Ground Source Heat Pump Cost – The Ultimate Buying Guide

What's a Typical Cost To Install a Heat Pump? Average Price: $6,430 - $12,470
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Ground source heat pumps, also called geothermal heat pumps, are your most efficient central HVAC option – and your most expensive one.

geothermal heat pump system

And that leads to…

Geothermal’s Big Question: Is cutting energy use and operating cost every month by 15% to more than 60% compared with an air source heat pump worth the upfront cost of a geothermal heat pump system?

There is no universal “right answer” because each situation is unique. So, the information provided here will help you answer that question within your own context.

“15% to more than 60%”? Yes, when comparing the efficiency of traditional split system heat pumps to geothermal heat pumps. Air source units are available in SEER ratings of 14 to 26 SEER.

Ground source heat pumps are produced with efficiencies of 18 to 58 EER, which is equivalent to 20.5 to 67 SEER. For further comparison, mini split ductless heat pumps range in efficiency from about 16 to 42 SEER.

OK, with that groundwork done, let’s get to the details.

Cost Range

$14,000 to $42,000 for most systems. The most expensive can exceed $50,000, but that’s rare.

Geothermal heat pump cost varies widely – some would say wildly – because of your system options, which are outlined below.

The price of a complete, new system is $14,000 to $42,000 – that’s the “wild” range. Most homeowners pay closer to the middle of the normal range of $21,500 to $32,000 based on the system size and the type of loop system used. If your cost estimate is in the upper-$20,000s, it will be close to average.

Cost by Ground Source Heat Pump Type

There are four basic loop types in ground source heat pump systems.

Water submerged open loop: $14,000 – $35,000

Water submerged closed loop: $15,000 – $37,000

Horizontal closed loop: $17,000 – $39,000

Vertical closed loop: $22,000 – $42,000

Open Loop in Lake or Wells – System Cost and Design

$14,000 to $26,000 using a lake

$22,000 to $35,000 using wells

While these are the most affordable when a lake is available for use, that isn’t common because local regulations in many areas prohibit these systems because of their impact on water supplies.

Where they are allowed, annual fees in the $thousands may be charged, driving the lifetime cost of the system higher than other options.

Efficiency Range

About 21 EER at the low end to 57 EER at the top. The most efficient rating seems to rise every year as technology improves. That’s also true for other heat pump types.

How is this achieved? The constant supply of water that hasn’t been heated (heat added) or cooled (heat extracted) makes them more efficient than closed loop systems. For example, the WaterFurnace 7 Series can be used in either loop type. The top efficiency for a closed loop system is 31.4 EER.

But when used in an open loop system, efficiency of the WaterFurnace 7 geothermal heat pump rises to 42.5 EER, an increase of 35%. The efficiency ratings are from Energy Star’s list of the most efficient ground source heat pumps.

And as you might guess, lake systems are mostly used in moderate and warm climates where river and pond water temperatures fluctuate throughout the year between cool and warm, but never extremely cold.

They are the most affordable because they require the least amount of excavation. However, in terms of pros and cons, they also require more maintenance than closed loop systems, especially where the water used has high mineral content.

How it Works

Lake loops: In summer, fresh, cool water is pulled into the system, and heat from inside the home is transferred into it as it passes through the heat exchanger before it is dumped back into the body of water at a different location.

The intake and discharge points are separated by as much distance as the property allows to prevent the “same” water being drawn back in that was just released. In a river, intake is upstream of discharge.

In winter, heat is extracted from the intake water before it is discharged.

Well loops: Most setups have an intake well and a discharge well. Other than that, they operate like a lake loop.

Closed Loop in Lake – System Cost and Design

$15,000 to $33,000

These systems require a private body of water on the homeowner’s property because the loops extend up to 100 feet from shore. So, like open loop lake systems, they are not as common as underground systems.

Efficiency Range

They start about 18 EER. The most efficient are close to 34 EER, which is about 60% as efficient as an open loop system. Efficiency varies by location – actually by the temperature of the water the loop is submerged in.

