to offset the heat loss.

The number of windows and where they are placed in the home impact the heat loss factor of the home.

While this all seems to be adding dollars to your bill, it would probably balance out to have your insulation and windows made energy-efficient and then be able to install a smaller geothermal heat pump at a lower cost.

3. Heat Emitting Appliances

All electrical appliances release heat when operating, and the heat load released needs to be factored into the equation for the heat pump size.

4. Number Of Occupants In The Home

People, like appliances, also release heat, and if there are many people in the home, the heat load will be more – so you can either evict those extended family members (finally, you have a good reason) or get a larger heat pump.

5. The Local Climate Conditions

If you live in the warmer areas, you would probably be able to look at a smaller heat pump, whereas colder climates would need a larger one depending on the other elements like insulation and windows.

However, the more extreme your climate, the more money you would save with a geothermal heat pump as the costs of fuelling either cooling or heating would drop dramatically.

6. The Size Of The Home & Existing Infrastructure

The larger the home, the more square feet that need to be heated or cooled, and along with the insulation and windows, the existing infrastructure or lack thereof can also add to the cost of the inside installation.

While all of this seems like a lot of work – and it is – a properly accredited and reputable geothermal installer will be able to evaluate and assess all of this and calculate the correct size heat pump as well as advise on any additional work that may be required like ducting or piping.

Additional ducting could cost between $3000 and $ 20000 depending on the volume required.

7. Heat Pump Efficiency Rating

Aside from the factors above, the heat pump features have to be considered, including the efficiency rating of the heat pump. The more efficient the heat pump is, the more expensive it is.

The COP rating measures how much heat is produced relative to the energy needed to produce it, and the EER rating measures how much heat is removed from the home relative to the amount of energy needed to remove it.

The higher these numbers on each, the less electricity and money is needed to run the machine.

8. The Heat Pump Compressor Options

Geothermal heat pumps have three compressor types- single-stage, two-stage, and variable-stage. These stages indicate the operational level of the compressor.

Single-stage only runs at full blast and switches off once the temperature is reached. They are cheaper to repair but use more power to run as they only cycle on or off.

Two-stage compressors are more efficient and can operate at a low intensity throughout the year to maintain the temperature at lower consumption levels and then switch to high intensity during very cold or very warm snaps.

Then move back to efficient operation once the temperature is high is achieved. They are more expensive than single-stage compressors but more efficient to run.

Variable-stage compressors are more efficient than two-stage and can operate at different levels based on the environment’s requirements. However, they cost more than two-stage units, are more expensive to repair, and lack durability.

Now that we have covered the indoor section costs, let’s move to the outdoor section.

What Would The Geothermal Outdoor Portion Cost?

The heat pump comprises between 30% and 45% of the total project cost, as most of the real costs come from the outdoor section of the installation.

The highest costs are the laying of the pipes, and depending on what type of ground loop system you choose or have to use, it will determine the costs for the outdoor segment.

There are three types of ground loops used in a geothermal system: horizontal, vertical, and water/pond loops but the water loops are rare so that we won’t consider them in this discussion.

Because each contractor would charge varying prices, the cost below will indicate the direct price to install these systems rather than the client price.

Let’s look at the different ground loop options and the associated cost of each.

What Is The Cost Of A Horizontal Ground Loop?

The typical direct price to install this system is between $1000 and $2000 per ton, so for the typical home requiring a 5-ton heat pump, the direct cost here would be between $5000 and $10000.

These systems are installed with trenches dug over hundreds of feet long and to a depth of between 6ft and 10ft underground.

What Is The Cost Of A Vertical Ground Loop?

The direct average cost to install a vertical ground loop is between $1600 and $4250 per ton, so the vertical loop installation for a 5-ton heat pump in an average home would cost between $8000 and $21250.

A series of boreholes are dug to install vertical ground loops, ranging between 200ft and 500ft deep. These holes are between 6″ and 8″ in diameter and would be placed about 20 feet apart if you need more than one.

Why Horizontal Loop Are Much Cheaper Than Vertical Loops

The simple reason is that trenching is much cheaper than drilling, and the typical cost per foot of trenching is just $2.50-$5, against the drilling costs of $5-$15 per foot, and depending on soil type and rock removals, this cost can rise to $30 per foot.

Are There Federal Tax Incentives For Geothermal Systems?

The good news is that the Federal Government passed a Federal Tax Incentive for residents that install geothermal heat pumps.

The value of this tax credit is currently 26% and will extend through to December of 2022. After that, it will reduce to 22% for systems installed in 2023 and will not be available in 2024.

How Much Can I Save With A Geothermal Heat Pump?

Aside from the 26% in tax credits, the US Department of Energy advises that installing a ground loop geothermal system would cut your heating costs between 30% and 60% and cooling costs between 20% and 50% immediately.

Geothermal systems also last much longer, with the internal components having around 25 years and the outdoor components doubling that lifespan.

Considering that most of the energy costs in a home are for heating, cooling, and water heating, installing a geothermal heat pump will cover the installation costs in about 4-7 years for new construction and 10-12 years if retrofitted.

While geothermal systems are expensive compared to conventional heating and cooling, they have the added benefits of reducing your carbon footprint and adding significant value to your property.

Buyers are willing to pay more for homes with installed energy and cost-efficient energy systems, and your geothermal heat pump system certainly ticks all of those boxes!


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