What Is a Geothermal Heat Pump?

How Geothermal Heating and Cooling Works

Just a few feet below the surface, ground temperature stays between 45°F and 75°F year-round (around 50–55°F in most of the continental US), regardless of air temperature. A geothermal heat pump exploits this stability by circulating fluid through underground pipes (called a ground loop) to exchange heat with the earth.

In winter: The fluid absorbs heat from the warmer ground, carries it inside, and the heat pump concentrates it to warm your home. Even when it's 0°F outside, the ground at loop depth is still 50°F+ — a far easier source of heat than frigid outdoor air.

In summer: The process reverses. The heat pump extracts heat from indoor air and deposits it into the cooler ground, effectively using the earth as a heat sink.

Types of Ground Loops

Horizontal Loop

Pipes are buried in trenches 4–6 feet deep across a wide area. Requires significant yard space (typically 1,500–3,000 sq ft per ton of capacity). The most affordable loop option ($10,000–$18,000 for a typical home) if you have the land.

Vertical Loop

Pipes are installed in vertical boreholes drilled 150–400 feet deep. Requires minimal surface area — suitable for smaller lots. More expensive ($15,000–$25,000) due to drilling costs but the most common option for residential retrofits.

Pond/Lake Loop

Coils are submerged in a nearby body of water at least 8 feet deep. The cheapest loop option if you have a suitable pond or lake on your property. Less common but very effective.

Open Loop

Draws water from a well, passes it through the heat pump, and returns it to a second well or surface discharge. Requires good water quality and local regulations permitting groundwater use. Highest efficiency of any loop type but limited applicability.

Efficiency and Savings

Geothermal heat pumps operate at COP (coefficient of performance) values of 3.0–5.0, meaning they produce 3–5 units of heating or cooling energy for every 1 unit of electricity consumed. By comparison, even the best air-source heat pumps achieve COP of 2.5–3.5 in moderate climates and drop to 1.5–2.5 in extreme cold.

For a typical home spending $2,000–$3,000 annually on heating and cooling, geothermal reduces those costs by 40–70%, saving $800–$2,100 per year. The system also provides partial hot water heating as a byproduct (via a desuperheater), reducing water heating costs by 30–50%.

Installation Costs

Total installed cost ranges from $15,000–$35,000 depending on loop type, system size, and site conditions. The ground loop is the largest cost component (50–65% of total). Indoor equipment costs are similar to a conventional heat pump. The federal Residential Clean Energy Credit covers 30% of the total installed cost through 2032, reducing net cost to $10,500–$24,500 for most installations.

Pros and Cons

Advantages

• Lowest operating cost of any HVAC system — 25–50% less than air-source heat pumps, 50–70% less than gas furnaces in most markets
• No outdoor unit — no noise, no aesthetics issues, no weather exposure
• Extremely long lifespan: indoor unit 20–25 years, ground loop 50+ years
• Provides heating, cooling, and partial hot water from one system
• 30% federal tax credit through 2032

Disadvantages

• High upfront cost — even after tax credits, costs 2–3x more than a conventional system to install
• Yard disruption during installation — horizontal loops require significant excavation
• Not all properties are suitable — small lots, rocky soil, or local regulations may limit options
• Requires a qualified installer — poor installation (especially loop sizing) leads to underperformance. Use an IGSHPA-certified contractor.

Is Geothermal Right for You?

Geothermal makes the most financial sense for homes with high heating and cooling costs (above $2,000/year), sufficient land for loop installation, and owners who plan to stay at least 7–10 years to recoup the investment. The system is especially attractive in climates with both cold winters and hot summers, where it outperforms air-source heat pumps in both seasons. New construction is the most cost-effective time to install geothermal, as trenching can be done during site work.