Check with the local geothermal contractors to determine if the body of water you have access to will yield greater efficiency than an underground loop system.

How it Works

The loop is submerged in the water, obviously. In summer, fluid in the loop absorbs heat that is transferred to it through the heat exchanger. The warmed fluid is cycled through the submerged loop. There, the liquid is cooled as it transfers heat into the water.

In winter, the liquid in the loop coils is heated by the water, and the system’s heat exchanger extracts the heat for use in the home.

Closed Loop Horizontal – System Cost and Design

$17,000 to $39,000

These are among the most commonly installed, but they require a large amount of property for the horizontal trenches. Horizontal loop ground source systems cost more than those using a body of water due to more extensive excavation.

But the overall price is lower than for vertical systems because the trenching cost is lesser than the cost of drilling bore holes for a vertical system.

A significant cost factor is the condition of the soils – rocky soil takes longer and is harder on equipment than other soil types, so cost rises.

Efficiency Range

17 EER to 30 EER. While some debate remains on this subject, the best information is that horizontal loops are roughly 10% to 15% less efficient than vertical systems and closed loop systems using a water source.

How it Works

Trenches from 3 feet to 8 feet deep are excavated, and straight runs of piping or flexible coils of tubing are laid in the trenches and covered. The deeper the trenches, the less the soil is affected by surface temperatures, and the more efficient the system will be.

Fluid, usually a mix of water and antifreeze, is circulated through the loop to absorb heat for heating and to dump heat when the system is air conditioning the house.

Closed Loop Vertical – System Cost and Design

$22,000 – $42,000

Drilling boreholes is the most expensive part of this installation. The size and number of holes is, therefore, the largest cost factor.

Efficiency Range

20 to 34 EER. Because temperature deep in the ground is more stable than closer to the surface, the fluid circulating in vertical loops gets cooler in summer and warmer in winter than fluid in shallower horizontal trenches. This makes it more efficient in absorbing and dumping heat.

How it Works

Deep holes are bored, and a sleeve is installed in them. The number of holes is at least two but up to six might be needed with size from 4” to 8”. Loops are placed in each well. Depending on the depth of the holes, they might hit water, but that doesn’t improve or detract from performance or efficiency.

As with other closed loop systems, a water and antifreeze combination is used as the heat transfer medium, and the transfer takes place in a heat exchanger in the system’s air handler.

Water to Air vs Water to Water

What happens inside your home with a ground source heat pump? The most common options are forced air systems and radiant heat systems.

Water to Air or Forced Air

This ground-source HVAC system type employs ductwork.

Split: Most of these are split systems, which means there is an outside component, the condensing unit, and an indoor unit. The indoor equipment is an air handler, just like those used in air source heat pump systems.

The air handler contains a refrigerant coil. As water from the loop passes through the coil, refrigerant transfers heat to it, when in AC mode, or pulls heat from it in Heat mode.

The air handler blower circulates air over the coil, pulling in untreated air and pushing treated air into the rooms of your home through ductwork.

In other words, heat and humidity are removed from the circulating air when the system is air conditioning your home. And heat is added to the air for heating your house.

Packaged: The other forced air option is a package heat pump – one large outdoor component that contains the condensing unit and the air handler. The air handler is connected to the home’s ductwork with a short duct.

Package geothermal equipment can be placed on the roof or on the ground. A package unit is chosen where there is no basement or crawlspace in the house where an air handler can be installed. Their disadvantage is shorter durability since all the equipment is placed outside and subject to the elements all day, every day.

What is treated air? Untreated air? “Treated” air is air that has been cooled and dehumidified in AC mode or heated in Heat mode and is leaving the air handler. “Untreated” air is the air entering the air handler. The air in your home continuously cycles from a state of being treated to becoming untreated and treated again.

How does a heat pump remove humidity? As the refrigerant removes heat from the air in AC mode, the coil gets very cold. Moisture in the air circulating over it condenses on the slanted coil, and it runs into a drain. The result is cooler, drier air.

