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Costs and benefits of geothermal heat pumps

Last updated 8/7/2019

The cost of a new ground source heat pump (GSHP) installation will vary based on a variety of factors, including the type of system, size of your home, and the physical characteristics of your property. While the upfront cost may look large in comparison to other heating and cooling technologies, the long-term savings of geothermal systems can often more than justify an installation.

costs and benefits of ground source heat pumps

How much does a ground source heat pump installation cost?

The total upfront cost of a ground source heat pump depends on many factors. Installing a home heating and cooling system is a large project, so you might expect to pay between $10,000 - $30,000 on a system. For smaller homes with lower heating and cooling loads, expect to be on the lower end of this spectrum. For larger properties or commercial buildings, higher upfront costs are the norm.

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Ground source heat pump rebates and incentives

In most cases, a ground source heat pump system will save you money in the long run, but the upfront costs of installation can look a little daunting. If you are concerned about the price tag for geothermal energy, understanding the rebates and incentives available to you can help you determine if it is something you want to invest in.

Some states–such as Massachusetts and Pennsylvania–offer residential rebates for ground source heat pump installations. Individual utilities may also offer financial incentives for geothermal, typically as Energy Efficiency incentives. Additionally, the federal Residential Renewable Energy Tax Credit (also known as the Investment Tax Credit, or ITC) gives homeowners everywhere a tax credit equal to 30 percent of the total installed cost of a ground source heat pump system.

For more information on what rebates and incentives are available near you for geothermal heat pumps, visit the Database of State Incentives for Renewables & Efficiency (DSIRE).

Factors that determine the cost of a GSHP system

The total cost of installation for a geothermal heat pump system depends on a number of factors, from the type of ground loop you install to your heating and cooling needs, and ultimately to the geology of your property.

Type of ground loop

The three major types of ground loops–horizontal, vertical, and pond/lake–all come with varying costs. The most inexpensive option will usually be a pond/lake loop, but you’ll need to have a body of water on your property for this to be a feasible option. 

Horizontal and vertical ground loops are much more common in GSHP installations, and the type you install will depend on the available space on your property. Horizontal ground loop geothermal systems are the most common residential geothermal option and are typically less expensive than vertical loop systems due to lower labor costs associated with the install.

Equipment quality

Any home technology upgrade will come with a range of equipment options to choose from. Some equipment is on the lower end of the quality scale (sometimes called “contractor grade”). This may be driven by the efficiency of the system and the reputation of the manufacturer. Geothermal heat pumps have several ratings associated with them to indicate product quality, including the Energy Efficiency Ratio (EER) and the Coefficient of Performance (COP)

A geothermal heat pump’s EER is a metric that rates its ability to cool an area efficiently. The number is a ratio of the heat removed from your home over the amount of electricity used to do so, meaning that a higher EER rating means a more efficient system. Geothermal heat pumps typically have an EER rating between 13 and 18. 

A heat pump’s heating efficiency is rated by COP. Ground source heat pumps typically have COPs between 3 and 5, which is also a ratio also representative of heat produced to electrical input. In general, ground source heat pumps with higher EER and COP ratings will cost more money to install but heat more efficiently. 

In addition to EER and COP, you can look for a government-certified ENERGY STAR label on some geothermal heat pump products. Ground source heat pumps with an ENERGY STAR label are certified by the Department of Energy as having above-average efficiency, making them the best choice for saving energy (and, therefore, saving on your utility bills). Ground source heat pumps with the ENERGY STAR level have high EER and COP ratings: to receive an ENERGY STAR label, a ground source heat pump must be over 45 percent more efficient than standard products. Additionally, these products must have an EER rating above 17.1 and a COP rating above 3.6 (for closed-loop systems).

Installation complexity and additional upgrades

Along with the heat pump unit and ground loop, your home duct system is a vital component to any GSHP system. If you have a pre-existing duct system that is well-insulated and sized appropriately for your geothermal system, you won’t have to pay extra money to retrofit your home with new ducts or update your current ductwork. For large homes with ductwork needed, expect to pay more for your geothermal installation.

System size/heating and cooling load

The installed cost of a GHSP depends on the size of the area that you want to heat and cool. Based upon the size of your home, the performance of your insulation systems, and more, your geothermal installer will recommend a certain size heat pump. Expect to pay more money for a heat pump with a higher capacity if you have an especially large area to keep warm or cool.

Site conditions

Lastly, the geology and accessibility of your property can have an influence on the price of a GSHP installation. Given the heavy equipment that installers need to dig the appropriate trenching for ground loops, it’s important that your property is accessible to large machinery. The more time and effort it takes for an installation crew to get to your property, the more you might have to pay. Additionally, geological conditions can influence costs. Depending on the soil and rock type under your property, your installer may need to use a more or less expensive material for the ground loop to make sure your system isn’t at risk of being damaged.

Financial benefits of ground source heat pumps

According to the International Ground Source Heat Pump Association (IGSHPA), GSHPs can offer between 25 and 50 percent savings on heating and cooling costs compared to conventional fossil fuel systems. The payback period for a typical geothermal heat pump system, or the time it takes to save your upfront investment in the form of reduced energy costs, is between 5 and 10 years, according to the Department of Energy. 

One of the biggest advantages of ground source heat pumps (and a big reason why you can save on energy costs by going geothermal) is their efficiency. A well-installed ground source heat pump system is capable of providing 3 to 4.5 times the amount of electrical energy it consumes in the form of heat energy for your home. This is possible because ground source heat pumps move heat, rather than burning fuel. As a comparison, the best oil-fueled furnaces can only approach a 1-to-1 ratio of energy consumed to heat energy provided. 

Another great benefit of GSHPs is their longevity: you can conservatively expect a new geothermal heat pump ground loop to last for more than 50 years and the indoor components to last for about 15 years. This means you’ll have access to reliable, low-cost heating and cooling for several decades, which in turn means significant lifetime savings from geothermal. 

Calculating “payback period” for ground source heat pumps

The payback period for a geothermal heat pump system can vary greatly depending on local utility rates and your upfront costs. In general, if you live in an area with high energy prices, you can expect a shorter payback period with geothermal. It’s safe to assume that most ground source heat pump systems will pay for themselves in somewhere between four and fifteen years.

Environmental impact of geothermal heat pumps

In addition to the financial benefits of installing a ground source heat pump, there are several positive environmental impacts of upgrading your property’s climate system. 

The high conversion efficiency of ground source heat pumps means that you’ll use less fuel to heat or cool your home. This translates to less power generated at power plants from fossil fuels like coal, natural gas and oil, which lowers the amount of greenhouse gas emissions and other pollutants entering the atmosphere.

You can lower your carbon footprint even further by switching all of your energy use, including your heat pumps, from fossil fuel-generated to solar electricity. Installing solar panels on your roof makes it possible to power your ground source heat pump system (and the rest of your home) with free, zero-emissions electricity. 

And as solar costs falls across the country, the average U.S. homeowner breaks even on their solar investment by year eight. Pairing your home heating and cooling system with locally generated solar electricity is a cost-effective way to heat and cool your home while reducing your reliance on fossil fuels. 

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