Saving Money With Geothermal Heat Pumps

How Much Can I Really Save?

Geothermal heat pumps, or ground source heat pumps (GSHP) have been around for more than half a century. The technology exploits the constant temperatures we find right below the Earth’s surface, either for heating or cooling purposes, and has significantly higher efficiency than electrical heating, furnaces or even air source heat pumps.

Geothermal heat pumps will obviously do well when it comes to lowering your carbon footprint, but can you really save money with them?

The goal of this article is to give you an idea of the potential to save money by installing geothermal heat pumps in your home or business – without going further into how geothermal heat pumps work. If you want to learn more about the technological aspects of how we can harness geothermal energy, How Can We Use Geothermal Energy? is a good starting point.


Costs of a Geothermal Heating and Cooling System

The installation of a geothermal heating and cooling system is significantly more complex and expensive than the installation of an air source heating system. It involves drilling, digging and laying pipes, all of which are expensive and time consuming. On the other hand, the benefits are greater.

The financial viability of a geothermal heating and cooling system (of which geothermal heat pumps are an intrinsic part of) is dependent on many different variables:


New construction or retrofitted for an existing building?

This is the first thing you should consider. A geothermal heating and cooling system is less affordable if it has to be retrofitted for an existing building, especially in the case of in-floor (or sub-floor) radiant heating. A geothermal retrofit is sometimes not financially feasible. However, the environmental benefits still apply!

Geothermal radiant floor


What is the type and size of your geothermal heating and cooling system?

Geothermal heat pumps can be used essentially everywhere. However, what system type you can install at a certain location depends on hydrological, geological, spatial characteristics of the land, and finally, how much space you have available.

A distributer/installer should be able to help you to pick the ideal system for your home or business. For now, learn more about these different system types in Geothermal Heating and Cooling Systems.

How much of your energy consumption should be covered by the geothermal heating and cooling system? Do you have enough space available to install a system big enough to provide you with your desired power output? Bear in mind that covering as much of your energy demand as possible might not be the best option from a financial standpoint.


Are you eligible for any financing programs?

Make sure that you figure out what kind of incentives/rebates/grants from the federal, state, and local governments that you are eligible for. The Database of State Incentives for Renewable Energy (DSIRE) should be able to provide you with more information on this.

Also note that you possibly can finance a geothermal heat pump (and the rest of the system) through energy-efficient mortgages.  Check with banks a mortgage companies to find out more about this. Also call up your electrical utility company and ask if they offer any financing for people installing geothermal heating and cooling systems.


How high efficiency rates are you able to get?

One of the key aspects of geothermal heat pumps is that they use the temperatures below the Earth’s surface, and not the outside ambient air, which is what air source heat pumps use. The below-surface temperatures are significantly more stable than those above – even throughout the different seasons of the year. The Earth acts as a massive energy storage (or an insulator), and the temperatures a few feet below the surface is not noticeable affected by outside ambient temperatures dropping.  The temperature range is 45°F – 75°F (7°C – 24°C), depending on latitude angle.

Efficiencies between 300%-600% on cold winter nights are not uncommon. This looks especially good when compared to 175%-250%, efficiency rates for air-source heat pumps during cold outside temperatures.  The bottom line is that temperature differences play a major role in the efficiency of heat pumps and is an intrinsic part of estimating efficiencies.


There are different financial models depending on how you use your geothermal heating and cooling system. Typical applications include:

  • A desuperheater comes as a part of geothermal heat pumps.  These can be used to provide hot water for a swimming pool, showers or whatever else you can think of. Overall energy demand in a building goes can go down significantly if a part of the hot water is supplied by a geothermal heat pump.
  • Then there is in-floor (or subfloor) radiant heating. Hot water circulates through a series of pipes that has been laid beneath the floor.
  • Geothermal heat pumps can be used to control humidity.  This makes efficiency goes up if you are located in a humid area, and would rely on other means to control humidity if it weren’t for a geothermal heat pump
  • Maybe you want to use your geothermal heat pump for your garage, basement, for snow and ice melting in your driveway, or in your greenhouse.


Initial Costs

What is the payback time of a geothermal heating and cooling system? Let’s look at a few typical numbers:

When we are estimating the initial costs of a geothermal heating and cooling system we have to take the system type, size, labor costs and drilling conditions into account. The ground loop of the system (the part of the system that sits below the surface) is usually the most expensive. The rates are usually somewhere between $1,000 and $3,000 per installed ton for the ground loop alone.

The total costs of a geothermal heating and cooling systems for home and small-scale commercial use usually ends up somewhere in the range $10,000 -$25,000.

As you can see, costs are significantly higher than those of air source heat pump systems. In fact, the initial costs of a air source equivalent of a 3-ton geothermal heat pump system, would be between $4,000 and $11,000 cheaper.