Auxiliary heat: The air handler is typically outfitted with electric heat strips ranging in size from 5kW to 30kW. They provide emergency heat if the heat pump fails. And on the coldest days, if the heat pump can’t make enough heat to satisfy the thermostat, the auxiliary heat will come on to boost heating capacity.

The problem with auxiliary heat is that electric heat is the most expensive type. If the heat pump is undersized and the backup heat runs a lot, it will significantly offset your efficiency savings by choosing geothermal.

Pros and Cons

These systems work with homes that already have ductwork, so they make the transition to ground source heating and air conditioning less expensive. And you have both heating and air conditioning.

The downside is that ductwork is necessary. If you’re building a home, then you have the added cost of ductwork, usually $3,000 to $5,500 depending on home size, layout, and ductwork type.

Plus, forced air systems pick up dust and other allergens, and spread them around the home, so they are a poor choice for those with severe allergies or asthma.

Water to Water

These are radiant heat geothermal installations, with the equipment in a package, usually installed indoors. The heat absorbed in Heat mode is transferred to the water circulating through pipes and radiators or in-floor radiant heat grids.

A piece of equipment called a desuperheater can be added to provide domestic hot water (water normally heated in a water heater) for your home. It isn’t the same water cycling through the piping.

Instead, a closed pipe is coiled inside a water tank, and water heated by the desuperheater cycles through it. The heated coil heats the water used for sinks, showers, laundry, etc.

Pros and Cons

Radiant heat is very comfortable heat without the potential air quality issues of forced air. It is efficient too because treated air isn’t lost through leaky ductwork. The US DOE suggests that up to 30% of heated or cooled air is wasted as it leaks from ducts.

The obvious downside is that this setup doesn’t provide air conditioning. As a result, they are more popular in northern climates – water to water heat pumps are the top choice in northern Europe, for example, and are catching on in the northern US where air conditioning isn’t essential.

Performance Options and Cost

As with air source heat pumps, you have three primary choices. Costs are for the condensing unit only, aka the outdoor unit.

Single stage units run at full capacity whenever heating and cooling. They are the least efficient but most affordable. Most are not Energy Star qualified.

Cost: $3,300 to $10,200

Two stage condensing units run on low when that is sufficient to satisfy the thermostat. The high stage, or 100% capacity, is used when the thermostat setting is changed by more than a few degrees, or the outside temperature is extreme.

Cost: $3,700 to $11,300

Variable capacity geothermal heat pumps are uncommon, but there are a few available. They modulate output from about 30% to 100%. Capacity changes in small increments to keep the indoor temperature accurate to the thermostat.

Variable capacity heat pumps are the most expensive but also the most efficient and the best for indoor climate control of humidity and temperature balance.

Cost: $5,200 to $12,300

Geothermal Heat Pump Cost by Size

This is the cost for the equipment, either an outdoor condensing and air handler for indoors or a packaged unit that contains both. Both systems include a compressor and a refrigerant coil plus a fan to cool the equipment. Loop costs are below.

Keep in mind that in all sizes, you have the option of single stage ($), two stage ($$) and variable capacity ($$$).

Most manufacturers offer sizes starting at 1.5 or 2 tons up to 6 tons. A few make 7-ton ground source heat pumps for residential installation. In terms of BTU/hour of heat removed (AC) or added (Heat mode), each ton is 12,000 BTU/hour. So, the range is 24,000 to 84,000 BTU/hour.

  • 1.5 & 2 tons: $3,300 to $8,700
  • 2.5 & 3 tons: $4,100 to $9,500
  • 3.5 & 4 tons: $4,800 to $10,600
  • 5 tons: $5,500 to $11,500
  • 6 tons: $6,400 to $11,900
  • 7 tons: $7,100 to $12,600

Loop Costs for Material and Installation

These costs include excavation or drilling, loop materials and the labor cost of installation.

  • Open loop: $4,800 to $12,000
  • Water submerged closed loop: $6,000 to $18,500
  • Horizontal closed loop: $7,200 to $22,800
  • Vertical closed loop: $10,300 to $28,000

Is a Ground Source Heat Pump Worth the Cost?

A major factor in making this decision is whether you plan an open loop system or a closed loop setup.

