Variable Refrigerant Flow (VRF) Market

Strategies Report
September 2019
Table of Contents
Executive Summary ....................................................................................................................................................1
List of Regional Market transformation strategies ................................................................................................2
Introduction ................................................................................................................................................................4
VRF Technology and Market Assessment ..................................................................................................................6
Framing Assessment of VRF Market, Technology and Performance……………………………………………………………….. 6
VRF Technology and Applications…………………………………………………………………………………………………………………… 9
VRF Performance Metrics, Ratings, and Standards ............................................................................................. 10
Minimum Efficiency Standard for VRFs ............................................................................................................... 11
Performance Specifications for VRFs................................................................................................................... 12
Regional Efficiency Program VRF Performance Criteria, Incentives and Program Delivery.............................. 113
Building Energy Code impacts on VRFs ............................................................................................................... 15
Savings associated with VRF installations; Energy, Cost, Peak load, and Emissions ........................................... 16
VRF Market Size and Research Insights ............................................................................................................... 20
VRF Refrigerants and Regulation ......................................................................................................................... 25
VRF Market Adoption Barriers and Opportunities .............................................................................................. 27
Regional Market Transformation Strategies ........................................................................................................... 28
Strategy #1: Increase reporting of VRF performance and costs to improve models for predicting cost-
effectiveness, energy and GHG savings............................................................................................................... 29
Strategy #2: Support improved test procedures and performance criteria/standards to enable the promotion
of climate-appropriate VRF ............................................................................................................................... 300
Strategy #3: Develop a comprehensive regional strategy for addressing the climate and safety risks of
refrigerants in VRF systems. .............................................................................................................................. 311
Strategy #4: Increase state policy support and program valuation of all energy savings and non-energy
benefits of VRF .................................................................................................................................................. 388
Strategy #5: Increase HVAC workforce development and training on proper VRF design, installation and
maintenance. ..................................................................................................................................................... 399
Strategy #6: Reduce incremental costs and increased VRF market transformation through robust, streamlined
and aligned regional, state and efficiency program market promotional actions .............................................. 40
Strategy #7: Promote integration of existing building management systems and advanced VRF controls to
increase coordination and efficiency between building heating and cooling systems and other occupancy type
controls. ............................................................................................................................................................... 42
Regional Market Transformation Goal .................................................................................................................... 44

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | ii

Appendix A .............................................................................................................................................................. 45
2018 VRF Heat Pump Incentive Summary ........................................................................................................... 45
Appendix B............................................................................................................................................................... 47

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | iii

Acknowledgements
This report reflects the invaluable contributions of multiple individuals.
We would like to recognize the report’s lead author, Chris Badger, Senior Consultant of Emerging Technologies,
Vermont Energy Investment Corporation (VEIC). Jake Marin and Rachel Mascolino, VEIC supported development
of key sections. NEEP staff also served key roles in the development of the report including David Lis, Director of
Technology and Marketing Solutions and Giselle Procaccianti, Commercial and Industrial Program Manager.
Formatting and edits were provided by Lisa Cascio, Director of Partner Engagement.
NEEP would like to recognize and thank members of its VRF Working Group for their participation in reviewing
this report and providing input into the creation of this document.
Finally, as this report follows the form and function of the 2016 Northeast/Mid-Atlantic Air-Source Heat Pump
Market Strategies Report, NEEP would like to take this opportunity to reiterate acknowledgement of its authors
and contributors – Robb Aldrich, Steven Winter Associates, Inc. and David Lis, Director of Technology and
Marketing Solutions, NEEP.
Cover photo courtesy of NEWYORK ENGINEERS, www.ny-engineers.com.

About NEEP
Founded in 1996, NEEP is a non-profit whose goal is to assist the Northeast and Mid-Atlantic region to reduce
building sector energy consumption three percent per year and carbon emissions 40 percent by 2030 (relative to
2001). Our mission is to accelerate regional collaboration to promote advanced energy efficiency and related
solutions in homes, buildings, industry, and communities. We do this by fostering collaboration and innovation,
developing tools, and disseminating knowledge to drive market transformation. We envision the region’s
homes, buildings, and communities transformed into efficient, affordable, low-carbon, resilient places to live,
work, and play. To learn more about NEEP, visit our website at http://www.neep.org.
Disclaimer: NEEP verified the data used for this white paper to the best of our ability. This paper reflects the
opinion and judgments of the NEEP staff and does not necessarily reflect those of NEEP Board members, NEEP
Sponsors, or project participants and funders.
©Northeast Energy Efficiency Partnerships, Inc. 2019

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | iv

Executive Summary
Variable refrigerant flow (VRF) heat pumps (VRFs) are a variable capacity, multi split technology primarily
targeted at commercial heating and cooling applications. A VRF heat pump is comprised of a single air or water-
cooled compressor utilizing refrigerants to supply multiple indoor fan coil units.
Since 2013, NEEP has worked on a regional market transformation initiative to accelerate the market adoption
of VRF technology in the Northeast region. The initiative collectively developed and recently updated the
Northeast/Mid-Atlantic ASHP Market Transformation Strategies Report to provide a “roadmap” of coordinated
regional activities to effectively transform the residential market. The regional initiative and its working group
have since advanced many of the key strategies, though there is still active work being done to transform this
market. Then in 2017, NEEP’s Regional Assessment of Strategic Electrification further underscored the urgent
need for market transformation for both residential and commercial heat pumps.

This report takes the framework of the residential ASHP initiative and adds a new focus on commercial
application of VRF and the respective market strategies that, if implemented by regional stakeholders, would
result in accelerated adoption of commercial VRF heat pumps in the Northeast/Mid-Atlantic region.

Like their smaller residential-scale heat pump technology counterpart, VRFs have continued to improve in
efficiency, introducing high performance cold climate versions designed to provide rated heating capacity even
in low ambient outdoor temperatures.
In Europe and Asia, market share of VRF heat pumps represent approximately 80-90 percent of installed HVAC
systems in commercial buildings. In the United States, however, the technology is still a nascent – but rapidly
growing – market. The rapid adoption of VRFs internationally and more recently in the U.S. is due to the
technology’s energy and non-energy benefits (e.g. efficiency, comfort, space savings, etc.). However, remaining
questions and limited field data on VRF installations – notably potential refrigerant leakage and verified energy
savings of VRF systems – continue to weigh on broader promotion of the technology.
Increased adoption of VRF offers the potential for significant gains in efficiency for cooling applications. As such,
it can become an important technology solution in NEEP’s broader ASHP electrification strategy for commercial
heating applications. However, increased regional coordination and collaboration is needed to realize the
potential for VRF as a GHG mitigation strategy in shifting away from fossil fuels.
This report maps out the critical strategies necessary for VRF market transformation. Like the 2016 NEEP ASHP
report, recommendations are framed for the broader community of regional stakeholders and sub-strategies
identify specific stakeholders for implementation.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 1

List of Regional Market transformation strategies
1. Increase reporting of VRF performance and costs to improve models for predicting
cost-effectiveness, energy and GHG savings
a) Regional energy efficiency program administrators should introduce
reporting requirements to capture project specific details on system design,
upfront and operational costs and estimated or modeled savings.
Additionally, longer term supplemental field evaluations, verification and
pre/post monitoring studies are of critical importance for documentation of
field VRF performance - including changes in energy use, ongoing
operational performance in relation to changing building loads,
supplemental systems and weather conditions.
b) Regional VRF working group and manufacturers collaborate to assess the
opportunity for leveraging existing or additional on-board metering of VRF
systems to inform field-verified performance. Identify best practices for
metering/monitoring VRF to identify the optimal balance of cost-
effectiveness vs. accuracy.
c) Regional stakeholders collaborate to develop best practices for VRF building
energy modeling and share updates to VRF performance curves (e.g. cold-
climate models), field verified building models and system costs.
2. Support improved test procedures and performance criteria/standards to enable
the promotion of climate-appropriate VRF
a) NEEP VRF working group should monitor and support development of
national test procedures, standards and advanced specifications that
improve the correlation and accuracy to real-world and climate-specific
applications. The working group should evaluate the benefits of developing
regional climate-specific performance reporting requirements and
advanced criteria for VRF.
3. Develop a comprehensive regional strategy for addressing the climate and safety
risks of refrigerants in VRF systems.
a) NEEP VRF working group should initiate and collaborate in research aimed
at identifying current VRF leakage rates, as well establishing data-informed
best practices for VRF installations and servicing.
b) NEEP VRF working group should invest in early support for industry
evaluation of new refrigerants for VRF installations and encourage early
market adoption. As new low-GWP refrigerants will potentially require
repiping for proper safety or performance, early planning and incentives
may be required for avoiding barriers to market growth of VRF.
c) Efficiency program administrators, state building code officials and industry
can collaborate to support training on best practices for VRF design to
mitigate safety, as well as reduce refrigerant charge to address leak risks.
Similarly, site inspections prior to commissioning and code official
enforcement of proper installations will support broader adoption among
HVAC contractors.
4. Increase state policy support and program valuation of all energy savings and non-
energy benefits of VRF
a) Regional state policy and efficiency programs should address policy barriers
to the full valuation of VRF in reducing fossil fuel use through beneficial

