How a Geothermal Heat Pump Works
A geothermal heat pump heats and cools your home by moving heat between your home and the ground, rather than generating heat directly.
You might already be familiar with an air-source heat pump, which moves heat between your home and the outdoor air. A geothermal system works the same way, with one big advantage: underground temperatures hold steady between 50 and 59 degrees Fahrenheit year-round, even when it's freezing outside or sweltering in summer. That stability is what makes geothermal systems so efficient.
A geothermal system has three main parts:
The ground loop — a network of pipes buried underground or submerged in water. Fluid runs through them, absorbing or releasing heat depending on the season.
The heat pump unit — installed inside your home, it contains a compressor, refrigerant, and heat exchanger to transfer heat between the loop fluid and your home's air.
The distribution system — ductwork or another delivery method that moves conditioned air throughout your home.
Some geothermal systems can also heat your water, so one system handles heating, cooling, and hot water together.
Types of Ground Collectors
The right loop type depends on your property. There are a few common configurations:
From energy.gov
Deep Vertical Heat Collector Narrow boreholes are drilled deep into the ground, typically 150 to 300 feet per ton of heating capacity. This option needs very little surface space (as small as a 10' x 10' area), making it a good fit for suburban lots or rocky terrain.
Shallow Horizontal Heat Collector Pipes are laid in long trenches dug 4 to 6 feet deep. This requires more land, roughly a quarter to three-quarters of an acre of open yard, but avoids the deep drilling of a vertical system.
Pond Heat Collector If your property borders a body of water at least 8 to 10 feet deep, coils can be submerged directly in the water.
A local installer can assess your property and recommend the best approach.
Energy Efficiency
Geothermal heat pumps are more efficient than any other home heating and cooling system, including standard air-source heat pumps.
An Energy Star-certified geothermal heat pump uses an average of 61% less energy than a standard heat pump, which can translate to around $830 in annual savings. Under the right conditions, a system can produce 3 to 6 times more energy in heat than the electricity it consumes.
What a Geothermal System Costs
A geothermal heat pump system, including installation, can cost up to $50,000. The exact price depends on:
The type and size of the ground loop
Your property's soil and terrain
Local permitting and labor costs
The size of your home
The installation, including drilling or excavation, typically makes up the largest portion of the total cost.
What about tax credits? The federal tax credit for purchased geothermal heat pumps expired at the end of 2025. Local utility or state incentives may still be available in your area. Check with your installer or local utility for current options.
Leasing as an alternative If the upfront cost is a barrier, a lease lets you get a geothermal system with no large upfront payment. Instead, you pay a fixed monthly amount that covers the equipment, installation, and maintenance. Palmetto offers geothermal leasing through the Comfort Plan.
Considerations
Pros
High efficiency in all climates, including extreme heat and cold
Can handle heating, cooling, and water heating in one system
Very quiet operation
Long lifespan: 20 to 25 years for the heat pump unit, up to 50 years for the underground loop
Durable regardless of weather conditions
Lower carbon footprint compared to fossil fuel systems
Cons
High upfront cost if purchasing outright
Requires available land or space for the ground loop
Installation is more involved than a standard HVAC system
Is a Geothermal Heat Pump Right for Your Home?
Geothermal is worth considering if:
You have high utility bills during hot summers or cold winters
Your property has enough open land or is near a body of water
You want one system to handle heating, cooling, and water heating
You want to reduce your home's reliance on fossil fuels
A qualified local installer can assess your home's heat load and property to tell you what's possible.
Frequently Asked Questions
Is a geothermal heat pump worth it?
For homes with high heating and cooling costs, a geothermal system can deliver meaningful long-term savings through lower energy bills. The bigger upfront cost is the main trade-off, which is why some homeowners choose to lease instead.
How much does a geothermal heat pump cost?
A new system including installation can cost up to $50,000. The actual cost varies based on your home size, property type, and the loop configuration needed.
Do geothermal heat pumps work in all climates?
Yes. Because geothermal systems draw from stable underground temperatures rather than outdoor air, they maintain efficiency even in extreme cold or heat. A local expert can help confirm whether a system is the right fit for your specific area.
What's the difference between a geothermal heat pump and an air-source heat pump?
Both move heat rather than generate it, which makes them more efficient than furnaces or air conditioners. The difference is the source: air-source systems exchange heat with the outdoor air, while geothermal systems exchange heat with the ground. Ground temperatures are more stable, which is why geothermal systems are generally more efficient.
This article is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice.