Both are heat pumps: they move heat instead of making it. An air-source heat pump trades heat with the outdoor air; a ground-source, or geothermal, heat pump trades it with the ground through buried pipes. That one difference drives efficiency, installation cost and which homes each suits.
The ground stays at a fairly steady temperature year-round, far milder than winter air, so a ground-source heat pump works more efficiently in cold weather. For the same house, at an assumed seasonal heating COP of 3.5 against an air-source unit at 8.2 HSPF2, heating drops from about 7,112 kWh to 4,884 kWh a year, $1,280 to $879 at 18 cents per kWh. Installing the ground loop costs far more.
How each works
- Air-source: an outdoor unit with a fan exchanges heat with the outdoor air, like a central air conditioner that also runs in reverse.
- Ground-source: a loop of buried pipe carries water or antifreeze through the ground, and an indoor unit exchanges heat with it. Loops run horizontally in trenches, vertically in boreholes, or through a pond, depending on the land.
Why the ground is more efficient
A heat pump's efficiency falls as the gap between the heat source and the delivered air grows. Physics sets an upper limit: delivering 95°F air, the maximum possible COP is about 12.3 drawing from 50°F ground but 6.2 from 5°F outdoor air. Real heat pumps reach well below these limits, but the ground-source unit keeps its advantage when it's coldest.
That limit is Carnot's: for heating it equals the delivered absolute temperature divided by the temperature gap to the source. Holding the delivered air at 95°F (554.67 degrees Rankine) and changing only the source temperature traces the whole efficiency story:
| Heat source | Source temperature | Maximum possible COP |
|---|---|---|
| Ground loop (steady) | 50°F | 12.3 |
| Outdoor air | 47°F | 11.6 |
| Outdoor air | 35°F | 9.2 |
| Outdoor air | 17°F | 7.1 |
| Outdoor air | 5°F | 6.2 |
| Outdoor air | -5°F | 5.5 |
The ground figure barely moves across the seasons because soil a few feet down stays near its annual average temperature. The air figure slides down the column as winter deepens, so an air-source unit loses ground exactly when heating demand peaks. Real equipment reaches a fraction of these ceilings, but the shape of the gap is the same.
Running cost
For a 2,000 sq ft home with average insulation in a climate with 4,500 heating degree days, the house needs about 58 million BTU of heat a year:
| System | Assumption | Heating electricity | Cost at 18 cents per kWh |
|---|---|---|---|
| Air-source heat pump | 8.2 HSPF2, seasonal COP about 2.4 | 7,112 kWh | $1,280 |
| Ground-source heat pump | Assumed seasonal COP 3.5 | 4,884 kWh | $879 |
The ground-source figure uses an assumed seasonal COP for illustration; check the rated efficiency of the systems you're quoted. ENERGY STAR certifies geothermal heat pumps separately from air-source models.
Installation
The ground loop is the big cost and the reason ground-source systems cost several times more to install. An air-source heat pump installs like a central air conditioner, and a cold-climate model handles most U.S. climates; see heat pumps in cold weather.
Our heat pump installation cost guide walks through what a ducted air-source system and a geothermal system each run before incentives. Geothermal costs substantially more to install, and the difference is the buried loop and the drilling or excavation it needs.
Ground-loop types
The loop field is what you are really choosing with geothermal. The DOE groups the options into four types: three closed-loop layouts, which circulate antifreeze through a sealed buried pipe, plus an open-loop system that uses groundwater or surface water directly.
A horizontal closed loop lays pipe in trenches a few feet down across open ground. It is the cheapest to dig where there is enough yard, but it needs the most land area.
A vertical closed loop drops pipe into boreholes drilled deep into the ground. It fits small lots because it uses little surface area, but it needs a drilling rig and costs more per foot of pipe.
A pond or lake closed loop coils pipe on the bed of a water body on your property. It is often the cheapest option when a deep enough pond sits close to the house, since it avoids most digging and drilling.
An open-loop system skips the sealed loop and instead pumps groundwater or surface water through the heat pump before discharging it. It needs an adequate, clean water supply and has to follow local rules on groundwater use, so it only suits sites that have the right water on hand.
When geothermal pays off
Payback compares that extra upfront cost against the yearly running saving. The example above saves $401 a year for heating: $1,280 for the air-source unit minus $879 for the ground-source unit. Dividing the extra install cost by that saving gives the simple payback.
Geothermal costs substantially more to install than an air-source system, so even at that yearly saving the upfront gap can take many years, often decades, to recover. That is why geothermal makes the most sense when you expect to stay in the home for decades. A colder climate, higher electricity prices, or a state or utility rebate shortens the payback by widening the yearly saving or cutting the upfront gap.
Maintenance, noise and lifespan
A ground-source system has no outdoor fan unit. The heat exchange happens indoors against the buried loop, so there is nothing outside to defrost in winter, ice over, or collect leaves, and the system runs without the outdoor fan noise an air-source unit makes.
An air-source heat pump sits outdoors and reverses to defrost its coil in cold, damp weather, which is normal operation. Both systems need the same indoor care: regular filter changes and an annual check of the refrigerant charge and air handler.
The buried loop has no moving parts and is the longest-lived part of a geothermal system, typically outlasting the heat-pump equipment itself. The indoor equipment is replaced on roughly the same schedule as any heat pump or air conditioner, while the loop stays in the ground.
Tax credits
The federal Residential Clean Energy Credit (25D), which covered geothermal heat pumps, ended for expenditures made after December 31, 2025. HEAR rebates for heat pumps, where your state's program is open, may apply; see HVAC tax credits 2026.
Which is right for you
- Ground-source: new construction or major renovation, land or drilling access, very cold winters, and a long time in the home to recover the installation cost.
- Air-source: most existing homes, especially in mild and mixed climates, and anyone who wants a far lower installed price.
A new build or gut renovation with land is the classic geothermal case, because the excavation is cheaper while the site is already open and decades in the home let the running saving catch up. An existing home in a mild or mixed climate is the classic air-source case, where winters are not cold enough to justify the loop and the lower install price wins.
A very cold climate with expensive heating fuel and a long expected stay tips back toward geothermal. A small urban lot with no yard and no drilling access usually rules it out, leaving a cold-climate air-source unit as the practical choice.
Frequently asked questions
Is a geothermal heat pump better than an air-source heat pump?
More efficient, especially in cold weather, but much more expensive to install. Whether it pays back depends on your climate, energy prices and how long you stay.
How much less electricity does a ground-source heat pump use?
In the example here, about 31% less for heating: 4,884 kWh against 7,112, at an assumed seasonal COP of 3.5.
Is there still a tax credit for geothermal heat pumps?
The federal 25D credit ended for expenditures after December 31, 2025. State and utility programs may still offer incentives.
Do air-source heat pumps work in cold climates?
Yes, especially cold-climate models; ENERGY STAR's cold-climate criteria require at least 70% of rated capacity at 5°F.
Sources & References
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