Operating/Maintenance Costs

This is where it gets interesting. While the initial costs of a geothermal heating and cooling system are much higher than air source heat pumps, furnaces, or electric resistance heating for that matter, the efficiency rates are generally much higher.

The warranty of the underground piping can be as high as 50 years, while the heat pump usually has a warrant of around 25 years. These systems are extremely reliable and do seldom need repairs.

High efficiency rates combined with low operating and maintenance costs, annual energy savings is typically between 30% and 60%.  Numbers from US Environmental Protection Agency (EPA) show that homeowners save 30-70% on heating and 20-50% on cooling costs by using geothermal heat pumps compared to other conventional systems. This translates to roughly $400 to $1,500 annual savings.

After a certain amount you hit a threshold where saved up money equals costs. This is known as the payback time and is usually somewhere between 5 to 7 years. Compare this to the warranty of a geothermal heating and cooling system, and investing in geothermal for your house or business becomes a no-brainer. Not to mention the obvious environmental benefits that comes with an installation like this.

Energy efficiency and conservation should be top-notch before you even start thinking about geothermal heat pumps. If you reduce your energy consumption, you might not need as large system as you thought. Read more about this in Most Efficient Energy Conservation Techniques.


  1. residential geothermal says

    It is a great system. Expensive to install, but cheaper in the long run. Absolutely a worthwhile investment for a new home if you can fit it into your building budget!

  2. Clifford Tiller says

    Your right. Although expensive but cheaper in the long run. I suits a person who is looking for comfort and budget wise equipment.

  3. Diane says

    We are very disappointed with geothermal during the summer. Humidity in the house hovers at 58% and even higher. Very uncomfortable. We complained to the installer who said get a dehumidifier. I think they should have told us upfront about this additional expense, not only the purchase cost but also the constant running and using electricity all summer. We would not have gone with geothermal if we had known this.

  4. cath mcsorley says

    I was thinking of instaling this form of heating to a new build property. from
    reading ur comment i now am unsure! Any change in the advice u recorded

    some months ago?

  5. jane says

    The overall comfort of our home is much better with geothermal heating and cooling, but the humidity indoors is far too high in the spring & summer without a dehumidifier added to the system. We live in the Mid Atlantic, Maryland, near the water.
    The comment above about geothermal helping with humidity is simply not true every day of the year. Even if your unit is running constantly during very hot days and taking moisture out of the air, in humid parts of the country there will be many days where the humidity is high outside but the temperature is too low for the geothermal heat pump to run all the time. When the unit is not running, it is not taking moisture out of the air, so your house will be humid.
    Our unit is over-sized for our house (beware the over sized unit) and so it only runs about five minutes before the house is nicely chilled down. Even on hot days, this is not enough run time for the system to take humidity out of the air. We have had one 98 degree day this year and that was the only day the humidity indoors approached a comfortable level. So we have an old dehumidifier running constantly. Guests complain that the house is too cool because I keep the thermostat set at 72 degrees, the house feels too damp at a higher temperature.
    Had we gotten better advice form the person selling us the system, we would have purchased a dehumidifier that fit into the system and gotten the same rebates and tax credits on the dehumidifier that we got on everything else! So get the system but be sure to get a dehumidifier, too. You’ll be able to keep the house at a higher temperature on humid days and still be very comfortable. Plus, things in your house will dry out faster!
    We are still happy we installed geothermal because on cold mornings when the temperature hovers around 5 degrees, we’re toasty warm inside. Our house was ALWAYS uncomfortable before. So even though our energy savings are not as promised, the electric bill is still lower than before and we have a house that is much more comfortable.
    Before buying a system, have your air ducts, vents and returns checked out. If the duct work cannot deliver conditioned air to a room and remove unconditioned air, your system won’t work correctly. We had four air ducts that were disconnected in the walls due to old, rotting duct tape and not enough duct work or air returns in an addition to our house. Three of the four contractors who gave us quotes refused to address the duct work problems. I think that was half the problem with the house being uncomfortable. We also had a whole house energy audit and had foam insulation put in the attic knee walls, under the eaves and cantilevered areas of the house, and attic insulation installed.
    I imagine that installing geothermal in a new home with correctly designed duct work would be an ideal scenario. However, for a new or existing home, if you’re a penny pincher who only wants to know if you’ll recoup the cost of the system in X number of years, don’t get it. If you want to live comfortably in your house, install a geothermal system, but add a dehumidifier if you live in a humid part of the country. AGAIN, do your research, get an energy audit first, and remember to address duct work problems BEFORE you install your system.

  6. Bob says

    The reason your system does not control humidity is because it is oversized. A Manual J analysis should have been calculated. If you insisted on a too large of a unit, it’s your fault. Otherwise it’s your contractors fault.

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