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 2

 electrification and peak demand reduction. Additionally, the development
of VRF case studies installations in a diverse set of building types, as well as
increased field performance monitoring, will increase the confidence in VRF
as a solution for building owners, and role in state GHG mitigation
strategies.
5. Increase HVAC workforce development and training on proper VRF design,
installation and maintenance.
a) Regional stakeholders, including manufacturers and program
administrators, should increase the level of investment in HVAC workforce
development and training to ensure that a sufficient number of “clean
energy contractors” are trained in design, installation and maintenance best
practices of new electrification technologies like VRF.
b) In tandem to workforce development and training, program administrators
should require manufacturer certification in the installation of VRF to
increase confidence in system performance and reduce risk of refrigerant
leaks. The NEEP workgroup can assess existing manufacturer training and
value of developing regional best practice guides and standardized
certifications for VRF contractors in critical areas (e.g. proper design, system
sizing and start-up procedures).
6. Reduce incremental costs and increased VRF market transformation through robust,
streamlined and aligned regional, state and efficiency program market promotional
actions
a) Regional VRF working group members should better track and report VRF
costs (incremental, installed and avoided), as well as assess the level of
incentive necessary to drive sustainable, yet accelerated growth in the VRF
market.
b) Energy efficiency and Renewable heating and cooling programs should
evaluate opportunities to align program delivery strategies – notably
midstream distributor partnerships, as well as coalescing around regional
performance criteria like the success of the ccASHP specification. However,
programs should seek to leverage the industry partnerships and conduct
standardized surveys to continue to gather detailed cost and system design
data to inform program design improvements.
c) Regional VRF workgroup members should work to develop a multi-year
market transformation strategy for increased voluntary building and
equipment efficiency standards, as well as education of building
professionals, to support VRF adoption and accelerated transition to low
carbon state building energy codes.
7. Promote integration of existing building management systems and advanced VRF
controls to increase coordination and efficiency between building heating and
cooling systems and other occupancy type controls.
a) Regional VRF workgroup members should invest in increased building
operation training, best practices in system design, and assessing program
or state building code strategies to increase VRF control and building energy
management system integration. These investments and collaboration with
industry will help achieve the highest building level HVAC energy savings
and comfort in VRF installations.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 3

Introduction
Since 2013, NEEP has led a regional market transformation initiative for air source heat pumps (ASHPs), mainly
for residential applications. The region has since seen a dramatic increase in activity focused on addressing the
key strategies that were identified by the initiative. Less regional attention has been paid to the commercial
application of ASHP technology specifically, VRF technology. Numerous studies, including NEEP’s 2017 Northeast
Regional Assessment of Strategic Electrification, have highlighted the urgency for the aggressive acceleration of
low-carbon space heating and cooling over the next 10-15 years if mid- and long-term carbon reduction targets
are to be met. It became clear that it was time to expand the ASHP regional market transformation initiative to
include VRF technology.

To launch the initiative, NEEP convened a diverse group of stakeholders to collaborate on further market
development of ASHPs. NEEP conducted an initial study1 of the needs and opportunities associated with low-
carbon building technologies; and then commenced a multi-stage process for engaging and soliciting input from
VRF stakeholders to best identify and prioritize market barriers and opportunities for growth in the regional
market.

NEEP kicked off the new VRF initiative in October 2018 with the VRF working group, consisting of heat pump
manufacturers, efficiency program administrators, engineers, contractors, and other interested parties to better
understand the persistent barriers in the VRF market. Two initial actions were taken to support the framework
for NEEP’s variable refrigerant flow (VRF) market strategies report:

 Presentation of the 2018 NYSERDA VRF report2 findings to the NEEP VRF working group, and
assessment of knowledge gaps to inform regional VRF market assessment and strategy
development
 Survey regional VRF working group of program activity and prioritize key research focus areas
The results of this initial framing allowed for two primary areas of focus for market research - VRF market
development and VRF technology and performance. These focus areas were to be informed by individual
research areas important to developing actionable strategies to support the VRF market.
Factors that affect VRF Market Development
 Cost
 Market actors
 Market interventions
 Market size
 Program strategies
 Regional promotion

1NEEP Regional Assessment of Strategic Electrification

2NYSERDA commissioned an assessment of VRFs in 2018 that identified barriers and opportunities to the heat pump technology and
energy savings estimates for commercial office and multifamily buildings. “Market and Technical Analysis of Variable Refrigerant Flow
Heat Pump Technology”, VEIC. May 2018.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 4

Factors that affect VRF Technology Performance
 Design and installation
 Performance
 Standards & savings
 Refrigerants
 Technology assessment

Following additional research informed by the working group, NEEP prepared draft market transformation
strategies. Regional stakeholders provided robust input after review of the draft report that included the market
assessment and market strategies.
Informed by the regional input, NEEP finalized this report. NEEP intends to use the strategy report to prioritize
regional activity that key market actors should focus on to accelerate the market adoption of VRF technology in
the coming years.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 5

 VRF Technology and Market Assessment
Framing Assessment of VRF Market, Technology and Performance
NEEP launched its market assessment work by organizing key research questions to more fully understand the
market that we were seeking to impact. Table 1 captured the topic areas that were of highest interest. Market
research was prioritized in the areas of biggest need.
Table 1 Framework for assessing VRF technology and regional Market

INPUT RECEIVED ADDITIONAL INSIGHT

VRF KEY QUESTIONS RELEVANT INFO
VRF MARKET DURING KICKOFF CAPTURED IN NEEP
Focus FOR NEEP VRF CAPTURED IN NYSERDA
TOPICS WORKING GROUP STAKEHOLDER
Area PROJECT VRF REPORT
WEBINAR SURVEY
- What are the most
- Benefits of VRF recent technological
systems over traditional advancements re HVAC
HVAC solutions were systems? Is VRF one of
What are the covered in the NYSERDA the preferred solutions
TECHNOLOGY
current VRF system report but tradeoffs in this mix?
ASSESSMENT
VRF Technology & Performance

applications? were not. - What are the

- Ideal application of VRF benefits/tradeoffs of
systems with a focus on VRF systems against
comfort cooling. other alternative
technologies?

What are some of the

best practices when it
How are VRF Lack of sufficient
DESIGN AND comes to design,
systems industry design and
INSTALLATION installation,
specified/sized? installations skills
commissioning and
O&M?

Cold climate
Have performance performance - the
specifications for more a system can
VRF operation and Most of this is covered reduce the capacity of
high efficiency in in the NYSERDA report. How does the industry the backup heating
PERFORMANCE
cold climate Cold climate concerns define “cold-climate” devices, usually
(Cold Climate)
applications been can be overcome with performance of VRF? natural gas boilers,
developed? (Do good design. the more it can be
they allow for cost-effective and the
differentiation?) more it can reduce
GHG emissions.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 6

 - What are relevant
efficiency metrics,
- NYSERDA’s modeling
standards & test
compares VRF systems’
procedures? There is a lack of real-
performance to typical
- Have world performance
baseline systems.
performance & data, and difficulties in
- NYSERDA’s modeling How does modeled
STANDARDS & energy use understanding how to
looked at factors that performance compare
SAVINGS deemed savings for design and size one
impact performance like to actual performance?
VRF and baseline for engineers, as it is
fuel prices, building
solutions been different for each
ages, external electrical
established? manufacturer.
loads and shell
- What are the
characteristics.
estimated savings
for VRF systems?
- Can more information
on the next generation
Mentioned re ASHRAE of refrigerant and
standards, but refrigerants be There is a potential for
Are leaking
assessment of provided? collision between VRF
REFRIGERANTS refrigerants an
refrigerant in VRF can be - Consider piping reuse, deployment and HFC
issue?
done more how ASHRAE-34 needs phase-out.
comprehensively. to evolve, how
manufacturers can get
involved etc.
VRF systems are more
expensive on a per-ton Incremental and
basis than other systems installed costs are
due to additional covered in the NYSERDA
What cost data is VRF is perceived as
COST installation costs of report, but perhaps
VRF Market Development

available? having a high cost

refrigerant lines, more recent and more
condenser costs and comprehensive research
other advanced can be done on this.
components.
High level assessment of
Who are the key
market actors and their
market actors re
MARKET ACTORS roles in influencing the
VRF market
adoption of VRF
adoption?
technologies.
What
Highlighted in response
appropriate/critical
to each market/
market
MARKET technical barrier
interventions can
INTERVENTIONS identified. Are there
be identified in
more holistic
order to accelerate
approaches?
market adoption?
How big is the
MARKET SIZE current VRF
market?

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 7

 Review of market
What program development and
How effective are
PROGRAM strategies for VRF industry engagement
current mid-stream and
STRATEGIES should be strategies relevant to
down-stream programs?
developed? overcome identified
barriers
How does the northeast
compare to other
- How can regional
regions?
stakeholder
– Is VRF adoption
communication be Broad lack of
Reference to case moving at the same
maintained? awareness about VRF
REGIONAL studies to highlight speed and in the same
- What are the technology and the
PROMOTION VRF’s applicability to direction?
existing VRF energy and non-
various building types. – What initiatives are
promotional energy benefits.
other regions
efforts in the
implementing to
region?
accelerate VRF
adoption?

