Guide to Natural Gas vs Geothermal Heating Costs

When choosing a heating system for your home or office, you need one that can get the job done. But that’s not all! It’s best to opt for an efficient and cost-effective system.

While most people are used to furnaces as the primary heat source in their homes, a geothermal heat pump is also a great option. While furnaces only provide heating, geothermal heat pumps can double as cooling units during the hot season.

If you want to install a heating system in your home but are debating which one, compare the two systems to see which one will work best for your lifestyle. This natural gas vs geothermal heating system guide will help you compare efficiency and cost so you can choose the best system for your home. 

Natural gas vs geothermal heating: Which one is more efficient? 

Efficiency plays a significant role in determining the overall cost of an appliance. When comparing natural gas and geothermal energy, which one is more efficient? Knowing the cost implications of each type of fuel is essential. Let’s look at the different fuel types and how well each system creates heat.

What is it fuelled by? 

While geothermal pumps take heat from the underground, they are powered by electricity, while natural gas furnaces are fuelled by natural gas. In most parts of the country, natural gas is cheaper than electricity, so a natural gas furnace would seem cheaper to operate than a geothermal heat pump. 

However, this is only partially true. While geothermal heat pumps use electricity as the power source, their working mechanisms are entirely different. We’ll see this more as we look at efficiency.  

Efficiency comparison 

When calculating geothermal system heating costs, the coefficient of performance must be considered. The coefficient of performance (COP) is a ratio that demonstrates how much heat or cooling a system provides for a certain amount of energy. A higher number indicates a more efficient and cost-effective system. 

The COP measure indicates that geothermal heat pumps can reach up to 400% efficiency for every dollar of electricity used. This indicates that geothermal heat pumps are more than three times more efficient than most other heating systems. 

Combustion-based units use an efficiency measurement called the Annual Fuel Utilization Efficiency (AFUE) ratio, which similarly measures the heat output against the fuel input. Typically, natural gas will have an AFUE rating of between 80% to 98%, while an electric furnace can go up to 100%.

A geothermal heating cost vs natural gas comparison shows that a geothermal heat pump will likely be more cost-effective to operate. 

Heating and cooling: Geothermal heating cost vs natural gas 

When comparing a geothermal and a natural gas heating system, homeowners often consider two main costs: the initial cost, which includes installation, and the cost of operation. 

While we covered a bit about efficiency and operating costs above, this next section will address the installation and other factors that will affect your overall HVAC budget. 

Factors influencing geothermal heating vs natural gas cost

Several factors that influence geothermal heating vs natural gas cost overall. They include:

Cost of installation

A natural gas heating system will be cheaper to install than a geothermal system. Unless, of course, you are upgrading your natural gas system and tapping directly into the gas source. 

The national average cost for installing a mid-range geothermal system runs between $20,000 and $28,000. A higher-end system can even cost up to $40,000. This is before the 26% residential federal tax credits, which is expected to change to 22% by the end of 2023.

On the other hand, installing a new natural gas furnace will cost you between $4,000 and $8,000 for a system with a 97% efficiency level. If you have a limited budget, consider installing a natural gas furnace. 


Climate change has been a focus for many governments and companies over the last few decades. With many policies aiming to help create a more sustainable future, such policies have favored clean energy systems over ones that rely on fossil fuels.

Unfortunately, as popular as it is, natural gas is non-renewable. As more people switch to renewable energy systems and the overall usage of gas decreases, not as many companies will mine for it. The result? Natural gas prices will gradually increase as the demand exceeds supply. 

Homeowners who rely on natural gas systems may see increases in energy costs over the next few years. Environment-wise, geothermal heat pumps are an ideal heating system; they use a renewable heat source and don’t cause pollution.  

Functionality in different seasons

Typically, natural gas furnaces are only responsible for heating the house. So for a cooler environment during the summer, you will need to install a separate AC unit which will increase your overall HVAC budget. 

Conversely, a geothermal heat pump can be used as a cooling unit, saving you the extra cost of an air conditioner. 

Federal tax credits

Another major incentive for homeowners to choose a geothermal heat pump over a natural gas furnace is federal tax credits. Typically, homeowners are eligible for up to 26% federal tax credit on total geothermal heating costs. This includes installation and labor.

However, there are several requirements you must meet before getting these credits. So, before you switch, ensure your new system is eligible for any government credits or rebate programs. 

Natural gas vs geothermal heating: Which system should you choose? 

Homeowners often wonder which system they should choose for their homes, and, for most people, it comes down to budget. 

There are a few types of natural gas systems; gas furnaces can cost between $3,000 and $7,000, whereas a new gas boiler can cost up to $9,000. On average, a new geothermal system costs between $18,000 and $45,000. 

The initial cost of a geothermal system can seem intimidating and may deter buyers from choosing it. However, based on the above geothermal heating and cooling cost comparison guide, factors like the cost of operation make it more cost-effective in the long run. 

This is because the system is more efficient, and for those seeking to protect the environment, it runs on renewable energy. Government tax credits also add to the benefits of installing a geothermal heating system. To find out which system is right for your home, consult a technician to get professional advice. 

Need help choosing a heating system? Let us help.  

In the long run, installing a geothermal system favors your pockets, provides enough comfort for your home, and protects the planet. However, a natural gas system may fit better with your current budget and residence.

At Anderson Air, we understand that you want a system that keeps you comfortable year-round and gives you the most for your money. If you are going to install a new heating system, contact us and one of our qualified technicians will gladly assist you. 

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