Ground Source Heat Pumps Market

On 4 July 2025 Public Law 119-21, the One, Big, Beautiful Bill, ended the 30% US residential clean energy credit for any geothermal heat pump installation completed after 31 December 2025, according to the IRS summary of the law’s provisions. Douglas Insights values the ground source heat pumps market at USD 7.98 billion in 2025 and forecasts USD 15.4 billion by 2035, a compound growth rate of 6.78% a year. The receipt is units times price: about 405,000 ground source heat pump systems installed in 2025 at an average installed value of USD 19,700 per system. The volume leg adds 5.1% a year as Europe and China electrify heat and utilities build shared ground loops, and the price leg adds 1.6% a year as larger commercial systems and deeper boreholes lift the average ticket. The study sits within Douglas Insights coverage of HVAC and building energy equipment and follows the published Douglas Insights research methodology.

What counts as a ground source heat pump system in this study?

Ground source heat pumps are heat pumps that move heat between a building and the ground or groundwater through a buried loop or a well, and Douglas Insights counts 405,000 such systems installed worldwide in 2025. The value of ground source heat pumps in this study includes the indoor heat pump unit, the ground heat exchanger, drilling or trenching, circulation pumps and commissioning.

The ground source heat pumps model splits revenue by loop configuration into six types: Closed-loop vertical borehole systems, Closed-loop horizontal and slinky systems, Open-loop groundwater systems, Networked and district ground loops, Hybrid ground and air source systems, and Surface water loop systems. It also splits ground source heat pumps by application into Residential, Commercial, Institutional, and Industrial and agricultural, and by capacity into Up to 20 kW, 20 to 100 kW, and Above 100 kW. Air source heat pumps, exhaust air units, heat pump water heaters and high-temperature process heat pumps are excluded; they are sized in the Residential Heat Pumps Market, Residential Heat Pump Water Heater Market and Industrial Heat Pump Systems Market reports.

What did the One Big Beautiful Bill change for US ground source heat pumps?

The bill removed a 30% federal credit worth about USD 7,500 to USD 12,000 on a typical US home system, and Douglas Insights estimates it cuts US residential ground source heat pumps installations by about 18% in 2026. Under the IRS guidance on Public Law 119-21, an expenditure counts as made when the original installation is completed, so a homeowner who paid a deposit in 2025 but finished drilling in January 2026 lost the credit.

The deadline pulled US ground source heat pumps work forward into the second half of 2025. NIBE, which owns the WaterFurnace, ClimateMaster and Enertech brands, told investors in its third quarter 2025 report that the US geothermal market had stayed stable but that it expected the residential subsidy to end after the new year, partly offset by incentives for commercial buildings. The commercial investment credit for geothermal heat pump property survived the bill, which is why Douglas Insights shifts US growth toward schools, offices and multifamily projects rather than cutting it outright.

What drives ground source heat pumps into new buildings and retrofits?

Four forces add about 5.1% a year to ground source heat pumps volume, and European heat electrification comes first. Germany sold 299,000 heating heat pumps in 2025, up 55% on 2024, according to its heat pump association BWP, and Sweden’s association reported ground source sales up 14% in 2025, because a borehole at 8 to 12 degrees Celsius beats winter air. Douglas Insights estimates Europe installed about 146,000 ground source heat pumps systems in 2025, and that building codes and gas phase-down plans add about 1.9 points a year to global volume through 2030.

Chinese public and commercial buildings are the second driver. China installs ground source heat pumps mainly in hospitals, schools, offices and new urban districts in the north and along the Yangtze, measured in square metres of floor area served rather than in homes. Douglas Insights estimates Asia Pacific installed about 128,000 systems in 2025, a large share of them commercial, and that clean heating programmes and near-zero energy building targets add about 1.4 points a year to global ground source heat pumps volume.

Shared ground loops are the third driver. Utilities and campuses now drill one borefield and connect dozens of buildings to it, so no single owner carries the drilling risk. Douglas Insights counts about 210 networked or district ground loop projects in operation or construction worldwide in 2025, and estimates that utility thermal network pilots in Massachusetts, New York and Colorado, district schemes in the United Kingdom and Switzerland, and university campus conversions add about 1.0 point a year to ground source heat pumps volume.

Cooling load is the fourth driver. Ground source heat pumps cool as well as heat, rejecting summer heat into ground that stays near 10 degrees Celsius instead of into air at 35 degrees, which lifts cooling efficiency by 25% to 40% just when grids peak. Douglas Insights estimates each 10% rise in cooling degree days in a market lifts the payback advantage of ground source heat pumps over air source units by about 0.6 years, and that data centres, hospitals and office towers seeking year-round efficiency add about 0.8 points a year to volume through 2035.

What holds back ground source heat pumps against air source units?

Drilling is the main brake: a ground loop adds USD 8,000 to USD 20,000 to a home system, and Douglas Insights estimates ground source heat pumps held only about 8% of global heat pump unit sales in 2025. An air-to-water heat pump can be installed in two days with no permit for the ground, while a borehole needs a drilling rig, a geological check and in many countries a water authority licence. Douglas Insights removes about 0.9 points a year from ground source heat pumps volume for this loss of share to cheaper air source units.

Driller capacity is the second restraint for ground source heat pumps. Each vertical borehole rig drills about 120 to 180 boreholes a year, and Douglas Insights estimates there were fewer than 4,000 active ground source drilling rigs worldwide in 2025, so drilling waits of three to six months are common in the United Kingdom and Germany.

Policy reversals are the third restraint. The end of the US residential credit, the German coalition’s 2025 plan to rewrite the Buildings Energy Act, and the International Energy Agency‘s finding that global heat pump sales fell about 2% in 2025, with the US down about 13%, show how exposed ground source heat pumps are to subsidies. Douglas Insights removes about 0.5 points a year from volume through 2028 for this uncertainty.

Which loop configuration carries the value in ground source heat pumps?

Closed-loop vertical borehole systems carry the most ground source heat pumps value at 44.0% of 2025 revenue, USD 3.51 billion. Networked and district ground loops grow fastest, at 12.41% a year.

Closed-loop vertical borehole systems are worth USD 3.51 billion in 2025. Closed-loop vertical borehole systems lead because they fit small urban plots and commercial sites, and the US Department of Energy notes that vertical loops use boreholes of about 100 to 400 feet, the standard design for commercial buildings and schools.

Closed-loop horizontal and slinky systems are worth USD 1.72 billion in 2025. Closed-loop horizontal and slinky systems lay pipe in trenches about 4 to 6 feet deep, cost the least for rural homes with land, and grow only 4.61% a year because new housing plots are smaller.

Open-loop groundwater systems are worth USD 957 million in 2025. Open-loop groundwater systems pump well water through the heat pump and return it, giving the highest efficiency, and grow 5.91% a year where aquifer permits are available, as in the Netherlands, Denmark and parts of China.

Networked and district ground loops are worth USD 758 million in 2025 and grow fastest, at 12.41% a year to USD 2.44 billion by 2035, because utilities and campuses can finance one shared borefield over 30 to 50 years and connect buildings that could never drill their own.

Hybrid ground and air source systems are worth USD 559 million in 2025. Hybrid ground and air source systems use a smaller borefield for base load and an air unit for peaks, cutting drilling by 30% to 50%, and grow 9.01% a year.

Surface water loop systems are worth USD 479 million in 2025. Surface water loop systems sink coils in ponds, lakes, rivers or harbours, and grow 5.31% a year, limited to sites with water nearby.

How do application and capacity split ground source heat pumps revenue?

By application, Douglas Insights estimates Residential takes about 52% of 2025 ground source heat pumps revenue, Commercial about 27%, Institutional about 15% and Industrial and agricultural about 6%. By capacity, Up to 20 kW systems take about 58%, 20 to 100 kW systems about 24%, and Above 100 kW systems about 18%, a share that rises to about 25% by 2035 as commercial and networked projects grow.

Which region installs the most ground source heat pumps, and which grows fastest?

Europe is the largest ground source heat pumps region at USD 3.18 billion in 2025, 39.8% of the total, and grows 6.83% a year to USD 6.15 billion by 2035. Sweden, Germany, Switzerland, Finland and Austria have long drilling traditions, and the UK Boiler Upgrade Scheme pays a GBP 7,500 grant for a ground source heat pump in England and Wales.

Asia Pacific is the fastest ground source heat pumps region, at USD 2.11 billion in 2025 and 8.53% a year to USD 4.78 billion by 2035. Chinese clean heating programmes in the north, public building retrofits and new districts carry most of that growth.

North America uses USD 2.43 billion of ground source heat pumps in 2025 and grows 4.84% a year to USD 3.90 billion, the slowest region, because the end of the residential credit hits the largest home market. The 2025 US Geothermal Market Report counts about 1.27 million US homes and 27,300 commercial buildings with geothermal heat pumps, and 34 states plus Washington DC with their own incentives.

Latin America uses USD 128 million of ground source heat pumps in 2025 and grows 7.33% a year to USD 259 million, led by Chile and southern Brazil. The Middle East and Africa is the wildcard at USD 136 million in 2025 and 7.93% a year to USD 291 million, because cooling-dominated ground source heat pumps and district loops in the Gulf and Turkey could scale quickly once large developers commit.

Which companies make ground source heat pumps, and how concentrated is supply?

Douglas Insights estimates NIBE Industrier holds about 17.8% of 2025 ground source heat pumps revenue, and the top three suppliers hold about 32.1%.

Advantage in ground source heat pumps rests on installer networks and drilling partnerships as much as on the heat pump itself. NIBE reported Climate Solutions sales of SEK 19,569 million for the first nine months of 2025, up 3.8%, in its third quarter 2025 interim report. Thermia joined the Stiebel Eltron Group in 2018, and Carrier completed its purchase of Viessmann Climate Solutions in January 2024.

