How Much Does Geothermal Heat Pump Installation Cost?

Reviewed by Joe Roberts remodeling expert. Written by Fixr.com.

How much does a geothermal heat pump cost?

Most U.S. homeowners spend somewhere between $15,231 and $27,711 to install a geothermal heat pump system on their property, and the national average cost is $21,154. The price you’ll actually pay for your system will depend on several cost factors, such as the size of your home, the type of system you get, and the soil makeup on your lot.

The upfront costs for geothermal heat pumps are much higher than the prices of other HVAC systems, but there are many benefits that make them well worth it. For one thing, they’re a much more efficient source of heating and air conditioning than standard AC units and furnaces, so they can save you bundles of money on your utility bills. Eventually, geothermal heat pumps pay for themselves.

Since they operate so efficiently, geothermal heat pumps also greatly reduce the fossil fuel emissions of the homes they’re used in. Heating and air conditioning account for roughly 51% of the energy your home uses, so swapping out your old HVAC for a high-efficiency geothermal heat pump is one of the very best ways to make your home more eco-friendly. 

Still, there’s no denying that these systems can be prohibitively expensive. Luckily, there are multiple rebates and tax incentives that make them more affordable, and there are also ways to finance the remaining system installation costs if you don’t have enough cash on hand.

Keep reading, and we’ll break down the various factors that determine how much you’ll pay for your geothermal heat pump. Afterward, we’ll point you to some resources for making your system more affordable and explain how you can cover the costs. 

What is a geothermal heat pump?

A geothermal heat pump is an HVAC system that both heats and cools your home while using less energy than standard HVAC appliances. It accomplishes this by harnessing the constant temperature of the ground—and sometimes the water—outside your home. 

In winter, the ground below the frost line is warmer than the air above ground. In summer, the ground is cooler than the air. This is also true of large bodies of water like lakes, ponds, and aquifers. Heat pumps take advantage of this temperature difference using systems of pipes buried deep underground. These pipes are filled with water and sometimes antifreeze to serve as a heat exchanger for the HVAC system. 

In winter, these pipes circulate the solution underground, where it absorbs heat. Then, the system runs the solution to the heat pump unit in your home. The pump’s air handler then sends the collected heat through your ductwork, providing hot air to your home. In summer, the system runs backward, absorbing heat from the air inside your home and sequestering it below the ground, thereby cooling your home.

There are several different types of geothermal heat pumps that we’ll talk about later, but this is more or less how they all work. This design makes geothermal heat pumps up to 50 percent more efficient than traditional HVAC systems. Imagine paying 50 percent less to heat and cool your home every year! Since geothermal heat pumps typically last 20 years or longer, they can save you thousands of dollars on operating costs over their lifespans. 

If you’re still a little foggy on exactly how geothermal heat pumps work, no worries! They’re complicated appliances. This video from the Department of Energy can help illustrate exactly how they work:

Factors in a geothermal system’s costs

System type

The type of heat pump you get is one of the biggest factors influencing your system costs. Geothermal heat pumps come in four varieties, and the total costs to install each of them differ. Here’s a quick breakdown:

• Horizontal loop systems: These are typically the cheapest systems, though they aren’t an option for every home. They get their name from the orientation of their thermal transfer pipes, which run horizontally beneath large pieces of land. Because they’re oriented horizontally, the pipes for this type of system don’t have to be buried very deep. This keeps the labor costs for installing these systems low. However, you need a wide lot to dedicate to the piping, so you may have to opt for a different system type if your property doesn’t include a big yard. 

• Vertical loop systems: The heat exchanger pipes in a vertical loop system are oriented vertically, and they run deep underground. The benefit of this is that they can fit onto smaller properties. The downside is that installation crews have to drill much deeper to accommodate the pipes. The result is that these systems can cost up to $10,000 more to install than a horizontal loop system. 

• Pond loop systems: Pond loop systems work a little differently than other geothermal heat pumps. Instead of harnessing heat from the ground to operate, these systems harness heat from nearby water sources. The installation costs for these types of systems depend on how close the water source is to your home. 

• Open-loop systems: Open-loop systems can be even cheaper than horizontal systems, but they aren’t a viable option for all homeowners. Unlike the other three system types, which repeatedly circulate the same liquid solution in a closed loop—hence their classification as closed-loop systems—open-loop heat pumps continuously pull new water from a nearby source into their pipes, run it through the system to extract heat, then dump the water back out. Like pond systems, an open-loop heat pump requires a large body of water close to the property. Additionally, some local regulations may prohibit residential water discharge in some areas, which is part of the reason open-loop systems aren’t always an option. 

Unfortunately, the only way to determine which of these systems will work best for your home is to contact a heat pump installer.

System size

In addition to coming in different types, geothermal heat pumps also come in different sizes. The larger the system, the more powerful—and expensive—it will be. The ideal size of your system will depend on how big your home is.

The size of a heat pump is measured in British Thermal Units (BTUs), a metric of how much heat they provide or remove. For simplicity, system size is usually listed in tons instead of BTUs, with one ton equaling 12,000 BTUs. For example, a five-ton HVAC system is also a 60,000 BTU system.

