Choosing the Best Heat Pump: Air Source or Ground Source (Geothermal)?

Introduction 

A heat pump is a versatile system that can both heat and cool a home, a fact that remains unknown to many people. Unlike traditional heating or air conditioning units designed for a single purpose, heat pumps efficiently transfer heat in either direction, extracting it from the outside air to warm your home in winter or removing heat from your home to cool your space in summer. This dual functionality, combined with energy efficiency, makes heat pumps a great solution.

Choosing the Right Heat Pump for Your Home

With rising energy costs and growing environmental concerns, heat pumps have become a popular choice for efficient heating and cooling in homes across the US. These systems are a great alternative to traditional furnaces or air conditioners. However, choosing between an air-source heat pump (ASHP) and a geothermal* ground-source heat pump (GSHP) can be daunting. Each type has unique benefits, costs, and requirements, making the decision dependent on factors like budget, space, and climate. This guide compares ASHPs and GSHPs, exploring their costs, efficiency, installation needs, and suitability to help you determine which is best for your home as of 2025.

Key Points

• Air source heat pumps (ASHPs) are generally more cost-effective and easier to install, while ground source heat pumps (GSHPs) offer higher efficiency, especially in colder climates.
• ASHPs are generally better for urban and suburban areas due to lower installation costs and space requirements, but in cold climates, GSHPs may save more long-term.
• There are two types of ASHPs: One, Mini-split (aka ductless) and; Two, Central air (aka ducted).

Space and Installation

• ASHPs require less space and are easier to install, making them suitable for urban or smaller properties. The outdoor portion generally requires the same space as a modern central air conditioner.
• GSHPs need significant land (600-1,200 square meters) for ground loops or boreholes, which can be disruptive and costly to install.

Year by year cost reductions

Cost Comparison

ASHPs typically cost between $3,500 and $20,000, depending on whether it’s a ductless mini-split system ($3,500-$6,000 per indoor head) or a central ducted system ($12,000-$20,000). GSHPs generally range from $10,000 to $50,000 or more, with higher costs for larger structures or those requiring boreholes. Historical trends show costs have decreased significantly since 2000, when ASHPs were around $19,000 and GSHPs exceeded $50,000. 

Tax Credits

Federal tax credits currently offer up to $2,000 for ASHPs and 30% of cost (with no cap) for GSHPs. These incentives were scheduled to be available through 2032. However, the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, impacted heat pump incentives by ending the $2,000 tax credit for ASHPs and 30% uncapped credit for GSHPs after December 31, 2025.

The Home Electrification and Appliance Rebates (HEAR) program, part of the Inflation Reduction Act, provides rebates for low- and moderate-income households for energy-efficient electric appliances and systems. This includes heat pumps, heat pump water heaters, electric stoves, ovens, dryers, and related electrical and home improvements. The program aims to make these upgrades more affordable, with potential rebates up to $14,000 per household. OBBBA also terminates the Home Electrification Rebate at the end of 2025.

Year by year performance improvements

Efficiency Comparison

As you can see in the graph above, heat pumps (which were already efficient) have continued to improve with each new generation of products. A standard air-sourced system in 2025 is more efficient than a typical ground-sourced system from 2 decades ago. This has made air-sourced systems practical in many more regions. 

Efficiency is measured by the coefficient of performance (COP). ASHPs have a COP of 3-4, while GSHPs reach 4-6. Since 2000, efficiencies have improved from COP 2-3 to 3-4 for ASHPs and 3-4 to 4-6 for GSHPs, driven by advancements in compressors, motor controllers, and heat exchangers.

Installation and Space Requirements

ASHPs are easier to install, requiring only an outdoor unit and minimal space, ideal for urban areas. GSHPs need significant land for ground loops or boreholes, making them suitable for larger properties but more disruptive to install.

Performance in Different Climates

ASHPs perform well in moderate climates but may lose efficiency below 32°F. There are cold-climate models of ASHPs designed to operate as low as 15°F, but they are generally more expensive. GSHPs provide consistent performance due to stable ground temperatures below the frostline (50-60°F), ideal for harsh winters. Hybrid heat pump systems combine a heat pump with a gas furnace or other backup heat source, switching between them based on outdoor conditions to optimize efficiency and comfort. They are ideal for regions with extreme temperature swings, offering up to 30% energy savings. This setup suits homes with existing furnaces, providing a cost-effective transition to greener heating while maintaining reliability during severe cold snaps.

Maintenance, Lifespan, and Noise

ASHPs require moderate maintenance and last 15-20 years. GSHPs have lower maintenance needs, with indoor components lasting 25+ years and ground loops 50+ years. ASHPs can be noisier due to outdoor units, while GSHPs are quieter. With variable speed motors, new models of ASHPs are quieter than their predecessors.

