Is Geothermal Heating and Cooling Worth the Cost?

Is Geothermal Heating and Cooling Worth the Cost? Heat Pumps Explained

When building a house, homeowners have several ways to power their heating and cooling systems, like oil, natural gas, or electricity. But there’s another option right below our feet. You can install geothermal heating and cooling at you home, but is it worth the cost? And how does it hold up?

Heating and cooling systems are an essential part of our homes, but it comes at a cost. According to the 2021 Annual Energy Outlook from the EIA, space heating represents 15% of the total household electricity use here in the U.S., while space cooling accounted for 16%. Together, they share 31% of the total electricity use in the country … but that’s going to vary based on the region. Along with electricity, the main heating fuels are natural gas and oil. While oil usage is low across the US, it’s still (sadly) widely used in the northeast where I live – we’re talking about 81% of all heating oil. 1 2

But thankfully, one alternative that’s slowly gaining steam is using geothermal energy directly from the ground for heating and cooling your home. If you’re interested in how geothermal energy is used to produce electricity, I have a video on that topic as well.

Geothermal systems have been in place since the 1940’s, initially providing water heating. But with the technology’s evolution, these systems have been used for different purposes, such as electricity generation and heating and cooling systems, also called Ground Source Heat Pumps (GSHP), which take advantage of the ground’s stable temperature to provide heating and cooling. 3 4

Basically, a geothermal heating system is made up of fluid-filled tube loops to exchange heat with the soil, and a heat pump that removes heat from that fluid, concentrates it, and then transfers it to the building using ductwork. That part looks pretty familiar to any other forced-air heating system you’ve probably seen. 5

The heart of a geothermal Heat Pump is made up of a heat exchanger, a compressor, and control systems to regulate the process. The fluid that’s used can range from ground water to a water mixed with anti-freeze, or another suitable refrigerant, that circulates through the ground loops.

But to understand that heating and cooling process, it’s important to know that heat always flows from the higher temperature fluid or body to the lower temperature one. For example, when you put an ice cube into a glass of water, it melts, right? That’s because the water has the higher temperature and more heat than the ice cube, so the heat is transferring into the cube, which causes the ice to heat up and melt. So taking that back to the heat pump …

During the winter, the temperature underground is higher than the surface air, so the cool liquid traveling from the house down inside the loops absorbs heat from underground bringing it up into the house. Then the heat pump compresses the liquid, increasing the liquid’s temperature, which warms the air. Then the warmed air is circulated around the house and exchanged with the cooler air. The cooled liquid from this process is pumped back to the ground to continue this cycle, forming a closed loop. 4 6 In the summer, this process is reversed. The lower temperature refrigerant absorbs heat from the house, which now has a higher temperature than underground, so it’s the same exact principle as before, but in reverse. The heated liquid transfers heat from the house into the ground and returns back up into the house cooled off. 7

cooling mode heating mode

Geothermal systems can be split up into several subcategories, the simplest of which are open-loop geothermal systems. They use an open-ended pipe to pump up groundwater, which is much closer in temperature to the surrounding ground. The water passes through heat exchangers within the heat pump and then then back to the ground, but at a distance from the intake point. This type of system takes a lot of care because you have to make sure the intake water doesn’t damage or clog up the pump or heat exchanger. On top of that, in some locations, there are environmental regulations that require that the output water has to be treated before being discharged back into the ground. Sediment and contaminants from the ground water can clog up and wear down the system, which doesn’t happen in closed-loop systems since the refrigerant flows through the loop without actual contact with ground water. All this makes these systems more expensive to maintain and have a shorter lifespan, but they have a lower up front cost and excellent efficiency. 3 4 8 9

open loop system

Closed-loop systems on the other hand are the most common type of geothermal systems for heating and cooling, and while not always as efficient as open loop systems, they make up for some of the downsides. They can be subcategorized into 4 types according to the orientation of the heat exchanger loops in the ground. 4 5

In vertical loops, as the name implies, they’re vertically oriented, and they require several holes to be drilled straight down into the ground. The number of holes, their depth, spacing between them, and the volume of fluid in the U-tubes vary depending on the soil, temperature variations, and the house’s heating and cooling needs. A great advantage of vertical systems is that they can be installed within a small area. 4

closed loop vertical geothermal system with underfloor heating and cooling

Horizontal loops are composed of pipes placed horizontally in the soil, with tubing usually buried between 1 to 3 meters underground but the length can reach up to 120 meters … they take up a lot of room. And if the loops are installed too shallow, they can run too cool in winter months. Horizontal loop systems are usually installed in locations with larger amounts of ground available for digging, such as farms, country houses … like I said, you need space. 10

closed loop horizontal geothermal system with underfloor heating and cooling

There are also slinky coil loops … not that kind of slinky … these are very similar to horizontal arrangements, but they coil the tubing to overlap itself to save space, so these loops provide the same distance of piping with less area. However, these systems require more coiling per kW of capacity. 10

Closed loop slinky type geothermal system

Finally, pond loops are submerged systems that are installed in bodies of water near the house. These systems don’t require drilling or digging, which can reduce costs, but the water needs to be deep enough so that the loops are not subjected to surface temperatures.

pond loop

Geothermal heat pumps are sized in tons. 1 ton corresponds to 12,000 BTUs and a heat pump with 3.5kW of power. On average, 16 to 23 BTUs per square foot per hour is a standard rule of thumb for heat loss. So in a new American house, which as of 2020 averages 2,301 square feet, it would require about 36,000 BTUs per hour, which brings us to a 3-ton heat pump at around 11kW. 11 12 13

Geothermal systems have some advantages that have raised interest for homeowners around the world. These systems can provide significant savings with heating and cooling, they can work well in almost all climates, they’re environmentally friendly, last longer than conventional heating and cooling systems (sometimes dramatically longer), and require low maintenance. 14 According to one market size report, the geothermal heat pumps market worldwide was valued at $9.5 billion, and is expected to grow at a compound annual growth rate (CAGR) of 7.2% from 2020 to 2027. The residential sector has been the big booster of that and accounted for 49.7% of the geothermal heat pump market in 2019, wtih hrizontal loop systems being the most common. 15

global geothermal heat pumps market

But like all technology, geothermal heat pumps have some drawbacks and challenges that need to be overcome in order to make these heating and cooling systems commonplace.

The high upfront installation cost is a stumbling block, which ranges from $10,000 to $30,000 according to EnergySage, and the larger the system is, the higher the upfront cost. 16 If you want to get more specific on those prices, it’s hard because it’s going to vary based on where you live and the type of system. But the ranges in costs for an average open loop system are between $9,000 – $15,000. And for closed loop systems you’d be looking at between $12,000 – $30,000. And within closed loop systems you have choices between horizontal or vertical loops. Horizontal being between $12,000 – $25,000 and vertical loops being between $15,000 – $30,000. The low maintenance and lower upfront cost of a closed loop horizontal system is why they’re the most common type sold. And these costs are pretty comparable in other areas of the world from what I’ve seen. I found some UK prices that fell pretty much inline with these.17

To put those prices in perspective, the average installation costs for a traditional HVAC system here in the US ranges from $6,820 to $12,350, including new ductwork, a new central air conditioner, and a new gas furnace. Replacing an HVAC system without new ductwork costs between $4,820 and $9,350, depending on the home’s size and equipment used. 18

Although the upfront cost of geothermal may be much higher than a conventional HVAC system, Ground Source Heat Pumps are much more efficient than traditional heating and cooling systems. They can achieve a coefficient of performance (COP) from 3 to 5, which means that for every 1 unit of energy that is used by the system to power itself, it will produce 3 to 5 units of heat for the home. In addition, geothermal heat pumps that are certified by ENERGY STAR are 45% more efficient at heating and cooling than traditional systems. In Canada you might be saving between $600 to $1,440 per year. And depending on your current heat source here in the US, you can see similar savings. The typical payback in savings of the system is usually around 8-10 years. But keep in mind that these systems have an average 20+ year life expectancy for the heat pump, and around 50 years for the underground infrastructure. In many cases closed loop systems can be expected to last between 50-100 years … with little maintenance. 19 20 21 22