To provide all the heating and cooling you need, your system should have between 1 and 1.25 tons for every 500 square feet of your home. So, if your home has 2,000 square feet of floor space, you’ll need a 3–4 ton system. It typically costs about $5,559 per ton to install a geothermal heat pump system, so a system of this size would likely cost between $16,678 and $22,237.

You can use these numbers to find an estimate based on the size of your home, but be aware that these prices are simply based on national averages. In some areas, installing a geothermal heat pump system can cost as much as $8,000 per ton. The layout of your home can affect the zoning needs of your system as well, which can also impact your price.

This variability makes it impossible to know exactly how much your heat pump will cost until you meet with an installer. 

Energy efficiency

Geothermal heat pumps are the most energy-efficient type of HVAC system, but they aren’t all equally efficient. As with any other type of system, more efficient units use better—and therefore more expensive—technology, so high-efficiency systems tend to cost more than low-efficiency models.

Because geothermal heat pumps both heat and cool a home, they have two different efficiency metrics: 

• Coefficient of performance (COP) for heating
• Energy efficiency ratio (EER) for cooling

The higher either number is, the more energy efficient the system is. In general, any closed-loop geothermal system with a COP over 3.6 and an EER over 17.1 will be highly efficient. Efficiency standards for open-loop systems are a little higher, and open-loop models with COPs over 4.1 and EERs higher than 21.1 are relatively efficient. 

If reducing your emissions and keeping your home’s heating and cooling costs low are your top priorities, opt for systems that meet these standards. To make this easy, just look for models with an Energy Star certification. Energy Star only certifies geothermal heat pumps that are 61 percent more efficient than standard models. 

Soil and water conditions at your property

Because heat transfer with soil or water is such an important component of a geothermal heat pump’s functions, the geology and hydrology around your house will determine the type of system ideal for your property and how large its ground loop must be.

If the ground around your property has excessive amounts of rock, for example, you may have to get a vertical system instead of a horizontal one since rock doesn’t transfer heat well. Conversely, if the makeup of the soil around your home is highly conducive to heat transfer, you could get by with a small horizontal system. If your home isn’t near any large water sources, both a pond loop and an open-loop system are probably off the table. It all depends.

Unfortunately, unless you’re an expert geologist who spends a lot of time working in their own backyard, you won’t know exactly what kind of soil your home has until you meet with an installer who can take a survey. Because of this, you shouldn’t bank on getting a more affordable system until after a professional consultation. 

Whether you’re retrofitting or building a new home

It’s usually cheaper to install a geothermal heat pump in a new construction home than it is to retrofit a heat pump onto an old home.

This is partially because installing a horizontal system greatly disrupts the landscape of a home’s lot. This can negatively affect an existing home’s foundation and the topography around it, so more compact and expensive vertical loop systems are better for many retrofits.

The expenses of updating a home’s ductwork and electrical systems to accommodate a geothermal heat pump also contribute to the higher costs of a retrofit. For example, if your current HVAC system is ductless, you’ll have to add the costs for new ductwork to the costs of installing the heat pump itself.

Of course, if you want to get a heat pump for an old home, you can still financially benefit from doing a retrofit job. Just expect it to cost a bit more upfront. 

Geothermal heat pump installation pricing tiers

The budget option

If you want to get a geothermal heat pump as affordable as possible, you have a few options to ask your installer about. First, ask if your property could accommodate a horizontal loop system. This will likely be your cheapest option, but don’t get married to the idea if you’re retrofitting. As we said, vertical loop systems are usually better for retrofits. Additionally, soil conditions can put horizontal loop systems out of the question. 

If a horizontal loop system isn’t an option, but you’ve got access to a large body of freshwater, ask your installer how much it would cost to install a pond loop or open-loop system. Prices for either system will depend on how close the water is to your home, so they could cost more than a vertical loop system, but they could also cost less.

If you have no choice but to go with a vertical loop system, opt for a model that’s just efficient enough to take advantage of the federal tax credit. Monopolizing on this valuable incentive will make your system considerably more affordable, but every unit of efficiency you get above the tax credit’s requirements will cost you extra upfront.

Alternatively, you can hybridize your existing HVAC system by adding a small geothermal heat pump to it without getting rid of your furnace and air conditioner. The three appliances will work together to regulate your home’s temperature, which will be more efficient than only using the furnace and AC. That said, it won’t be as efficient as getting a heat pump large enough to replace the other two appliances. This option means you’ll spend more on maintenance in the long term since you’ll need to maintain three appliances instead of just one. Still, the initial costs would likely be lower. 

Your last option is to get an air source heat pump instead of a geothermal model. Air source heat pumps aren’t nearly as efficient as geothermal options, and they often require that you keep a furnace in your home to help cover your heating needs, but they’re more efficient than standard systems. Best of all, they are thousands of dollars cheaper than geothermal models. 