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 8

VRF Technology and Applications
VRF was introduced in the 2016 NEEP ASHP Market Strategies report3, and although VRFs are available for air
conditioning use only, this report focuses on VRFs as a comprehensive heating and air conditioning solution for
commercial buildings. Increased performance by VRFs is achieved using inverter-driven, variable-speed
compressors which “allow heat pumps to operate much more efficiently by varying capacity with building
loads”. Unlike chillers, VRF systems circulate refrigerant instead of water as the heat transfer medium. The
current refrigerant used in VRF systems is R410A, but research on alternative low global warming potential
(GWP) and natural refrigerants is ongoing.
As noted in the ASHP report, VRF systems – which have unique design flexibility – are typically installed in
applications where there is a central heating and cooling load larger than what is economical to serve with mini
split heat pump units. A commercial building with multiple and diversely loaded zones – potentially with
simultaneous heating and cooling needs – is an example of where VRF would be a more appropriate application
when compared to mini split technology. A single outdoor condensing unit can be connected to multiple indoor
evaporators providing efficiency through load matching and heat recovery. Systems selected with a heat
recovery module have the added benefit of simultaneously heating and cooling from one condensing unit,
transferring energy between zones.
Figure 1: VRF Heat Pump heat recovery building design

(Source: 2012 GSA VRF Systems Report / Mitsubishi)

Achieving simultaneous heating and cooling of zones connected to one condensing unit is not possible without
the heat recovery module option, available from all major VRF manufacturers. The additional cost of adding heat
recovery technology is justified when there is diversity of heating and cooling needs in the same conditioned
space. Potential for heat recovery is best captured in the original system design, understanding that it is not
going to increase the system efficiency in all applications.

3 https://neep.org/sites/default/files/NEEP_ASHP_2016MTStrategy_Report_FINAL.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 9

The use of VRF heat recovery is typically best suited for design applications with smaller, separated spaces (e.g.
offices, classrooms or conference rooms), with a known diversity of heating and cooling needs.
Based on industry interviews in the 2018 NYSERDA VRF report, VRF systems are well suited for “any space type
that provides comfort cooling”, including offices (both small and large), multifamily (apartments, residential
town homes, dormitories, and condos), assisted living, hotel/motel, and K-12/university. The common attributes
of these building types are that they have physically defined zones and variable occupancy rates through the day
and week.
The NYSERDA report highlights the attractiveness of VRF in urban areas where building space limitations on the
roof and between floors in retrofit and new construction applications is a significant concern. Additionally, as
urban applications are typically in buildings with lower natural gas heating costs and higher electricity rates,
summer cooling savings and the non-energy benefits of comfort and space savings (e.g. reduced ductwork) can
often drive VRF selection. Alternatively, applications in more rural areas not served by natural gas recognize a
significant benefit from reductions in higher oil and propane heating fuel costs.

VRF Performance Metrics, Ratings, and Standards

Air-Conditioning, Heating, and Refrigeration Institute Standard 1230: Performance Rating of Variable Refrigerant
Flow (VRF) Multi-Split Air-Conditioning and Heat Pump Equipment (AHRI 1230-2014) establishes the test
procedure of VRF equipment. Standard 1230 classifies equipment by nominal capacity stating that for systems <
65,000 Btu/h, the standard measure of efficiency shall be expressed by EER, SEER, and HSPF. For systems ≥
65,000 Btu/h, the standard measure of efficiency shall be expressed by EER, IEER or IPLV, and COP. The primary
focus of this report is on air-cooled VRF greater than 5.4 ton or 65,000 Btu/h; smaller capacity systems less than
5.4 ton and water-cooled criteria are not currently captured.

 Energy efficiency Ratio (EER) A ratio of the Total Cooling Capacity in Btu/h to the power input
values in watts [W] at any given set of rating conditions expressed in Btu/Wh.
𝑡𝑜𝑡𝑎𝑙 ℎ𝑒𝑎𝑡 𝑟𝑒𝑚𝑜𝑣𝑒𝑑 𝑓𝑟𝑜𝑚 𝑡ℎ𝑒 𝑐𝑜𝑛𝑑𝑖𝑡𝑖𝑜𝑛𝑒𝑑 𝑠𝑝𝑎𝑐𝑒 𝑑𝑢𝑟𝑖𝑛𝑔 95°𝐹 𝑡𝑒𝑠𝑡 (𝐵𝑡𝑢)
 EER = 𝑡𝑜𝑡𝑎𝑙 𝑒𝑙𝑒𝑐𝑡𝑟𝑖𝑐𝑎𝑙 𝑒𝑛𝑒𝑟𝑔𝑦 𝑐𝑜𝑛𝑠𝑢𝑚𝑒𝑑 𝑏𝑦 𝑡ℎ𝑒 ℎ𝑒𝑎𝑡 𝑝𝑢𝑚𝑝 𝑑𝑢𝑟𝑖𝑛𝑔 𝑡ℎ𝑒 95°𝐹 𝑡𝑒𝑠𝑡 (𝑊𝑎𝑡𝑡−ℎ𝑜𝑢𝑟𝑠)
 Integrated Energy efficiency Ratio (IEER) The integrated energy efficiency ratio expressed in
Btu/Wh is a metric used to represent the annualized performance of the mechanical cooling
system, as well as to serve as a comparative metric for partial load performance of VRFs at (4)
different capacities defined in AHRI 1230:
 A = EER at 100% net capacity at 95°F outdoor dry bulb
 B = EER at 75% net capacity at 81.5°F outdoor dry bulb
 C = EER at 50% net capacity at 68°F outdoor dry bulb
 D = EER at 25% net capacity at 65°F outdoor dry bulb
As highlighted in the calculation of IEER below, the full load capacity represents only two percent of the
assumed operation of the VRF to reflect typical real building applications.

IEER = (0.02 ∗ 𝐴) + (0.617 ∗ 𝐵) + (0.238 ∗ 𝐶) + (0.125 ∗ 𝐷)

AHRI 1230-2014 specifically notes “IEER is not intended to be a predictor of the annual energy
consumption of a specific building in a given climate zone. To more accurately estimate energy
consumption of a specific building an energy analysis using an hour-by-hour analysis program should be
performed for the intended building using the local weather data.”

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 10

  Coefficient of Performance (COP) A ratio of the heating capacity in watts [W] to the power
input values in watts [W] at any given set of rating conditions expressed in watts/watts [W/W]
Minimum Efficiency Standard for VRFs
Minimum efficiency standards for air, ground, and water source VRF heat pumps are covered under ASHRAE
Standard 90.1-2016 Table 6.8.1-10 for both heating and cooling operation. The table below is an excerpt for air-
cooled VRF and ≥ 65,000 Btu/h, based on the focus of this report.

Minimum Energy Efficiency Criteria

Equipment Type Cooling Capacity Heating Type
Cooling Mode Heating Mode

≥ 65,000 Btu/h w/o Heat Recovery 11.0 EER; 12.3 IEER 3.3 COP at 47°F
VRF Air-Cooled Heat Pump
< 135,000 Btu/h w/ Heat Recovery 10.8 EER; 12.1 IEER 2.25 COP at 17°F

≥ 135,000 Btu/h w/o Heat Recovery 10.6 EER; 11.8 IEER

VRF Air-Cooled Heat Pump
< 240,000 Btu/h w/ Heat Recovery 10.4 EER; 11.6 IEER 3.2 COP at 47°F

w/o Heat Recovery 9.5 EER; 10.6 IEER 2.05 COP at 17°F
VRF Air-Cooled Heat Pump ≥ 240,000 Btu/h
w/ Heat Recovery 9.3 EER; 10.4 IEER

Table 2 ASHRAE Standard 90.1-2016 Table 6.8.1-10 for Air-cooled VRF systems above 65,000 Btu/h

VRF systems have the potential to be highly effective at load matching. The ability of the system to yield savings
at part load conditions is highly dependent on the controls algorithms used, and proper design and sizing. This
energy benefit is not currently captured in the efficiency standards using the current test procedure.
In January 2018, a VRF multi split air conditioners and heat pumps working group was formed by the U.S.
Department of Energy (U.C. DOE) Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC) to
reach a consensus agreement for updates to federal test procedure and standards for VRF. The current federal
standards required for equipment manufactured after January 2010 must meet or exceed the ASHRAE Standard
90.1-2010 Table 6.8.1-10. This working group met on April 17-18, 2019 to review a proposed Controls
Verification Procedure Test Plan (CVT)4 to address advocate concerns around the current test procedure and its
ability to properly assess the impact of software controls on the performance of VRF.
The working group came up with a proposed repeatable, reproducible and representative controls verification
test (CVT) procedure. To vet this procedure and provide data to inform the finalization of a code-language
version, the working group also developed a recommended test plan and guidance document. The test plan
recommended by the working group includes the recommendation that DOE consultants be given access to
testing and test data under NDA for tests conducted by Original Equipment Manufacturers (OEMs) in-house to

4 https://www.regulations.gov/contentStreamer?documentId=EERE-2018-BT-STD-0003-0028&attachmentNumber=1&contentType=pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 11

verify that the CVT procedure meets the required goal. More updates on this can be found on the ASRAC
website5.