Pros and Cons

• ASHP Pros: Lower cost ($3,500-$20,000), easier installation, less space needed, suitable for urban areas.
• ASHP Cons: Lower efficiency below 32°F, higher operating costs, noisier outdoor unit. (Hybrid systems that use a furnace only on subfreezing can mitigate this)
• GSHP Pros: Higher efficiency (COP 6), lower operating costs, longer lifespan, quieter operation.
• GSHP Cons: Higher upfront cost ($10,000-$50,000+), significant land needed, complex installation.

Mini-Split or Central Air?

There are two primary types of ASHPs: ductless mini-split systems and ducted central systems, each offering distinct advantages depending on home layout and heating needs.

A mini-split ASHP is a ductless system with one outdoor unit connected to one or more indoor units. It's ideal for zone heating/cooling for homes without ductwork or to add more temperature control to an area that's poorly serviced by the current ducting.

A central air ASHP uses ductwork to distribute cooled or heated air throughout the home. It's suitable for whole-house climate control. Central ASHPs are a better fit for larger homes with existing ductwork.

Hybrid Heat Pump System

A hybrid heat pump system combines a heat pump with a traditional heating source, such as a gas furnace, to optimize energy efficiency and comfort. The heat pump handles heating and cooling during mild weather, while the secondary system activates in extreme temperatures. This setup is a good option for homes in regions with variable climates, like the US Northeast, where winters can be harsh, or for those seeking to lower utility bills while transitioning from fossil fuels. It suits properties with existing furnace infrastructure, offering flexibility and potential savings of up to 30% on heating costs, depending on usage and local energy prices.

Technological Improvements (2000-2025)

Since Y2K, heat pump efficiencies have improved due to variable-speed compressors, enhanced heat exchangers, and smart controls. Cold-climate ASHPs and better GSHP ground loop designs emerged by 2010. By 2025, integration with solar panels and advanced controls further boosted performance.

Summary Table

Aspect	Air Source Heat Pump (ASHP)	Ground Source Heat Pump (GSHP)
Cost (2025)	$3,500-$20,000	$10,000-$50,000
Efficiency	COP: 3-4	COP: 4-6
Installation	Easier, less disruptive	Complex, requires groundwork
Space Needed	Less, wall-mounted	Significant, needs land
Performance in Cold	Decreases below 32°F	Consistent
Lifespan	15-20 years	25+ years (indoor), 50+ (loops)
Federal Incentive	Up to $2,000	30% of cost (no cap)

Which is Best for You?

The best choice depends on your budget, available space, and climate:

• If you prioritize long-term savings and have ample land, a GSHP might be more beneficial due to higher efficiency and lower operating costs.
• If you have limited space and a tighter budget, an ASHP is likely better due to lower upfront costs and easier installation.
• If you already have a home with ducting, a central ASHP can tap into these conditioned air highways.
• If you don't have existing ducting, ductless mini-split ASHP can give you the cool or warm air directly into the space you need it. Multiple heads may be needed for larger areas, but this allows for zone control, meaning you don't have to condition the spaces you are not using.

Consider your budget, space, climate, and incentives when deciding.

Citations:

• Energy Saving Trust: Air source heat pumps vs ground source heat pumps
• EnergySage: Air Source vs. Geothermal Heat Pumps
• The EcoExperts: Air Source vs Ground Source Heat Pumps
• GreenMatch: Air vs Ground Source Heat Pumps
• US Department of Energy: Heat Pump Systems
• Better Planet: Ground Source vs Air Source Heat Pumps
• EDF Energy: Ground source vs air source heat pumps

* Geothermal & Ground-source Terms

The terms geothermal heat pump and ground-source heat pump (GSHP) are often used interchangeably, but there are subtle distinctions:

• Geothermal Heat Pump: A broad term that refers to any system using the Earth's thermal energy for heating or cooling. This includes GSHPs but can also encompass systems tapping into deeper geothermal resources (e.g., hot springs or volcanic heat) for direct heating or power generation. In residential contexts, it typically means a GSHP.
  
  
• Ground-Source Heat Pump: Specifically refers to a heat pump system that uses the stable temperature of the ground (or groundwater) at shallow depths below the frostline to transfer heat to or from a building. It involves ground loops (or sometimes wells, lakes, or ponds) to exchange heat with the soil or water.

Key Difference: GSHP is a type of geothermal system focused on shallow ground heat exchange for residential or commercial use, while "geothermal" can include broader applications like deep geothermal energy for electricity. In practice, for residential applications, they usually refer to the same GSHP technology.

