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Geothermal Heating Systems
(Benefits, Costs & How It Works)

A look at geothermal heating systems, their features and benefits, costs, how they work, and how much money you can save.

Whether you are building a new home altogether or want to make your current HVAC system more energy-efficient, geothermal heating systems may be what you are looking for. If you are prepared to handle the initial cost which can be steep, you can potentially save lots of money in the long-run by reducing your utility costs up to 60% annually.

See here for a comparison of traditional residential gas and propane furnaces.

Covered in this article:

7 Advantages of a Geothermal Heating System

  1. Low MaintenanceThe hardest time you are likely to have with your geothermal heating system will be over once the installation is done because these systems require very little maintenance. The Earth loop (piping) system is all covered underground and barring an extreme seismic event, should be well-protected for the duration you have it installed. The pump and fan system are all located inside the home where they are protected from the elements and are simple enough that they generally require only minor maintenance and upkeep.
  2. You May Qualify For Incentives Depending on where you live, installing a geothermal heating system in your home may make you eligible for government grants and tax rebates. Local utilities may also offer certain incentives.
  3. Add Value To Your Home In today’s housing market geothermal HVAC systems can be an attractive feature to a potential home buyer, given that it usually means lower heating bills. That is why so many homeowners look at the installation of a geothermal system as an investment rather than an expense. These kinds of heating systems can actually add value to your home should you ever be in the position to sell it.
  4. Efficiency Of course, one of the biggest draws to geothermal heating is the excellent efficiency they offer. While the COP rating of your particular unit will certainly have a bearing on exactly how efficiently it operates, most average-priced geothermal setups still offer excellent efficiency that’s on par with that of even the highest AFUE rated furnaces and boilers. However because much of the actual heating energy is drawn from the Earth, there is often less total energy that must be supplied from local utility companies.
  5. Ecologically Responsible People are becoming more aware of their carbon footprint these days which is one reason why geothermal heating systems are in relatively higher demand now than they have ever been. Since they use heat that is already stored beneath the ground, they are totally sustainable and have almost no negative effect on the environment.
  6. Geothermal Systems Can Be Paired If you already have a traditional forced air heating or cooling system, geothermal systems can be easily paired with them. You can actually power your current radiant flooring system and other such HVAC implements with geothermal heating.
  7. Little Space Is Used The most important components of geothermal heating systems (and the most space consuming) are buried underground. The rest of the system can be easily installed in your basement or garage and does not take up much room at all.

How Geothermal Heating Works — 2 Types Explained

Instead of using non-sustainable sources of heat like fossil fuels, geothermal heating systems use 100% natural and sustainable heat from the Earth. This heat comes from the natural activity in the Earth’s core and some is also absorbed from sunlight during the day.

Type of Geothermal Heating System How it Works
Open-loop system
  • draws in warm water from underground
  • circulates it through the heat pump
  • drains the water back outside through a different well or to a nearby stream.
Closed-loop system
  • circulates antifreeze or a refrigerant solution through a closed pipe setup, drawing heat from the ground.

The great thing about geothermal heat is that no matter where you live, the temperature underground stays pretty consistent throughout the year. For instance, you may live in an area where the winters can get to -30 degrees Celsius but the temperature starting at just 6 feet underground will still stay significantly warmer than that even in the most frigid winters.

3 Key Components of a Geothermal Heat Pump System

  1. Heat pump – can be installed inside your home in your basement. The heat pump then distributes the warmth and mixes it with the air in your vents.
  2. Heat transfer medium – a series of pipes are installed under your home. These pipes extract the natural heat from the ground and send it up to the heat pump
  3. Air delivery system – The warm air is then sent through the vents or to a radiant heating system installed in your flooring.

Geothermal Efficiency

  • Geothermal heating system efficiency is measured by coefficient of performance (COP).
  • A highly-efficient geothermal heating system will have a COP rating of 3 to 5.

For every one unit of energy that is used by the system to power itself, it will produce 3 to 5 units of heat for the home.

Geothermal Heating System Cost

There are some basic factors that will influence the cost of your geothermal system so let’s get those basics out of the way before we start getting into dollar amounts:

  • Home SizeIn general, a 3-ton system should suffice for the average-sized home. Of course, the larger the home, the larger the system you will need to heat it will be and the more you will ultimately pay.
  • Local Geology Because geothermal HVAC systems depend on an open or closed loop piping system that is placed underground, the geology of your property must first be inspected to ensure that such a system can be safely installed. There are usually ways to grade and treat a piece of land so that it is safe to have one of these “Earth loop” piping systems installed but the more work your land will need, the higher the system price tag will be. Sometimes the piping is installed vertically in deep holes, while other times the pipes are run mostly horizontally underground.
  • Nature of Soil Some types of soil are more suited to Earth loop system installation so the type of soil present on your property will also have an effect on the price.
  • Your Preferences Of course, at the end of the day, it is really up to you how much heating power you will need. Even though you may have a small or average sized home, you may opt for a more powerful geothermal system because you live in a colder part of the country and want/need more heating power.

Unit Price

The heat pump and related components cost similar to a new furnace – about $2500 – $5000.

How Much Does Installation Cost for an Average Sized Home?

Installation costs typically run between $20,000-$30,000.  

20,000-30,000 upfront?  What kind of return on investment can I expect?

Geothermal offers consumers savings of 40-60% every year on their energy bills.  Let’s take a look at what that looks like:

Average Consumer’s Gas Monthly Gas Bill Potential Energy Savings with Geothermal Heat Pump
$125-$200/month $50-$120/month

This can amount to huge savings in the long-term and while high-efficiency furnaces usually take several years cover their initial cost (depending on how inefficient your previous system was).

Due to their high price point, geothermal systems often take many years to recover the initial cost, but they are a worthwhile investment for environmentally-conscious and homeowners who plan to be in their homes for many years.

UPDATE: In Ontario, the provincial government has proposed a sweeping climate change plan, which would include significant incentives for switching to geothermal. It remains to be seen whether other provinces in Canada might follow suit.

Bottom Line

A geothermal heating pump system is a good long term investment for homeowners who plan to be in their homes for a significant time.  This will allow you to recoup your initial costs and enjoy the energy savings for years to come.

With rising energy costs, a 40-60% energy savings offers extreme value to consumers, as well as an eco-friendly option.

Interested but not sure if you are able to afford the upfront costs associated?

Many contractors offer financing plans on installation to manage the cost. Fill out our online form for more information and a free quote from local suppliers, and be sure to ask about incentives and tax rebates to help with the cost.

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