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How much does a geothermal heat pump cost to install?

Let's look at the financial case of replacing an aging 13 SEER air conditioner and 80 AFUE furnace with high-efficiency conventional equipment versus upgrading to a WaterFurnace geothermal heat pump.

If you're shopping for new HVAC equipment, it's probably because your existing equipment is nearing the end of its useful life or you're building a new house. Both scenarios require some level of investment.

What's the minimum you'd be happy with in your home? If you're considering geothermal it's very likely that efficiency is important to you. If the minimum you'd accept is a 16 SEER air conditioner paired with a 92 AFUE furnace, it makes sense to use that cost as a starting point for analysis because it represents the minimum amount of money you can spend and still be comfortable (literally).

Depending on where you live, costs for a 16 SEER air conditioner and a 92 AFUE furnace can vary greatly—but it can reach $13,000 in many areas. The cost the cost to install a geothermal heat pump varies based on many factors (geography, ground composition, size of home, equipment chosen, etc.) but could cost $25,000 in the same areas. There's currently a 30 % US federal tax credit through 2032. That's $7,500 as a credit on your taxes, not just a deduction. The initial cost difference between an ordinary system and a geothermal system is just $4,500. Your area may also have other additional incentives that won't be factored in for this calculation.

Cost difference between geothermal and new A/C + furnace $4,500
Annual savings of geo versus aging 13 SEER/80 AFUE system[1] $1,416
Time to recoup initial investment 3 years, 2 months
Profit after 25 years (average life of GHP[4]) $41,912
$45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 -$5,000 Initial 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ($4,500) ($3,084) ($1,637) ($159) $1,352 $2,895 $4,473 $6,084 $7,731 $9,414 $11,133 $12,890 $14,685 $16,519 $18,393 $20,308 $22,265 $24,265 $26,308 $28,395 $30,529 $32,708 $34,935 $37,211 $39,536 $40,912 Recoup initial investment 3 years, 10 months $40,912 Return
Loop
Fact

The useful life of the underground energy collector can be more than 100 years[2] and won't need to be replaced at the end of the 25-year life of the indoor heat pump. This means the upgrade costs for the next system will only be for the indoor equipment and, therefore, will be much cheaper.

Some people may ask, "Why aren't you figuring payback for the entire cost of a geothermal heat pump rather than just the difference between conventional and geothermal?"

As we mentioned above, most people have already decided the minimum level of efficiency they'd accept and there's a cost associated with that. But, for a complete look, let's compare the lifecycle costs and payback — on both technologies.

Conventional Geothermal
New equipment 16 SEER/92 AFUE 43.5 EER / 5.1 COP
Annual savings (versus existing 13SEER/80AFUE)[2] $162 $1416
Useful life 15-18 years[3] 25 years[4]
Break-even point NEVER 11 years, 1 month
Return at 25 year mark $26,047 loss $28,912 profit
Cumulative energy savings $5,310 saved $46,412 saved
$60,000 $45,000 $30,000 $15,000 $0 -$15,000 -$30,000 -$45,000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Purchase 2nd System
A conventional system is a $26k loss as compared to a $21k profit over the 25 year expected lifespan of a geothermal heat pump

As you can see, the energy savings from a 16 SEER air conditioner and 92 AFUE furnace will NEVER pay you back during the life of the system. In fact, you'd still be over $10k in the hole when the system needed to be replaced at the end of the 16-year mark—putting you even farther from payback.

When the first WaterFurnace unit finally needs replacement at the end of the 25-year mark, the 2nd furnace and 2nd air conditioner will already be 1/3rd of the way through their expected lives—and you'd be $26,046 in the hole overall. Meanwhile, the WaterFurnace system will have already paid for itself through energy savings - and gone on to generate an additional $28,912.

Another important benefit of geothermal is that the underground energy collector has a life expectancy of more than 100 years[2]. This means the original collector can be used with a second WaterFurnace unit—making the second system much cheaper.

The economics are even more dramatic for the second WaterFurnace system:

A homeowner who chooses a furnace and A/C will have gone through their 3rd (and started on their 4th) sets of equipment to match the lifespan of 2 geothermal units.

50 Year Analysis Conventional Geothermal
Number of Systems 4 2
Returns at the 50 year mark $79,466 loss $87,056 profit
Cumulative Energy Savings $14,414 saved $125,988 saved
$100,000 $75,000 $50,000 $25,000 $0 -$25,000 -$50,000 -$75,000 -$100,000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 $87,056 Profit Purchase 2nd System Loop Value $28,912.28 Purchase 2nd System Purchase 3rd System Purchase 4th System $79,466 Loss
  1. GeoLink Design Studio based on 2500sq ft. home in the Midwest. Electricity: $0.12/kWh, Natural Gas: $1.50/ccf, Annual inflation: 2.18%
  2. 2009 Jana Laboratories study
  3. ASHRAE
  4. US Department of Energy