In order to reduce upfront costs of GSHP, government policies and incentives like tax credits and grants have been used to reduce the payback period. For example, here in the US, the Federal Residential Renewable Energy Tax Credit (that’s a mouthful ) provides homeowners a tax credit of 30% from the total installed cost of an Energy Star rated system. 16 So a $20,000 system would cost you $14,000 after the tax credit. On top of that, some states also offer grants to homeowners who install geothermal systems, like Maryland, which offers $3,000 in grants. 23 Now you’re talking about an $11,000 system. And the company, Dandelion here in the US, offers a really simple and upfront process of getting geothermal installed in your home. They’ll evaluate if you’re home is a good candidate, help you take advantage of incentives, and provide no down payment loans, so you can start seeing financial savings from day one. Their service area is really focused in the Northeast US right now, but will hopefully continue to expand.

There are a few innovations that have been helping to improve efficiency, drive costs down, and make it more accessible, like Dual Source Heat Pumps (DSHP). Some areas of the world are too hot or too cold for a heat pump to regulate a house’s temperature. DSHP can use heat not just from underground, but also the air. They will switch to whichever source is most effective at that moment, achieving a higher efficiency than a traditional heat pump. They’re about 2-7% more efficient than air source only and 4-8% more efficient than just ground source. 24 25

Smart controls have also been implemented to offer support for the grid, as well as reduce their running costs. If properly synchronized, the smart controls of millions of devices such as GSHPs and electric vehicles would allow the grid to balance supply and demand. Smart controls also allow homeowners to utilize supplier’s dynamic tariffs for their benefit, simply running their GSHPs when electricity prices are the lowest. Heat pumps from the British company Kensa, for example, can be integrated with smart controls to align heating schedules to periods of low-carbon and low-cost electricity. Tariffs such as Agile Octopus, for example, publish half-hourly electricity prices a day ahead. Therefore, the smart control will verify those prices and synchronize them with the household’s usual routine, providing the homeowner with lower running cost. 26

Geothermal heat pumps may not be the first pick for the average homeowner, who isn’t thinking long-term for the environmental benefits, but with further refinements and incentive policies, geothermal systems will continue to become a more compelling choice for the masses.

What do you think? Do want a geothermal system? I know I do. Jump into the comments and let me know.

  1. Frequently Asked Questions (FAQ) ↩︎
  2. A vision for the 2020 RECS: Preparing for the next Residential Energy Consumption Survey ↩︎
  3. Why Are Heat Pumps an Efficient Solution for Your Home? ↩︎
  4. Understanding Geothermal Heating and Cooling Systems ↩︎
  5. Geothermal Heat Pumps ↩︎
  6. The Geothermal Heat Pump Consortium Champions GeoExchange Technology ↩︎
  7. Geothermal Cooling: Everything You Need To Know ↩︎
  8. Open Loop vs Closed Loop Geothermal Systems ↩︎
  9. Dandelion Energy: Open Loop vs Closed Loop Geothermal Systems ↩︎
  10. Slinky coil loops ↩︎
  11. Median size of single family housing unit in the United States from 2000 to 2019 ↩︎
  12. Sizing Geothermal System ↩︎
  13. 4-Step Guide to Designing Geothermal Systems ↩︎
  14. Are geothermal heat pumps right for you? Comparing pros and cons ↩︎
  15. Geothermal Heat Pumps Market Size, Share & Trends Analysis Report By Type (Open Loop, Closed Loop), By Application (Residential, Commercial, Industrial), By Region, And Segment Forecasts, 2020 – 2027 ↩︎
  16. How much does a geothermal heat pump cost? ↩︎
  17. Fixr: How Much Does It Cost to Install a Geothermal Heating System? ↩︎
  18. How Much Does HVAC Installation or Replacement Cost? ↩︎
  19. How Much Do Ground Source Heat Pumps Cost in the UK? ↩︎
  20. Geothermal Heating Systems (Benefits, Costs & How It Works) ↩︎
  21. Geothermal Heat Pump Guide: The Costs and Benefits ↩︎
  22. Guide to Geothermal Heat Pumps ↩︎
  23. Geothermal Heat Pump Cost Savings ↩︎
  24. So Hot Right Now: Innovations in Heat Pump Technology ↩︎
  25. Geothermal Technology for €conomic Cooling and Heating ↩︎
  26. Top Heat Pump Tips: How to Save Energy in Winter ↩︎