Performance Specifications for VRFs

ASHRAE Standard 90.1 Energy Standard for Buildings Except Low-Rise Residential Buildings is typically adopted
by states and municipalities to establish minimum efficiency requirements of building design and construction.
ASHRAE Standard 90.1 2010 and later includes minimum equipment efficiencies for VRF.
Advanced performance specifications have been developed by two recognized labels - Environmental Protection
Agency (EPA) ENERGY STAR™ program and the Consortium for Energy Efficiency (CEE). However, the
performance specifications can introduce additional variance and confusion in the market for establishing a
uniform set of performance levels for VRF. Additionally, the ENERGY STAR specification does not capture the
minimum efficiency COP criteria for heating mode at 17°F.
An excerpt of the current V3.1 Light Commercial HVAC ENERGY STAR minimum performance criteria6 effective
January 2018 for VRF air-cooled heat pumps is outlined below:
Table 3 ENERGY STAR Criteria for Certified Light Commercial VRF Multi-Split Systems

Minimum Energy Efficiency Criteria

Equipment Type Cooling Capacity Heating Type
Cooling Mode Heating Mode

≥ 65,000 Btu/h w/o Heat Recovery 11.8 EER; 17.4 IEER 3.4 COP at 47°F
VRF Air-Cooled Heat Pump
< 135,000 Btu/h w/ Heat Recovery 11.6 EER; 17.2 IEER 3.4 COP at 47°F

≥ 135,000 Btu/h w/o Heat Recovery 10.9 EER; 16.4 IEER 3.3 COP at 47°F
VRF Air-Cooled Heat Pump
< 240,000 Btu/h w/ Heat Recovery 10.7 EER; 16.2 IEER 3.3 COP at 47°F

Consortium for Energy Efficiency (CEE) has developed advanced performance tiers for VRF7 (applied to both air-
source and water source within capacity bins)

5 https://www.energy.gov/eere/buildings/appliance-standards-and-rulemaking-federal-advisory-committee
6 https://www.energystar.gov/sites/default/files/Light%20Commercial%20HVAC%20Version%203.1%20Program%20Requirements_1.pdf
7 https://library.cee1.org/system/files/library/13655/Final_2018_CEE_HECAC_Initiative_Description.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 12

Table 4 CEE Specification for VRF Multi-Split Heat Pump Systems

Equipment Type Size Category Subcategory Cooling Mode Heating Mode

≥65,000 and w/o Heat Recovery 11.3 EER; 14.2 IEER 3.4 COP at 47°F
<135,000 Btu/h w/ Heat Recovery 11.1 EER; 14 IEER 2.4 COP at 17°F

≥135,000and w/o Heat Recovery 10.9 EER; 13.7 IEER

VRF Air Source <240,000 Btu/h w/ Heat Recovery 10.7 EER; 13.5 IEER
3.2 COP at 47°F
w/o Heat Recovery 10.3 EER; 12.5 IEER 2.1 COP at 17°F
≥240,000 Btu/h
(Cooling Mode) w/ Heat Recovery 10.1 EER; 12.3 IEER

In partnership with the Air-Conditioning, Heating, and Refrigeration Institute (AHRI), CEE maintains a CEE
Directory of Efficiency Equipment. This directory of HVAC equipment can searched for the most efficient
residential and small commercial equipment on the market. Manufacturers work with AHRI to verify that their
equipment meets the criteria established by the federal ENERGY STAR® program and by CEE. This directory
leverages the AHRI Directory of Certified Product Performance along standing source of performance certified
heating, ventilation, air conditioning, and commercial refrigeration equipment and components.

Regional Efficiency Program VRF Performance Criteria, Incentives and Program Delivery
Commercial scale VRF heat pumps have been introduced into several NEEP member programs in the Northeast
and Mid-Atlantic. Incentive and performance criteria, as well as program requirements and delivery (e.g.
downstream customer incentives and midstream distributor incentives) vary from state to state – and in the
case of Massachusetts - between the utility-led Mass Save® and state-led Massachusetts Clean Energy Center
(MassCEC) programs.
Table 5 Regional Efficiency Program VRF Performance Criteria

Rebate
State HPSF EER IEER SEER COP
Incentive
For air cooled units ≥5.4
Massachusetts ≥11.0 ≥18.0 ≥3.4
tons = $125/ton
(Mass Save)
For water cooled units
≥12.0 ≥20.0 ≥4.3
≥5.4 tons = $125/ton
For units without heat
Massachusetts recovery ≥5.4 tons =
Must meet the minimum efficiency ratings established in the
(Clean Energy $800/ton
ANSI/ASHRAE/IES Standard 90.1-2016 Energy Standard for
Center)8 For units with heat
Buildings Except Low-Rise Residential Buildings
recovery ≥5.4 tons =
$1,200/ton

8Award levels for Public/Non-Profit = $1,000/ton without heat recovery, $1,400/ton with heat recovery; Award levels for Affordable
Housing = $1,600/ton without heat recovery, $2,000/ton with heat recovery. MA CEC revised incentive levels in early 2019 and plans to
sunset the VRF program in June 2019 for a transition to utilities.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 13

 Rebate
State HPSF EER IEER SEER COP
Incentive
For units without heat
recovery <5.4 tons = ≥10.0 ≥11.0 ≥17.0
$800/ton
For units with heat
recovery <5.4 tons = ≥10.0 ≥11.0 ≥17.0
$1,200/ton
Rhode Island Air-cooled units ≥5.4
≥11.0 ≥18.0 ≥3.4
(Program ensures tons = $125/ton
that efficient
equipment is Water-cooled units ≥5.4
≥12.0 ≥20.0 ≥4.3
available) tons = $125/ton
New York Flex Tech program: cost-shared energy efficiency technical analyses and strategic energy
(NYSERDA) management assistance to existing facilities, can include investigation of VRF
<5.4 tons = $125/ton
≥8.5 ≥12.5 ≥15.0
(Tier 1)
<5.4 tons = $230/ton
≥9.0 ≥13.0 ≥16.0
(Tier 2)
≥5.4 & <11.25 tons =
≥11.3 ≥14.2 ≥3.4
$125/ton
PSEG- Long Island
≥11.25 tons & <20 tons =
≥10.9 ≥13.7 ≥3.2
$80/ton
≥20 tons = $80/ton ≥10.3 ≥12.5 ≥3.2
Water source unit
≥14.0 ≥4.6
<11.25 tons = $80/ton

<5.4 tons = $100/ton ≥9.0 ≥16.0

<5.4 tons = $150/ton ≥10.0 ≥18.0
Energy Save PA
Custom energy ≥5.4 tons and <11.25
≥11.0 ≥11.2 ≥3.6
calculations tons = $35/ton
required for VRFs ≥11.25 tons and <20
≥10.6 ≥10.7 ≥3.6
tons = $35/ton
≥20 tons = $35/ton ≥9.5 ≥9.6 ≥3.5

Massachusetts Mass Save9 and Rhode Island10 are examples of regional efficiency programs supporting VRF
through midstream incentives delivered through participating HVAC distributors. One of the primary benefits
cited for customers through the upstream programs is the stocking of eligible, efficient products.
The NYSERDA report also highlights the importance of distributors as part of the supply chain and their role in
influencing the decision tree for selecting VRF.
“In all project types, the distributor is at the center of the efficiency discussion. This market actor is the vehicle
through which VRF equipment is connected to the mechanical engineer, architect, and DB [design-build]
contractor. VRF distributors have trained engineers that support market actors in both project types.

9 https://www.masssave.com/en/saving/business-rebates/upstream-electric-hvac-program/
10 https://www.nationalgridus.com/media/pdfs/bus-ways-to-save/ee7078-ci-upstream-hvac.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 14

Distributors’ sales engineers attempt to connect with decision makers to influence the best HVAC system for the
project.”11
There are two primary sales paths for VRF equipment - “plan and specification” (PS) and “design build” (DB).
These two pathways reflect the different key influencers as part of the decision to choose VRF over more
conventional and potentially “like-for-like” replace of end of life equipment replacement.

Figure 2 Example of VRF Project Pathways (NYSERDA 2018)

Building Energy Code impacts on VRFs

A key industry concern is the impact of building codes on VRF’s due to the economizer requirement in the IECC
2018 that creates a potentially unnecessary design and cost burden for VRF systems.
“Economizers are not a logical pairing with VRF systems because one of the main features of VRF is that heat is
transferred via refrigerant, not air. The notion of utilizing mild ambient air in large air ducts does not align with
VRF technology. In other HVAC system types, economizers are a great energy saving feature. However, VRF
systems provide the code minimum ventilation rates only, and are not designed to provide additional fresh air.
The efficiency gains from reducing fan energy are tremendous and outweigh the benefits from economizers.”
A recommendation supported by industry suggests an exception be made for VRF in future energy codes and
standards to consider the operational and design differences compared to traditional HVAC technologies.

