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Cost of Geothermal HVAC Versus Other Types of Home Heating Systems

One of the first things you hear from skeptics about Geothermal heating systems, is that they are simply too expensive to be a good economical choice. But is that true? It takes crunching some numbers to find out.

This Geothermal Guide article gives you information about the prices for geothermal HVAC versus other types of home heating systems, and looks at both upfront prices and the cost of operating the system in the years ahead. We’ll use a typical 2,000 square foot home as the basis for the cost comparison.

Equipment and Installation

Conventional HVAC Systems: These systems include packaged units and split systems consisting of a heat pump or gas furnace for heat and a heat pump or central air conditioner for cooling. The level of efficiency varies quite a bit and the cost varies in relation to the efficiency as well as the performance features they might have such as 2-stage heating and cooling and a variable-speed blower.

Standard (low) efficiency conventional HVAC systems with few or no extra features are relatively inexpensive. Equipment prices for a 2,000 square foot home could be as low as $5,000. If you choose high-efficiency, high-performance equipment, your cost for equipment could be as high as $10,000.

As for installation of a standard HVAC system, it costs about the same to install the system regardless of efficiency or performance. Installation prices vary greatly, but on systems of this size, the average would range from $4,000 to $7,000. Therefore, here are cost estimates for conventional HVAC systems:

Geothermal HVAC Systems: Geothermal heating and cooling systems are more expensive for both equipment and installation because there is more involved. The largest additional expenses are in the material to create the loop and the labor to install it.

If you choose an open-loop system that uses a consistent supply of well water, and a separate well needs to be drilled, that will increase the costs by $5,000 to $10,000 in most areas. Where wells cost more than that, most homeowners choose a closed-loop geo thermal system. There is a slight increase in efficiency with an open loop system, but not enough to overcome prohibitive drilling prices. A qualified geothermal contractor will be able to tell you if wells are feasible in your area.

There are differences in efficiency with geothermal heating and cooling systems, but not as great as there are among conventional HVAC systems. All geothermal energy systems are very efficient – 40% to 70% more efficient than conventional equipment.

The equipment includes the geo thermal unit itself, usually a packaged or split geothermal heat pump system. The material includes the HDPE pipe or copper coil used underground or under water. Equipment and material prices for a 2,000 square foot home range from $12,000 to $15,000. Installation costs will be range from $12,000 to $16,000 in most cases.

When comparing equipment of the same relative efficiency, you can see that a geothermal heating and cooling system will cost 2-3 times more than a conventional HVAC system.

Geothermal Versus Traditional Operating Costs

Geothermal heating and cooling is 40% to 70% more efficient than conventional HVAC systems. In terms of heating, the most efficient gas furnaces are about 97% efficient. That means that 97% of the energy used translates into heat for your home. To compare, a conventional heat pump is about 300% efficient. That means for every unit of energy spent, 3 units of heat are created.

The key to that comparison is the use of refrigerant which doesn’t create heat, it captures and uses heat that is already available in the air. A geothermal heat pump can be up to 500% efficient or more in the same type of comparison.

To put it in terms of EER, or Energy Efficiency Rating, (Glossary) the most efficient conventional systems are 16-18 EER. The most efficient geothermal systems are 27-31 EER. That significant difference translates into dramatically lower energy use for geothermal cooling and heating systems.

In short, you’ll reduce energy use and utility bills by up to 70%. In a 2,000 square foot home that may translate into $1,400 a year in cost savings or possibly more.

Current Geothermal Tax Credits

Current federal geothermal tax credits, which run through 2016, provide a 30% tax credit on the entire cost of a geothermal heating and cooling system. That includes the equipment, material, geothermal contractor fees, wiring, etc. There is no cap on the tax credit either. Smaller tax credits for conventional HVAC systems are running out and may no longer be available.

This 30% tax credit for geothermal energy equipment makes them much more competitive in terms of their prices. Combined with the lower energy bills produced by geothermal energy systems, the payback period for choosing geothermal heating and cooling can be 10 years or less in most circumstances.

Finally, with the federal geothermal tax credits in place, the cost of the equipment and installation is very attractive compared to what it was just a few years ago. And with the significant reduction in energy use and lower energy bills, geothermal HVAC systems give homeowners the opportunity to choose green technology while gaining control of their energy costs.