Benefits Solar Energy and VPPs for your Home and Neighborhood

Solar Data from Tesla App

Introduction

The above screenshot captures a day’s solar energy generation, storage, and use of 66.5 kWh in rainy Portland, Oregon. It also offers a glimpse into how one household harnesses solar power to meet its energy needs while contributing to the broader energy ecosystem. By participation in Portland General Electric’s (PGE) Smart Battery Pilot program, this setup shows the potential of distributed energy resources. The integration of solar energy systems with Tesla Powerwalls, represents a significant step toward sustainable living and grid resilience. We'll explore the implications of this, its financial and environmental benefits, and its impact on the neighborhood, particularly under a time-of-use electricity plan and virtual power plant (VPP) participation.

This screenshot showcases solar energy and its distribution across home use, EV charging, storage, and grid export, underscoring the potential of integrated home solar and battery systems.

Energy Distribution and Personal Benefits

The Tesla app screenshot illustrates a well-balanced energy distribution, with 57% (38.5 kWh) powering the home directly, 15% (10.0 kWh) charging an electric vehicle (EV), 18% (12.4 kWh) stored in the Powerwalls, and 10% (6.6 kWh) fed to the grid. This configuration highlights the system’s efficiency in meeting daily energy demands while leveraging storage for future use. Tesla's Charge-on-Solar feature allows surplus solar to charge the EV only when solar production outpaces the home's needs. With a total storage capacity of 40.5 kWh across three Powerwall 2s, the household can store excess solar energy generated during the day, as evidenced by the 12.4 kWh stored. This stored energy is used during peak rate times (5PM till 9PM) under the time-of-use (or time-of-day) plan. This strategy reduces reliance on grid electricity, which is costlier during peak hours, potentially saving hundreds of dollars annually depending on rate differentials.

Participation in PGE’s Smart Battery Pilot program further enhances financial benefits. The program compensates participants $1.70 per kWh for energy discharged during Peak Time Events, which occur approximately 10 times a year. If the household discharges 25 kWh per event, it could earn $42 per event, totaling ~$420 annually. This income, combined with the avoided peak costs and the net metering credits from the energy exported to the grid provides a robust financial incentive. Environmentally, the system displaces fossil fuel-based grid electricity with clean solar power, reducing the household’s and the grid's carbon footprint.

The integration of solar energy systems with battery storage represents a significant step toward sustainable living and grid resilience.

Neighborhood Impact and Grid Stability

The household’s energy setup has far-reaching implications for the neighborhood, particularly through its role in PGE’s VPP initiative. The 6.6 kWh exported to the grid, as depicted in the screenshot, contributes to a collective effort that stabilizes the grid during peak demand periods. When the sun is shining, the air conditioner units are running, and solar feed-in is helping power them. By aggregating energy from participating homes, a VPP event reduces the need for peaker plants, which are notorious for their high CO2 emissions. This collective action supports PGE’s goal of incorporating more renewable energy sources, enhancing grid reliability across the community.

Moreover, the local storage and generation of energy decreases transmission line demands. This reduces energy losses that occur over long distances and eases the strain on infrastructure, potentially delaying costly upgrades. If more neighbors adopt similar systems, the neighborhood could become a model of resilience, capable of withstanding outages more effectively. The Powerwalls’ backup capacity ensures the household remains powered during disruptions, a benefit that could extend to the community if adoption grows, mirroring successes seen in other regions during severe weather events.

Economically, widespread participation in VPP programs could lower electricity costs for the neighborhood by reducing the utility’s infrastructure investment needs. The compensation paid to participants, such as the $1.70 per kWh from PGE, also circulates money within the community, stimulating local economic activity. Environmentally, a neighborhood with high solar and battery adoption significantly cuts its collective carbon footprint, aligning with broader climate goals and reducing reliance on fossil fuels.

This system exemplifies how individual action can contribute to a sustainable and resilient energy future.

Conclusion

The Tesla app screenshot, showcasing one day's 66.5 kWh of solar energy generation and its distribution across home use, EV charging, Powerwall storage, and grid export, underscores the transformative potential of integrated solar and battery systems. For this Portland household with three Powerwall 2s, the setup offers substantial financial savings through time-of-use optimization and VPP earnings, alongside significant environmental benefits by reducing CO2 emissions. The neighborhood reaps rewards through enhanced grid stability, reduced transmission demands, and increased resilience, with the potential for economic and ecological improvements as adoption spreads. This system exemplifies how individual action can contribute to a sustainable and resilient energy future.

If you want solar and/or batteries for your home, here are some referrals: 

If you're within 50 miles of SunPath's office in Beaverton, Oregon, I recommend getting a quote from them for your solar project. Also (before or after you have the quote), tell them you were referred by Patrick from CarsWithCords.net, you'll get $500 off, and I'll receive a referral bonus.

If you're considering Tesla for your solar project, you can use my referral code (https://ts.la/patrick7819) for $500 off, and I'll receive referral points for Tesla merch.

   

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