11 NYSERDA 2018 VRF Report

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 15

Savings associated with VRF installations; Energy, Cost, Peak load, and Emissions
Utility programs supporting VRF through commercial HVAC programs typically treat it as a market opportunity in
which the prescriptive measure savings are defined as the delta between the baseline VRF equipment efficiency
(e.g. ASHRAE 90.1-2016) and the high efficiency VRF meeting (e.g. ENERGY STAR or CEE specification). However,
a few regional utility efficiency programs including those in Massachusetts and Rhode Island have established
higher VRF IEER requirements (Air-cooled VRF ≥ 18.0) beyond CEE Tier 1 criteria. Custom measure analysis offers
the potential for improved targeting of cost-effective opportunities where oil or propane heating fuels can be
offset.
Manufacturers are actively releasing new VRF product lines with increased efficiency and capacity at lower
outdoor ambient temperatures. Below is an example of a recent advancement in a manufacturer product line
without heat recovery (left) and with heat recovery (right). IEER performance increased by up to 28 percent over
previous models and achieved up to 29.3 IEER in heat recovery units at eight tons.

Figure 3 Comparison of Daikin VRV IV to III heat pump performance for systems without (left) and with (right) heat recovery12

Manufacturers have dramatically increased VRF heat pump cold climate performance to broaden the
applications and performance in northern climates. Leading manufacturers promote strong heating capacity
performance down to -13 °F in heat recovery systems and 0 and -4 °F systems where heat recovery is not used.
Current ASHRAE heating COP reporting requirements and testing are limited to 47 and 17 °F. Increasing testing
and reporting requirements at lower temperatures would improve the ability to compare cold-climate
performance, support broader applications to replace conventional heating systems and improve cost-
effectiveness for NEEP programs and buildings in the Northeast climate.
The limited number of independent evaluations of VRF performance support robust energy savings in a small
sample of diverse heating fuel types, building use and type, and baseline equipment being replaced. Most of the
savings estimates are developed pre-installation through energy model simulations of buildings instead of more
difficult field monitoring of the HVAC post installation. Comments from NEEP VRF stakeholders highlighted that
energy modeling inputs and functionality to properly model VRF systems is lacking in some of the most common

12 https://www.daikinac.com/content/assets/DOC/Product%20Brochures/CT-VRV-Catalog-08-15.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 16

tools (eQuest, TraneTrace, etc.) and although workarounds are possible, they require significant modeling
expertise.
A report published by the Minnesota Department of Commerce in 201513 concludes that VRF systems reduced
energy use by 30-40 percent compared to conventional HVAC systems and highlighted the partial load benefits
of the variable speed compressors in matching the building’s heating and cooling load.

In 2012 the General Services Administration (GSA) commissioned a study assessing VRF performance through
model simulations against a variety of baseline technologies and fuel types (electric vs. natural gas). The model
simulations were based on previous models from independent sources and manufacturer simulations.
Table 6 Potential HVAC Only Energy Savings from VRF Systems Compared to Other Systems (GSA 2012)14

The Energy Trust of Oregon designed a pilot through its New Buildings program to capture the costs and savings
of VRF projects to support a prescriptive program development. Initial research findings found an average HVAC
energy savings of 2.9 kWh/sf/yr or 35 percent, with a range of 13 – 63 percent savings depending on baseline

13 http://mn.gov/commerce-stat/pdfs/refrigerant-technology-cold-weather.pdf
14 https://www.gsa.gov/cdnstatic/GPG_Variable_Refrigerant_Flow_12-2012.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 17

equipment and building type. The program implementer modeled existing VRF systems across three primary
building types – school, multifamily and office – to support prescriptive savings for the pilot program.

Table 7 Energy Trust VRF pilot program prescriptive savings and incentive (ACEEE 2016)15

In 2018, NYSERDA commissioned a market and technical study of VRF by VEIC and Energy Solutions to assess the
technology opportunity as part of the broader Renewable Heating and Cooling program.16 VEIC created a
building scenario energy model to estimate “energy savings offered by VRF systems installed in key building
types in New York City and the Northeast based on a variety of modeling input scenarios – by varying fuel prices,
building age, internal electrical loads, and shell characteristics – then applied to the building types and local
climate conditions.”

For the NYSERDA study, VEIC utilized OpenStudio, an open-source interface with EnergyPlus, an extremely
flexible and powerful BEM platform developed by the U.S. Department of Energy (U.S. DOE) and the National
Renewable Energy Lab (NREL). EnergyPlus is considered the replacement to the previous DOE-2 platform, on
which e-Quest (one of the most popular BEM tools) is built. Program implementers can use building energy
models to develop high-level estimates of performance or by capturing actual project specific building and HVAC
system details – along with energy use and costs -provide a robust model of VRF performance and savings.

For NYSERDA’s purposes to guide the aggressive state goals for emission reductions, GHG impacts were tracked
along with that of energy. The GHG impacts serve as alternative lens to assess the total VRF project value in
addition to the customer financial economics and program cost-effectiveness. In the case of office buildings,
GHG emission reductions from VRF ranged from a maximum of 41 percent for older, large office buildings in NYC
to a net increase of 10 percent for older, medium-sized office buildings in upstate New York. It should be noted
that the modeling assumed a generic VRF performance and is not necessarily representative of the higher
efficiency models being introduced in the Northeast market currently with higher IEER and COP levels. Increases
in energy savings and GHG reductions would be expected for the advanced cold-climate models.

In the VEIC analysis, the modeling results found significant heating fuel savings but the electrical savings for
cooling in some cases were offset by the increased heating electrical load.

15https://aceee.org/files/proceedings/2016/data/papers/3_345.pdf
16NYSERDA provided a public version of the “Market and Technical Analysis of Variable Refrigerant Flow Heat Pump Technology” report
to the NEEP VRF working group in October 2018.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 18

 Figure 4 Change in building electric and fossil fuel consumption, GHG and peak demand from VRF installations in office buildings

The NYSERDA study also assessed the significant changes in seasonal peak demand from VRF
installations relevant to changing utility peak load profiles. The result is a more significant winter peak
increase in the heating dominated, fuel switching multifamily applications. Whereas the VRF
installations in office buildings create a more uniform peak between winter and summer, greatly
reducing the summer peak for baseline cooling systems.
Not modeled in the NYSERDA report is the potential to more effectively use the variable capacity
functionality of the VRF to serve load management purposes to mitigate or shift peak loads during
certain times of day or peak events.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 19

 Figure 5 Change in seasonal peak demand in multifamily (left) and office buildings from VRF installations

VRF Market Size and Research Insights

In Europe and Asia, market share of VRF heat pumps represents approximately 80-90 percent of installed HVAC
systems in commercial buildings, but in the United States, the technology is still a nascent – but rapidly growing
– market.17
Recent market reports have identified VRFs as the fastest growing technology in the HVAC market (>15 percent
annual growth) and representing 3-5 percent of the total HVAC market in the U.S. Regional sales data is largely
limited to fragmented program participation data, however based on industry feedback, market adoption of
VRFs has been led by urban areas like New York City in which the space savings of VRFs is a premium benefit.
The AHRI monthly, year-over-year comparisons of shipment data demonstrate the continued growth in U.S.
sales of heat pumps in comparison to air conditioners. On an annual basis, heat pumps have experienced more
than 12 percent increase in shipments compared to four percent for air conditioners. However, these sales have
disproportionately come from residential scale heat pumps, whereas commercial combined heat pump and air
conditioner sales in most capacity sizes ranged from -6.8 percent to 3.8 percent growth. One notable exception
was in very large commercial systems that are outside of the primary focus of the VRF heat pump market that
experienced a double-digit growth – though small in quantities.

17Joanna Turpin. VRF Market Expected to Hit $24B by 2022. ACHR News. February 2017. https://www.achrnews.com/articles/134465-
vrf-market-expected-to-hit-24b-by-2022

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 20

 500,000

179,513 199,666

250,000

293,983 292,320

0,000
Dec-17 Dec-18

Air Conditioners Heat Pumps

Figure 6 AHRI U.S. Heating and Cooling Equipment Shipment Data for Air Conditioners and heat Pumps in December 2017 and 201818

Historically, VRF has represented a small percentage of the overall HVAC market, but increases in performance,
flexibility in design, and broader awareness of the technology and its applications are accelerating its growth.
The non-energy benefits (i.e. comfort, space savings, and electrification benefits to a clean-energy electrical
grid) of VRF are often neglected at the building design stage with a primary focus on the upfront and operational
energy costs compared to traditional heating and cooling technologies.
Commercial air source heat pumps in the United States are comprised of three primary types:

 Packaged rooftop heat pumps

 Split-system heat pumps
 VRF/ductless systems
Commercial VRF represent a small, but growing share of the overall market, dominated by more traditional
ducted heating and cooling systems.

18AHRI 2018 U.S. Heating and Cooling Equipment Shipment Data. February 2019.
http://www.ahrinet.org/App_Content/ahri/files/Statistics/Monthly%20Shipments/2018/December_2018.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 21

 Chillers

Rooftops

VRF / Ductless Systems

PTAC

Single Package

Portable A/Cs

Split System Heat Pump

Furnaces

Split System A/C

0% 5% 10% 15% 20% 25% 30% 35%

Figure 7 US HVAC Industry volume comparison of Commercial and light commercial HVAC types19

Based on CBECS 2012 data, space heating, cooling, and ventilation in Northeast buildings represents
approximately 52 percent (36 percent heating, seven percent cooling and nine percent ventilation) of all energy
used in buildings or 50 kBtu per square foot of building area - a significant opportunity for efficiency and
greenhouse gas (GHG) mitigation. Within the NEEP region, as would be expected, buildings in New England have
a higher energy intensity for heating, while Mid-Atlantic buildings have a higher cooling and ventilation load.

