Idealized heat source models, which assume constant heat flux along the entire length of heat sources, cannot be used for accurate quantification of ground temperature response during thermal operation of geothermal piles. This paper presents an annular cylinder heat source model that can realistically simulate heat transport by the fluid circulating through the tubes embedded in heat exchanger piles. A finite difference code is developed for simultaneous solution of partial differential equations, which describe both transient and steady-state heat transfer from a geothermal pile to the surrounding soil. Results show that the use of a constant heat flux along the entire length of a heat exchanger pile may significantly misinterpret thermal response over time after the start of heat exchange operation. The impact of different model parameters on the performance of a geothermal pile is investigated through a sensitivity study. Based on the results from sensitivity study, initial temperature difference between ground and circulation fluid, thermal conductivity of soil, and radius of circulation tube are identified to be the most important parameters that affect thermal efficiency of a geothermal pile.