What price does an installed ground source heat pump system carry for homes and offices?

An installed ground source heat pumps system averaged USD 19,700 in 2025, and Douglas Insights expects the average to reach about USD 23,100 by 2035. A US home system of 3 to 5 tons sells for about USD 20,000 to USD 40,000 before incentives, a European brine-to-water home system for about EUR 20,000 to EUR 35,000 with drilling at EUR 50 to EUR 80 per metre, and a Chinese commercial system for about USD 60 to USD 110 per square metre served. The ground source heat pumps price rises 1.6% a year because commercial and networked projects take share, even as indoor unit prices fall about 1% a year.

How far could ground source heat pumps revenue climb by 2035?

The base case takes the ground source heat pumps market to USD 15.4 billion by 2035, inside a range of USD 11.3 billion to USD 20.3 billion. The slower case assumes the end of the US residential credit after 4 July 2025 is copied by European grant cuts and that drilling capacity stays tight, setting the volume leg at 2.8% and the price leg at 0.7% for USD 11.3 billion. The faster case assumes utilities roll out shared ground loops at scale, China extends clean heating to the Yangtze basin and drilling costs fall with new rigs; it sets the legs at 7.2% and 2.4% for USD 20.3 billion. Each 1-point change in the volume leg moves the 2035 ground source heat pumps figure by about USD 1.53 billion. Published growth estimates for ground source heat pumps run from about 5.2% to 9.6% a year, and the Douglas Insights figure of 6.78% sits inside that range, below the midpoint because of the US credit loss.

Which laws and grant schemes steer ground source heat pumps purchases?

Government support touches about 70% of 2025 ground source heat pumps revenue, Douglas Insights estimates, through grants, tax credits, building codes and drilling permits. In the United States, Public Law 119-21 ended the residential credit after 31 December 2025, while the commercial investment credit remains. In England and Wales, Ofgem’s Boiler Upgrade Scheme pays GBP 7,500 for a ground source heat pump and GBP 9,000 for off-gas-grid homes until 31 March 2027. Germany’s Buildings Energy Act requires 65% renewable heat in new heating systems, and its federal grant covers up to 70% of eligible heat pump costs for qualifying owners.

How do utility thermal networks change the ground source heat pumps business model?

Utility thermal networks turn ground source heat pumps from a one-off purchase into a regulated asset, and Douglas Insights estimates networked loops will take about 16% of ground source heat pumps revenue by 2035, up from 9.5% in 2025. Massachusetts and New York allow gas utilities to build such networks, and a utility-run pilot in Framingham, Massachusetts, has operated since 2024. The model cuts the upfront bill for a home by roughly USD 10,000 to USD 15,000.

What seasonal efficiency do ground source heat pumps deliver against gas boilers?

Ground source heat pumps typically deliver a seasonal coefficient of performance of 3.5 to 4.5, against about 0.9 for a condensing gas boiler, so one unit of electricity moves 3.5 to 4.5 units of heat. The US Department of Energy says geothermal heat pumps can pay back their extra cost in 5 to 10 years, that indoor components last about 24 years and that ground loops last 50 years or more.

Douglas Exclusive: the ground source heat pumps borehole drilling capacity tracker

The borehole drilling capacity tracker counts about 3,850 active ground source drilling rigs across 24 countries in 2025, and ties each to the ground source heat pumps systems it can serve. The tracker shows that Sweden, Germany, China and the United States hold about 68% of rigs, and that installations would hit a drilling ceiling near 560,000 systems a year by about 2032 unless rig numbers grow at least 4% a year, as the base case assumes. Douglas Insights uses the tracker to cap the faster ground source heat pumps scenario.

Methodology and receipts: how do 405,000 systems add up to USD 7.98 billion?

The ground source heat pumps model multiplies about 405,000 systems installed in 2025 by an average installed value of USD 19,700, giving USD 7.98 billion. System counts come from heat pump association sales, grant and permit statistics and manufacturer disclosures in 28 countries, checked against the 3,850-rig drilling tracker. Values come from 620 installer quotes, tender results and list prices by loop configuration, capacity and region. The forecast compounds 5.1% volume growth and 1.6% price growth to about 666,000 systems at about USD 23,100 each, and USD 15.4 billion, in 2035.

Sources

1. Internal Revenue Service One, Big, Beautiful Bill provisions (2025)
2. Internal Revenue Service FAQs for modification of sections 25C, 25D, 25E, 30C, 30D, 45L, 45W and 179D under Public Law 119-21 (2025)
3. Ofgem Boiler Upgrade Scheme (BUS) (2026)
4. GOV.UK Apply for the Boiler Upgrade Scheme: What you can get (2026)
5. U.S. Department of Energy, Energy Saver Geothermal Heat Pumps (2025)
6. NIBE Industrier (investor report) NIBE Interim Report Q3 2025 (2025)