45.0
41.0

34.1
31.6
30.0

Northeast
New England
15.0 Middle Atlantic
9.0 9.8
6.6 7.3 6.7
4.5

0.0
Space Cooling Ventilation
heating

Figure 8 Buildings energy intensity with existing heating system types in Northeast Commercial Buildings (CBECS 2012)

However, existing buildings and the HVAC market in general is characterized by a diverse set of conventional
heating and cooling technologies, with a significant amount incorporating non-heat pump technology. This

19 Steve Jones. Mitsubishi presentation at Texas Utility Innovations - Source AHRI and BSRI September 2012.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 22

creates both barriers and opportunities for market growth of VRF in relation to displacing the existing heat
transfer medium (e.g. ductwork or water piping) with new refrigerant piping.

Packaged heating units

Heating System Type

Boilers

Individual space heaters

Middle Atlantic
New England
Furnaces

Heat pumps

0 50 100 150 200 250

Number of Buildings (Thousand)

Figure 9 Existing heating system types in Northeast Commercial Buildings (CBECS 2012)

Packaged air conditioning units

Cooling System Type

Central chillers

Individual air conditioners

Middle Atlantic
New England
Heat pumps

Residential-type central air

conditioners

0 50 100 150 200

Number of Buildings (Thousand)

Figure 10 1 Existing cooling system types in Northeast Commercial Buildings (CBECS 2012)

Forthcoming commercial building studies commissioned by NYSERDA20 and other states will bring valuable
regional data to the potential market size for VRF. As part of this effort, NYSERDA will conduct a commercial
building baseline study, potential study, and market assessment for commercial unitary air conditioner systems.

20 https://www.nyserda.ny.gov/About/Publications/Building-Stock-and-Potential-Studies/Commercial-Statewide-Baseline-Study

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 23

However, a compilation of market assessments and baseline studies would be of value in developing a regional
estimate of the potential VRF market.
In 2014, New York City (NYC) committed to an 80 percent reduction in GHG emissions by 2050 (80 x 50) with an
interim goal of 40 percent reduction by 2030. The NYC 80 x 50 roadmap21 highlights the important role of
improving the city buildings as they represent 68 percent of total GHG emissions. To achieve an 82 percent
reduction in building GHG emissions (52 percent by 2030), two primary actions related to building are identified:

 Shift to a 70-75 percent renewable-based electric grid

 Achieve deep energy retrofits in 100 percent of buildings, with 50-60 percent implementing high
efficiency electric heating systems
A focus on high efficiency electric heating systems reflects the fact that space heating and domestic hot water
(DHW) production represent 74 percent of multifamily and 25 percent commercial NYC building emissions.
Figure 11 New York City Building GHG Emissions by End Use22

Source: 2013 and 2014 Local Law 87 Submissions

21 New York City’s Roadmap to 80 x 50 (2016)

22 Presented at NEEP NYC in-Person VRF Meeting (December 2018)

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 24

To advance efforts in addressing GHG emissions in buildings, the NYC Sustainability Office has developed a
partnership program to pilot deep energy retrofits through a new High Performance Retrofit Track. The deep
energy retrofits are to target all major building systems and the building envelope, but also advance strategies
for increased tenant engagement and building operator operation and maintenance (O&M) training.
Table 8 Multi-path deep energy retrofit strategies in NYC High Performance Retrofit Track partnership program

Building Block Systems

Heating Cooling Ventillation Envelope
Equipment Distribution Equipment Equipment Air Sealing Windows Roof Walls
Retrofit Path 1 - Existing System Upgrade steam 1) Upgrade
Boiler Add interior
existing system, or Common area High Roof deck

Choose at least 2
Optimization replacement and system + O&M High efficiency or exterior
2) Evaluate and tenant efficiency or cavity
Retrofit Path 2 - Hydronic right sizing at end Hydronic cooling wall
installation of new spaces windows insulation
of life conversion insulation
Conversion system
Retrofit Path 3 - Electrification + 1) Upgrade Interior wall
Heating Load Reduction Air source or Remove or keep Air source or existing system, or Common area High Roof deck insulation
ground source existing system ground source 2) Evaluate and tenant efficiency or cavity
Retrofit Path 4 - Elecrification + heat pump as backup heat pump installation of new spaces windows insulation Exterior wall
Major Envelope Improvement system insulation

Additional Systems
Electric Loads
Domestic Hot Water Lighting Solar PV Required in commercial Tenant Engagement O&M Training
Encouraged in residential
Options Include: Options Include: Options Include: Options Include: Determined based on Building operators to
- Low-flow fixtures - Install LEDs - Install PV on roof - Upgrade fans and building needs receive Operations &
- Air source heat pump for - Upgrade fixtures - Community shared motors Maintenance training
hot water - Install controls and solar - Appliance efficiency
- On-demand electric sensors - Data center/server
resistance room optimization

The multi-path strategy is designed to align with a capital planning schedule for building upgrades and allow for
flexibility based on the specific building needs. The combination of efficiency, building shell improvements and
electrification of heating loads with air and ground source heat pumps serve as a comprehensive solution for
achieving the city GHG emission targets.

VRF Refrigerants and Regulation

VRF systems contain significant amounts of refrigerant due to increased heating and cooling capacities and
significantly increased refrigerant piping lengths in commercial buildings. In VRF systems, refrigerant is the
transfer media in vapor-compression style heat pumps and flows from the outdoor condenser unit to the
various indoor fan coil units and back through an extensive piping network. Refrigerant therefore moves
throughout the entire system, going through a cyclical phase change process to absorb and reject thermal
energy.
Refrigerants are regulated by the Environmental Protection Agency (EPA) under section 608 of the Clean Air
Act23 and given an “R” number to designate the molecular structure of the substance - some of which are “pure”
while others are “blends”. The most common type of refrigerant used in VRF systems is R-410A. This refrigerant

23 https://www.epa.gov/section608/managing-refrigerant-stationary-refrigeration-and-air-conditioning-equipment

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 25

is a near-azeotrophic mix of R-32 and R-125. It was introduced by Carrier Corporation in 1996 and is considered
the current primary replacement for R-22.24
The quantity of refrigerant in a VRF system is dependent on a variety of factors such as system capacity, length
of distribution piping, heat recovery functionality, among others. Systems tend to average 3-6 lbs. per cooling
ton (12,000 btu/h), therefore an “average” 30-ton system would contain 90-180 lbs. of refrigerant once the
system is fully charged and operational.
From the 1930s-1990s, predominant refrigerants were chlorofluorocarbons (CFCs). Due to concerns around
impact of these refrigerants on ozone depletion, the Montreal Protocol was signed in 1987, which phased out
the use of these substances in refrigerant systems.25 Following the phase out of CFCs, hydrochlorofluorocarbons
(HCFCs) were introduced as a replacement. HCFCs have significantly reduced impact on ozone depletion.
However, these substances were additionally phased out, both for ozone impact as well as a growing concern
about the role of these substances in contributing to global warming. In the 2000s, HCFCs were replaced with
hydrofluorocarbons (HFCs), which are the predominant refrigerant type used in air conditioning/heat pump
systems today. Although this class of refrigerant has 0 Ozone Depletion Potential (ODP), their Global Warming
Potential (GWP) is high.

Figure 12 Evolution of ozone depletion and global warming potential impacts of refrigerants in air conditioning & heat pump systems

Although VRFs represent a very small portion of the use of refrigerants compared to the larger refrigeration and
conventional air conditioning market, efficiency program administrators and energy advocates are concerned
about investing in a technology with associated risks of potential non-energy climate impacts. The risks are
categorized into three categories:
1. Global Warming Potential
2. Safety
3. System Obsolescence
Each of these refrigerant risk categories is explored further as part of the market strategy section of the report.

