How much does geothermal heating cost?

The cost of digging and laying the ground loop is by far the most expensive part of installing a geothermal heating system. Depending on the type of ground loop system you use, excavation and installation typically account for more than half of the total cost because of specialized digging equipment and costly variables like suboptimal soil or rocky ground.

While the upfront cost of installing the ground loop seems high, it's basically how your geothermal heating system works. The heat pump moves air or an antifreeze solution through these pipes to transfer heat from your house into the ground—and vice versa to cool it. So laying it out properly and sizing your system to your BTU (energy) needs is crucial for a system that will run efficiently for decades.

There are three common ground loops to choose from, each with their own benefits and costs.

Lake loops or open loop systems

The most cost effective system is a lake loop that uses nearby groundwater or lakes for a water to water heat transfer to and from your system. Lake loops can be smaller and less costly to install thanks to the greater temperature difference of the water. However, this isn't an option in many areas as a you need a pond or lake that's at least a half acre wide and 8 feet deep. It's also not ideal in climates where the lake or pond could freeze.

Similar to a lake loop, an open loop system is also cost effective and uses naturally occurring water to assist with heating or cooling your home. These loops use lake or well water directly in the plumbing of the heat transfer loop to circulate heat to and from the heat pump.

Once the water has been used, it's usually deposited in another well or returned to the water source. Again, these systems are cheaper to install, but significantly less common than the two most popular ground loop systems—horizontal and vertical ground loops.

Horizontal loops

Horizontal loops are the most common and cheaper of the two standard ground loops because they only require a trench depth of 4-6 feet. This doesn't usually require any special digging equipment, which helps keep the cost of installation low. However, you need a lot of land to install a horizontal loop large enough to absorb and transfer heat into the ground, especially for larger buildings.

Horizontal ground loops typically require 400-600 feet of pipe (depending on the efficiency of the soil and the pipe material) for every ton of cooling and heating capacity. The average geothermal home system uses a 2-3 ton heat pump which means well over a thousand feet of pipe for even a small system.

Many horizontal loops are buried under spacious areas like parking lots or parks, but a large yard (enough to lay 1,500 - 1,800 feet of pipe for a 3 ton heat pump) can provide enough space for a horizontal loop with the right layout. Ask about layout options like coiled loops to save you space and keep you from installing the more costly option—vertical loops.

Vertical loops

Vertical geothermal loops are exactly what they sound like. When a horizontal loop isn't possible due to ground conditions or lack of space, you'll need to dig down far enough to install a sufficient-sized ground loop system.

Vertical loops are often drilled up to 250 feet, but can be as deep as 400 feet which requires specialized (and costly) drilling and installation equipment.

Size of your house, heat pumps, and air ducts

You can install a geothermal heating and cooling system in most areas in the US. However, not all installations carry the same upfront costs, since every ground source heat pump has to be tailored to the demands of each individual property. In addition to the cost of digging and installing the ground loop, geothermal heat pump costs also include:

1. The square footage of the space. Homes over 2,500 square feet require larger ground loops and more powerful heat pumps.
2. The size of heat pump. A 2-5 ton geothermal heat pump costs $1,500 - $7,500, depending on the size. This size is usually good for homes under 2,500 square feet.
3. The cost of updating or installing air ducts. Air duct installation or retrofitting can add $3,000 - $10,000 to the cost of installing a GSHP.

A geothermal heating system for the average 2,500 square foot home in the US needs a 2-3 ton heat pump (or one with 36,000-40,000 BTU capacity). Geothermal heat pumps cost on average $2,500 per ton to install. A small 2-ton heat pump system can cost around $5,000 for the pump and installation while larger 5-ton systems may run upwards of $12,000.

The good news is, geothermal heat pumps are getting more affordable every year and some 2-3 tons heat pumps are available for as low as $1,500. You just need to make sure you get the right size pump in an energy efficient model, which a contractor can help with.

Heat pumps are sized according to tons and BTU capacity (1 ton = 12,000 BTUs), and the cost increases with every ton. Pumps are also rated for either a closed system, open system, or both so make sure you talk with your HVAC installer about the size and compatibility to make sure you don't overpay for your heat pump.

Here are three more things to look for in a high-efficiency heat pump:

• Higher COP efficiency (heating) rating — 5 beats 4
• Higher EER rating (cooling) — 30 is better than 20
• ENERGY STAR label—as they're more efficient to run

Geothermal heat pumps are the component that moves the fluid through your ground loop system, transferring heat from the ground to your home to heat it, and removing it into a "heat sink" to cool it when your air conditioning is on. A heat pump that's too small won't be able to transfer enough heat through the ground loop. One that's too big will cost more to purchase and run, resulting in higher upfront costs and fewer savings on your heating and cooling costs on your utility bills.

The initial cost to install a geothermal heating pump system typically costs about twice as much as conventional HVAC options. However, once installed geothermal heating systems are much more efficient to run and maintain than furnaces, boilers, or oil-based heaters.

Many homeowners can even recoup the cost of installation within a few years through savings on their utility bills, especially if they can reduce the initial installation costs. You can save on installation costs by opting for a horizontal loop, asking about energy-efficient options, and taking advantage of federal and local tax credits.

Go horizontal and ask about energy-efficient systems

You can save thousands of dollars on installation costs if you have the room for a horizontal closed loop heat pump system. Installing a horizontal system only requires contractors to dig a 4-6 foot deep trench, which is far more cost effective than installing a vertical loop system which averages a depth of 250-400 feet deep.

Also ask contractors about redundant loops and coiled systems when you request free estimates. This more efficient ground loop system that still works for your BTU capacity could save you thousands.

Take advantage of federal tax credits and rebates

As of 2019, homeowners can take advantage of a federal energy credit when they install a geothermal heating system. In 2019, that rebate is 30% of the total cost. Installation of a geothermal system can cost upwards of $30,000 so a 30% rebate ($9,000 in that case) can make that upfront investment in lower monthly energy bills much more manageable.

However, this rebate is set to diminish on an annual schedule, so act soon for the biggest rebate before this credit expires in 2021:

Federal energy credit for geothermal heating installation rates:

• 2019: 30%
• 2020: 26%
• 2021: 22%

Find local and state energy rebates

The federal energy credit is a great way to save money on geothermal installation, but it's not the only option.

Find local and state rebates for everything from your ground loop to the geothermal heat pump itself with initiatives like New York's Ground Source Heat Pump Rebate, which offers a rebate of $1,500 per ton of cooling capacity. To find tax credits for your area, the Database of State Incentives for Renewables & Efficiency has full list of renewable energy rebate options for every state.​

Use nearby bodies of water

Closed and open loop geothermal heating systems that leverage nearby water sources are significantly cheaper to install. Ask if your home is a candidate for lake loop or hybrid systems that use things like cooling towers or standing wells.

Anything that can reduce the size and cost of drilling your ground loop will make installing a geothermal system that much easier.

Ask if soil testing is included in the initial estimate

Soil testing can be expensive (often more than $1,000), but it's important to know the density and efficiency of the ground where you're installing the loop system. Ask if a soil test or sample is part of the initial estimate or if the contractor has worked with homeowners in your area to save on this costly, and often hidden, price of installation.

Ask if you're a candidate for direct use geothermal

Direct use geothermal systems are exactly like what they sound. These systems pump naturally heated groundwater from local sources either directly into your home for things like space heating or water heating. They can also be set to cycle through a heat transfer pump just like a traditional ground source heat pump.

Direct use geothermal heating is much cheaper to install and maintain than even lake loop systems, but it's limited to regions where heated groundwater (i.e. hot springs) is readily available. Ask your contractor if direct use geothermal is available in your area.

Find an efficient, properly sized heat pump

Buy a heat pump that's the right size and the most efficient model in your price range that fits your BTU needs. An undersized heat pump won't give you the heating and cooling you need, and an oversized pump will unnecessarily increase your installation costs.

Once your system is installed, the amount of electricity it takes to run your heat pump will be your only heating expense.