No matter what type of system you go with, you shouldn’t even try to DIY your heat pump installation to save on labor costs. This is a complex job that requires a lot of expertise and heavy-duty excavation, so it should only be attempted by professionals.

The mid-range option

For customers who can afford to spend a little more on geothermal heat pump installation, our recommendation is largely the same as it is for budget-conscious customers: first, ask your installer what your options are. 

Vertical loop systems aren’t inherently better than horizontal loop systems. Vertical loop systems just take up less space, so there’s no reason to pay extra money if a horizontal system is an option for your property.

The only real difference in our recommendation is that you should opt for a system that’s as efficient as you can afford. The more efficient your system, the more energy savings you’ll reap over the course of your heat pump’s life. 

The high-end option

If you want to install the best geothermal heat pump available and have the money to make it happen, you should still ask your installer what system type and size they’d advise for your home. Then, depending on what they recommend, get a system of that type with state-of-the-art efficiency. 

If your home is especially large, going this route could cost over $40,000, but if you’ve got that in the budget, it’s one of the best ways to save on energy costs long-term and keep your home’s emissions low. Only switching your home to a renewable energy source like solar is as good for your wallet and the planet. 

If you’re feeling especially splurgy, you could also add a desuperheater to your system. This device will divert some of the heat your system collects—either from your home or from the ground—into your water tank, meaning your heat pump will also provide your home with hot water. This will increase your installation costs by several hundred dollars, but it will lower your energy bills, thereby netting you additional energy savings on water heating.

Lastly, if you want your system to run as efficiently as possible, you should take this opportunity to update your home’s insulation. Get a professional energy audit of your home. If it reveals any leaks in your insulation, reinforce those areas with new insulation to ensure your HVAC system is as energy-efficient and cost-effective as possible. 

How to pay for your geothermal heat pump

The high costs of geothermal installation understandably discourage many from investing in these efficient HVAC systems. Fortunately, though, there are a few ways you can cover these costs without breaking the bank. 

Apply for the federal tax credit and other incentives

The best way to pay for your system is to apply for every incentive and rebate available to you, and the first incentive on your list should be the federal tax credit. Until 2033, installing a new, Energy Star-certified geothermal heat pump will net you a tax credit of 30 percent of the project’s costs. So if you get a system that costs $20,000, you’ll get credited $6,000 on your taxes the following season, making your system that much easier to pay off. 

In addition to the federal tax credit, you can apply a wide variety of state and local incentives to your geothermal installation costs. You can also sometimes take advantage of government or manufacturer rebates. The best part is that you can often apply for multiple incentives at once. To learn what incentives are available in your area, check out this resource from DSIRE. 

Finance through your installer

Some geothermal installers partner with financial institutions to offer their customers flexible payment plans. If you can’t afford to pay for your geothermal heat pump out of pocket completely, ask your consultant about the installation company’s financing options. They may cut you a deal none of your other options could match. 

Take out a personal loan

If you don’t like the financing your installer offers, you can take out a personal loan to cover the costs of this project instead. Depending on your credit score, this option might have the steepest interest rate, but it’s also a little safer than the following options since it doesn’t use your home as collateral.

Take out a home equity loan

Home equity loans work a lot like personal loans. You apply for the loan, the lender assesses your financial situation, and they give you a lump sum of money depending on what they think you’re good for. 

There are two key differences, though. First, the equity you have in your home is factored into your interest rate, so the more equity you have, the better your interest rate will be. Second, these loans use your home as collateral, so you could lose your home if you fail to keep up with the payments. These factors often make these loans a little easier to pay back, but they have higher consequences for defaulting. 

Open a HELOC

What home equity loans are to personal loans, home equity lines of credit (HELOCs) are to credit cards. With a HELOC, you open a new line of credit you can repeatedly use to finance home improvement projects. The debt you accrue with your HELOC comes with a regular payment schedule, just like credit card debt. Unfortunately—as with a home equity loan—failing to keep up with these payments could mean you lose your home.

Other factors to consider

Pulling permits

As with any large home improvement project, installing a geothermal heat pump requires pulling permits and adhering to local and federal regulations. Luckily, if you hire a qualified contractor, they’ll handle all of this for you. You’ll still have to pay for it all, though. 

Depending on what’s required in your area, getting the necessary permits for this job can add a few hundred dollars to the total costs, so be sure to account for permits when you’re budgeting. 

Notifying your HOA

Geothermal heat pump installation involves a lot of loud machinery and big crews, which can greatly disturb the peace in your neighborhood. If your neighborhood has an HOA, this can result in serious conflict. To avoid a nasty scene and wasting your money on a project that your HOA forces you to halt (yes, they often can), be sure to get HOA permission for this project before your crew shows up to break ground. 

The cost of a heat pump HVAC system

Geothermal heat pumps are expensive. There’s no denying that. But with their second-to-none energy efficiency and long lifespans, they can save you more money in the long run than they cost upfront. And with the various incentives and rebates available to people who invest in these eco-friendly HVAC systems, they’re a feasible option for just about any homeowner.