24“About Refrigerant R410A (HFC), http://www.toshibacca.com/en/learn-more/refrigerant-r410a-hfc

25 “The Montreal Protocol on Substances That Deplete the Ozone Layer”,
https://www.state.gov/e/oes/eqt/chemicalpollution/83007.htm

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 26

 VRF Market Adoption Barriers and Opportunities
The following table captures the VRF market barriers that were highlighted by NEEP’s VRF working group. The
regional market transformation strategies in this report were developed to assist in overcoming these barriers.
Table 9 Barriers to the Regional Development of the VRF Market

Climate- Need for the development of performance specifications for VRF system operation and high efficiency in
specific cold climate applications. Metrics have to be proved - show the math, using real numbers on upfront
Barriers costs, fuel savings, etc.
Lack of awareness that heat pumps even exist, or if there is awareness, there is especially a sense that
“they don’t work in cold climates”, or “they don’t work below freezing”.
Consumer Costs vary significantly, with a large range in pricing for the installed cost of essentially the same system.
Barriers In general, VRF is perceived as having a high cost.
With the drop in oil prices, comfort cooling was the main reason to buy in 2016. These issues are
becoming less significant.
Installers are available, but may not themselves yet trust or be willing to recommend this technology for
primary heat.
Design and Many installers in Northeast have limited experience with ducted heat pumps and don’t offer them as an
Installation option.
Barriers Poor informational feedback on how efficiently VRF units operate once installed, therefore there is a lack
of readily available accurate information on system economics relative to oil and gas-fired systems.
A general need to improve industry design and installation skills for VRF systems.
Need for regulators to allow electric utilities to promote fuel switching - this is the easiest way to get
greater heat pump adoption. Doing this will create the larger carbon savings than energy efficiency
programs, at no additional cost.
Furthermore, the incremental electric sales will reduce electric rates. Regulators very rarely understand
Policy Barriers
that electricity, when used in efficient heat pumps, is by far the cleanest heating fuel in terms of carbon
emissions. Heat pumps in New England reduce natural gas home heating CO2 emission by 40 percent and
oil emission by 60 percent. There is considerable policy misalignment between the jurisdiction with
climate change response mandates and utility regulatory bodies’ rules.
Program General inability to develop savings calculations without believable seasonal COP values.
Barriers Need for better models for savings for different types of equipment or in differing installation use cases.
Promotion
Broad lack of regional awareness about the VRF technology, and its related non-energy benefits.
Barriers
Refrigerant
Potential for collision between VRF deployment and HFC phase out.
Barriers
Standards Lack of real-world performance data, and difficulties in understanding how to design and size a VRF
Barriers system, as it is different for each manufacturer.
Technology CO2-based systems may be available in the near future with 1/2000 of the global warming potential of
Opportunity today’s refrigerants.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 27

Regional Market Transformation Strategies
The Variable Refrigerant Flow (VRF) Market Strategies Report is intended to serve as a framework for increasing
shared regional knowledge, and streamline and align market strategies with a focus on addressing identified
barriers to this specific new clean energy technology.

This section describes seven key regional market transformation strategies, including tactical details for each of
them. While they are framed as recommendations to the broad community of regional stakeholders, the sub-
strategies identify specific stakeholders for implementation. Earnest deployment of the recommended market
strategies outlined here should produce the necessary market conditions for accelerated and sustained uptake
of VRF systems throughout the Northeast and Mid-Atlantic regions.

List of Regional Market transformation strategies

1. Increase reporting of VRF performance and costs to improve models for predicting
cost-effectiveness, energy, and GHG savings.

2. Support improved test procedures and performance criteria/standards to enable the

promotion of climate-appropriate VRF.

3. Develop a comprehensive regional strategy for addressing the climate and safety
risks of refrigerants in VRF systems.

4. Increase state policy support and program valuation of all energy savings and non-
energy benefits of VRF.

5. Increase HVAC workforce development and training on proper VRF design,

installation, and maintenance.

6. Reduce incremental costs and increased VRF market transformation through robust,
streamlined, and aligned regional, state, and efficiency program market promotional
actions.

7. Promote integration of existing building management systems and advanced VRF

controls to increase coordination and efficiency between building heating and
cooling systems and other occupancy type controls.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 28

 Strategy #1: Increase reporting of VRF performance and costs to improve models
for predicting cost-effectiveness, energy, and GHG savings

Industry and efficiency programs utilize a variety of proprietary and open-source building modeling tools to
assist in selection, system design, prediction of performance, and cost savings of VRF installations. However, the
limited amount of field-verified data, limitations of existing test procedures and standards, as well as minimal
documented installed, incremental, and avoided costs serve as a barrier to increased confidence in VRF as a
cost-effective measure for efficiency programs and their customers. Below are examples of the impact on
different stakeholders due to the absence of established performance of ASHPs from the NEEP 2016 report:

 For consumers, it remains difficult to assess investing in VRF without knowing the likely savings;
 For contractors, it is challenging to provide accurate projections for savings in comparisons to the
systems currently operated;
 For regulators and program administrators, it is very difficult to establish proper policies, programs,
and incentive levels if savings and other benefits are in question. There is inadequate data to
support one-size-fits-all deemed savings estimates.
Due to nascent market of VRF and its broad applications across different commercial building types, fuel
sources, building-specific size and system requirements, as well as the variety of conventional HVAC alternatives,
it is important to increase reporting of both the technical design and costs accessible to programs and industry
partners.

Strategy 1a) Regional energy efficiency program administrators should introduce reporting requirements
to capture project-specific details on system design, upfront and operational costs, and estimated or
modeled savings. Additionally, longer-term supplemental field evaluations, verification, and pre/post
monitoring studies are of critical importance for documentation of field VRF performance - including
changes in energy use, ongoing operational performance in relation to changing building loads,
supplemental systems, and weather conditions.

Ideally, data should be captured at a regional level and with standardized reporting and field evaluation
protocols to serve to provide the most value to a variety of stakeholders. As highlighted earlier in the report, this
field-verified data can be instrumental in improving the accuracy of the building energy models that industry and
efficiency programs rely on to inform savings and system design decisions.

One attribute of the advanced controls native to VRF systems is the ability for industry to monitor and track real-
time performance of installed systems, potentially reducing the typically high cost of adding supplemental
metering and increasing the accuracy of evaluating system performance. This functionality of certain
manufacturer VRF controls was highlighted at the December 2018 in-person NEEP VRF workgroup meeting as a
supplemental area of focus for collaboration.

Strategy 1b) Regional VRF working group and manufacturers collaborate to assess the opportunity to
leverage existing or additional on-board metering of VRF systems to inform field-verified performance.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 29

 Pinpoint best practices for metering/monitoring VRF to identify the optimal balance of cost-effectiveness
vs. accuracy.

As noted earlier in the report, there are existing proprietary and non-proprietary building energy modeling
software currently being utilized by industry and efficiency program administrators to evaluate VRF design
tradeoffs and estimate energy savings based on building-level and locational parameters. The existing building
and HVAC models continue to improve in function and accuracy, but increasing confidence and investment in
VRF will require ongoing collaboration for improvements. With the recent introduction of new, high efficiency
cold climate VRF models, it will be necessary to update models with a diverse set of VRF performance curves to
reflect the wide variation in heat pump and heat recovery performance.

Strategy 1c) Regional stakeholders collaborate to develop best practices for VRF building energy modeling
and share updates to VRF performance curves (e.g. cold-climate models), field-verified building models,
and system costs.

On-board VRF control systems may serve as a valuable source of data to improve building energy modeling tools
for VRF at different building load and weather conditions.

Strategy #2: Support improved test procedures and performance criteria/standards

to enable the promotion of climate-appropriate VRF
The current federal standard and test procedure VRF working group will be instrumental in
identifying where national collaboration efforts are succeeding or falling short in accurately reflecting real-world
system performance – notably with a new focus on including an assessment of VRF control systems.

Figure 132 Daikin product brochure demonstrating broader operational range of new VRF/VRV models26

26 Daikin brochure VRV Applications in Extreme Cold Conditions (2017)

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 30

There are a lot of commonalities between the federal, ASHRAE, ENERGY STAR, and CEE standards and
specifications for VRF heat pump products. However, new VRF models – notably cold-climate models – are
demonstrating operational capacity to a wider range of design temperature and operational conditions that are
not currently tested under current standardized test procedures.

NEEP stakeholders emphasized the need to work with AHRI in “creating the next generation of standards in VRF”
to better reflect and align with the manufacturer focus on properly optimizing the overall performance and life
cycle cost of the unit. The current set of test procedures and standards reflect a more traditional focus on IEER
and full load COP.

NEEP has demonstrated a successful role in developing and maintaining a cold-climate specification and eligible
product list for residential-scale ASHPs, addressing a critical need for manufacturer reporting of ASHP
performance at temperatures below that required for AHRI 1230 (Cold Climate Air Source Heat Pump
Specification (Version 3.0) at 5°F). Leveraging NEEPs established working group and partnership on the current
cold climate specification might serve as a template for developing similar standardized reporting for
commercial VRF products at a wider range of temperatures. However, any future developments from the
federal working group on VRF will be important to monitor and inform any future efforts in this area.

Strategy 2a) NEEP VRF working group should monitor and support development of national test
procedures, standards, and advanced specifications that improve the correlation and accuracy to
real-world and climate-specific applications. The working group should evaluate the benefits of
developing regional climate-specific performance reporting requirements and advanced criteria for
VRF.

