How Much Does Geothermal Heating Cost to Install?

Geothermal heating systems offer a whopping 300 to 600 percent efficiency rating, which can save you money on energy bills while helping to ease your impact on the environment. Despite the efficiency and potential savings associated with these systems, many buyers may be deterred by the high up-front cost of geothermal. To understand whether this technology is right for your home, weigh both the initial costs and potential operating savings, as well as the effect of any tax incentives.

Two Workers Join Residential Geothermal Heating/Cooling Pipe
credit: BanksPhotos/E+/Getty Images
Two Workers Join Residential Geothermal Heating/Cooling Pipe.

Geothermal Overview

Rather than burning oil or gas to produce heat, geothermal systems extract heat energy from beneath the Earth, where the temperature remains between 45 and 75 degrees Fahrenheit regardless of the temperature above the ground. Geothermal systems use a small amount of electricity to pump water or fluid through pipes buried below the ground, where the fluid absorbs natural underground heat energy and transfers it back to the surface. An above-ground heat exchanger uses this heat energy to heat air, which is then transferred throughout the home using ducts. These systems produce more energy than they consume, allowing them to exceed 100 percent efficiency.

Upfront Costs

The average home requires between one and five tons of heating and cooling capacity, depending on size, insulation quality and how tightly the home is constructed. Geothermal heating costs $5,000 to $9,000 per ton compared to $3,000 per ton for traditional heating systems, according to a September 2013 report by National Geographic. Renewable Energy Vermont estimates the cost of the above ground geothermal components at $3,800 to $5,000 per ton of capacity at the time of publication, plus $1,500 to $2,000 per ton for the underground portion of a typical geothermal system.

Cost Considerations

Tightly-constructed or well-insulated homes require smaller heating and cooling systems, and the same is true for geothermal. Cut the cost of your geothermal equipment by sealing air leaks and increasing insulation throughout the home before investing in this technology.

Energy Savings

While geothermal heating and cooling costs several times more than other technologies, these systems pay for themselves in energy savings in 5 to 10 years, according to the U.S. Department of Energy. "The Family Handyman" magazine estimates that geothermal saves you 30 to 60 percent on heating and 20 to 50 percent on cooling costs compared to a traditional furnace and central air conditioner.

Life Expectancy

Homeowners considering geothermal technology may be concerned about the difficulty of maintaining underground pipes. Fortunately, the underground components used in geothermal heating typically come with warranties of 25 to 50 years, while the pumps used with these systems feature a 20-year average warranty. Geothermal systems require relatively little maintenance, including routine filter inspections and changes, as well as regular inspections to ensure that all equipment is functioning properly.

Rebates and Incentives

Many government agencies and utility companies offer incentives to encourage the use of efficient technologies, such as geothermal. "National Geographic" estimates that federal and local rebates together amount to roughly 30 to 60 percent of the cost of a geothermal system. The federal government offers a tax credit through 2016 that amounts to 30 percent of the cost of a geothermal system. The U.S. Department of Energy's Database of Incentives for Renewables and Efficiency provides information on similar incentives offered at the state or local level.