Open Loop

If you have free access to a pond or lake, then you can install an open loop system for a lot less money than a closed loop system and get higher efficiency.

In this case, then yes, a geothermal heat pump isn’t a lot more expensive than a standard split system heat pump or a mini split system with 4+ zones. Equipment and installation costs are competitive, and the operating cost savings with geothermal are significant.

If you plan to use wells for intake and discharge of water, then the upfront cost goes up. Still, it is worth getting estimates for a ground source system with wells and other heat pump options to compare system costs and operating costs.

Closed Loop

Because these ground source heat pumps are not as efficient and can cost quite a bit more than an open loop system, the advantages are fewer. The most efficient air source split system heat pumps are 55% to 60% as efficient as closed loop ground source units and are installed for 50% to 60% of the cost of geothermal.

Mini split systems are more efficient than air source heat pumps, with EER ratings of 12 to 18 for Energy Star certified units. Compare that with 18 to 30 EER for Energy Star ground source heat pumps, which makes mini split units 60% to 67% as efficient.

The Bottom Line

If an open loop ground source heat pump is an option, then it is a much better long-term value in terms of operating costs. And with energy prices rising, operating costs might soon be the most important factor in the type of HVAC systems homeowners choose.

When considering a closed loop setup, it makes sense to get estimates for standard, mini split and geothermal options. Compare upfront costs with the cost of running the systems based on their efficiency levels.

Most likely, an air source or mini split heat pump will be a cost-effective choice over the first decade or so. After 10 years, the energy cost savings you get from running a geothermal unit will begin to swing the advantage to geothermal.


What size geothermal heat pumps are available?

Sizes range from 2 tons to 7 tons, which is the equivalent of 24,000 to 84,000 BTU/hour.

How long do ground source heat pumps last?

The average for the above-ground equipment is 20-25 years with regular maintenance, though a little less for packaged components.

The loop infrastructure may last up to 40 years, so replacing it might not be necessary when you replace the heat pump and air handler.

Compare air source heat pumps vs. ground source heat pumps.

Air source systems cost less, around $7,500 to $20,000 installed, but are only 35% to 60% as efficient as ground source HVAC systems.

The site says (PDF), “Geothermal heat pumps reach high efficiencies (300%-600%).” What does that mean? What is heat pump COP?

COP, or coefficient of performance, is a way to measure the efficiency of a heat pump. A system that is 300% efficient for heating, for example, creates 3 times or 300% the amount of heat that an electric heater would produce using the same amount of energy. Most have a COP of 4.0 to 5.5, or 400% to 550% efficient.

Is there a federal tax credit for geothermal HVAC systems?

Yes. Qualifying components meet the standards of the Renewable Energy Tax Credits.

Water to air heat pumps must have efficiency ratings of 17.1 EER in a closed loop or 21.1 in an open loop.

Water to water systems must have a rating of 16.1 EER (closed loop) or 20.1 EER (open loop).

The current program runs through the end of 2023.

What is the federal tax credit for geothermal?

The 2022 credit is 26%. The 2023 credit is 22%.

Our guess is that the program or something like it will be renewed beyond 2023, but that’s not a sure thing.

What is the geothermal tax credit form?

Also called the Residential Energy Credits form, it is IRS form 5695. This link should be updated for 2022 by the end of the year.

What is EER rating?

Energy Efficiency rating – it measures how efficiently the heat pump uses electricity to remove or add heat to a dwelling.

What are the best geothermal heat pump brands?

Quality brands that only make geothermal include Bard, ClimateMaster, GeoStar, Hydron and WaterFurnace.

Some brands that make air source heat pumps also offer geothermal, but often the equipment is manufactured for them by a geothermal specialist. These brands include American Standard, Bosch, Bryant/Carrier (made by ClimateMaster), Trane and York.

Note: Trane seems to have paused production of its geothermal line. This could be due to parts/supply shortages or quality/performance issues they are seeking to resolve.

What's a Typical Cost To Install a Heat Pump? Average Price: $6,430 - $12,470
See Costs Near You

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