Strategy #3: Develop a comprehensive regional strategy for addressing the climate
and safety risks of refrigerants in VRF systems.
Global Warming Potential (GWP) is a metric used to describe the relative impact of a compound’s
contribution to global warming. GWP is given as a value relative to the baseline of CO2, which has a GWP of 1.
On an equal mass basis, a substance with a GWP of 2 would therefore have two times the impact of CO2. R-
410A has a GWP of 2090. In effect, this means that one pound of R-410A released into the atmosphere would
have the same impact on global warming as 2090 pounds of CO2. Based on our characterization of an “average”
VRF system, the refrigerant contained within has the potential impact of 188,000-376,000 pounds CO2 if it were
all to be released.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 31

Table 10 ODP and GWP for Various Refrigerants27

VRF systems are a key strategy being utilized for CO2 reduction in commercial buildings and by design are not
intended to leak refrigerants. However, the number of field connections of refrigerant lines and lengths of piping
potentially exposed to physical damage from external elements increases the chance of a system leak. Properly
designed and installed, VRF can displace aging fossil fueled heating systems and inefficient air conditioning,
saving money, energy and significantly reducing the CO2 associated with space conditioning. However, there is a
concern that the targeted CO2 reduction benefits of VRF will not be realized if a high rate of refrigerant leak
exists.
The net CO2 impact of VRF is dependent on a variety of factors. These factors include:

 VRF system performance

 Baseline fuel type and system performance
 Carbon content of electricity
 GWP of refrigerant
 Refrigerant leakage rate
VRF system performance is addressed elsewhere in this report. Baseline fuel type and system performance need
to be calculated on a case by case basis. However, higher carbon fuels, such as oil and propane, and older,
inefficient heating systems will present a larger opportunity for carbon offset than newer heating equipment
burning low-carbon fuels (such as natural gas or wood). Carbon content of the electricity being utilized for VRF
operation is beyond the scope of this report but does have significant impact on the potential for carbon
reduction through any electrification measure.
Given the high GWP of currently utilized refrigerants (such as R-410A), concerns around leakage rates are a high
priority as we evaluate the CO2 impact of VRF. Unfortunately, very little data exists on the average leakage rates
for VRF systems. Some basic modeling demonstrates that over 35 percent of all refrigerant would have to leak

27Nick Martineau. CO2’s Stage a Comeback. August 2015. http://koretechnical.com/rca-ti-tips/2015/8/14/the-comeback-of-co2-as-a-

refrigerant

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 32

out every year to break even on CO2 if the VRF system is replacing #2 fuel oil. However, if that same system
were replacing natural gas, the break-even level would only be 15 percent per year.
During the NEEP in-person December 2018 working group meeting, Steven Winter Associates presented
modeled greenhouse gas (GHG) footprints for several buildings in New York City with VRF installations. The
modeled results included an assumed 10 percent leakage rate and suggested an equal to larger carbon impact
when compared to gas heated buildings.28 The results did not include additional performance related to cooling
compared to conventional air conditioning systems. Although limited, additional reports have been cited by the
U.K. Department of Energy & Climate Change, which identified a 3.5 percent leakage rate (8-10 percent of
buildings leaking at a 40-50 percent rate)29 and another report by the U.S. Department of Defense identified
leakage rates as high as 25 percent.30
It is important to collect additional data on the percentage of installations and rate of leakage that is occurring,
as the concern about refrigerant leakage is rooted in the fact that VRF systems require extensive piping field
connections. Systems can contain hundreds of connections, each one representing a risk for leakage. As with all
emerging technologies that require a highly trained workforce, there is a learning curve that we must address to
ensure quality and dependable installations.

Figure 14 Modeled NYC GHG emissions assuming a 10% per year leakage31

28 Zuluga, Marc, “VRF: A Little Bit of Data & A Few Questions”

29 UK Department of Energy & Climate Change, “Impacts of Leakage from Refrigerants in Heat Pumps”, March 2014
30 US Department of Defense, “Heating, Ventilating, and Air Conditioning Systems”, November 2017
31 Zuluga, Marc, “VRF: A Little Bit of Data & A Few Questions”

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 33

Until we understand the baseline condition, we will not be able to address the issue of VRF refrigerant leakage.
A large-scale assessment of leakage rates for different manufacturers and building types across a broad
geographic area will provide the much-needed information to make informed policy decisions going forward.
There is potential for getting this data remotely as some manufacturers report the ability to track this utilizing
on-board diagnostics which can upload data remotely. This would require manufacturer engagement and
customer sign-off to access this data.
Through improvements in training programs, manufacturers and industry partners can work with installers to
ensure that best practices are employed in the field. Clear recommendations about which field connections are
acceptable and the best way to conduct these connections as well as QC and pre-charge field inspections by
trained staff will go a long way to ensuring quality installation and lower lifetime leakage rates.
Evidence of refrigerant leaks should be addressed through remediation and repair rather than periodic addition
of refrigerant. Industry partners should educate customers to proactively engage with their service contractor
on this practice. Customers should look for charges related to added refrigerant and question why the system is
leaking.
During the 2018 NEEP in-person meeting, industry participants highlighted that manufacturers have
supplemental on-board diagnostic equipment designed to detect refrigerant leakage, as well as internal
reporting of cases of refrigerant leakage that might serve as critical information to best understand the number
of reported leakage events, amount leaked and ideally the reason for the leakage.

Strategy 3a) NEEP VRF working group should initiate and collaborate in research aimed to identify
current VRF leakage rates, as well establish data-informed best practices for VRF installations and
servicing.

There are a variety of low GWP refrigerant options that are being developed, tested, and anticipated to come on
the market soon. However, initially these new refrigerants may come with increased costs, lower performance
(efficiency), or difficulty in entering the market due to existing building safety codes with respect to
flammability.32
 R-32: Most market attention has been focused on R-32 as a viable alternative to 410A, as it has a
moderate GWP value of 675, or about 1/3 that of 410A. However, R-32 is classified as an A2 for
flammability, making it “moderately flammable” according to regulatory prohibitions. As a
result, this refrigerant is not a viable alternative to 410A.
 HFOs: A new class of refrigerants being tested for replacement of HFCs is hydrofluoroolefins
(HFOs), which have ultra-low GWP values while maintaining 0 ODP.
 Natural refrigerants (NR): Compounds such as propane (R-290) and CO2 (R-744) are included as
potential alternatives and although new VRF products (and existing installations) are not
currently commercially available utilizing these refrigerants. Other technology sectors such as

32 https://dms.hvacpartners.com/docs/1001/Public/0E/ENG_NEWS_3_2.pdf
https://www.ashrae.org/technical-resources/bookstore/standards-15-34

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 34

 commercial refrigeration and air-to-water heat pumps are beginning to take advantage of these
refrigerants and their unique performance characteristics.
Another recommendation is to utilize equipment with lower charge levels. By utilizing water, or another transfer
medium on the distribution side, the amount of refrigerant needed in the system is reduced, thereby reducing
the GWP of the system. Air-to-water or other technologies provide much of the benefit of traditional VRF while
reducing the refrigerant impact.
Due to the ever-changing regulatory environment of refrigerants, there are concerns around access to phased-
out refrigerants and stranded distribution piping.
The EPA, under the Trump administration, has rolled back adoption of Significant New American Policy (SNAP)
rules that would have begun phase-down of HFC refrigerants. However, several states such as California, New
York, Connecticut and Maryland (among others), have opted to adopt the SNAP rules at a state level. It is
anticipated that many other states will follow suit. These rules require a refrigerant phase-down of targeted
high-GWP refrigerants. Similar rules are being adopted in Canada, France, and other countries around the world.
For the industry, sweeping changes in refrigerant regulation are expected, and although the timing on when HFC
refrigerants will no longer be available is unclear, most agree that a shift away from HFCs is inevitable.
For customers that install 410A systems, access to refrigerants, whether as a leak replacement or for service
reasons, is critical for ensuring that the equipment does not become a stranded asset. Another concern is that
when new refrigerants are introduced, existing installed piping distribution systems may very well be made
obsolete. Refrigerant piping size plays a critical role in system design with different refrigerants having different
operating parameters. For example some operate at much higher pressures than others, requiring stronger
piping materials/joints, while others require larger or smaller piping diameters for proper system performance.
A change in refrigerant (unless considered a “drop-in replacement”) will potentially require a complete
replacement of the distribution piping and fan coils.
Based on historical regulatory changes and resulting phase-outs, we can confidently assume that R-410A will be
available for the life the current VRF equipment. Phase-outs generally affect new installations long before they
become unavailable for addition to existing systems. Costs will be expected to increase as a phase out nears full
transition, however, it is unlikely that 410A will become entirely unavailable at any point in the foreseeable
future.
Although it is possible to develop a low GWP “drop-in” replacement to 410A which can utilize existing piping,
there is significant uncertainty if the next generation of refrigerants will be able to utilize existing infrastructure.
Installing piping in accessible locations whenever possible may be a potential opportunity to reduce anticipated
costs of re-piping, but it is more likely that the piping be considered as a temporary, perishable portion of the
VRF system that will need to be replaced.

Strategy 3b) NEEP VRF working group should invest in early support for industry evaluation of new
refrigerants for VRF installations, as well as incentivizing their early-market adoption. As new low-
GWP refrigerants will potentially require re-piping for proper safety or performance, early planning
and incentives may be required for avoiding barriers to market growth of VRF.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 35

Safety standards have been developed by ASHRAE to govern the management of refrigeration systems:
 ASHRAE Standard 15 defines the requirements for refrigerant system design, construction,
installation, and operation of refrigeration systems
 ASHRAE Standard 34 establishes a refrigerant safety classification system including flammability
and toxicity
Together, these standards, when properly adhered to, provide a clear and conservative framework for
refrigerant safety. R-410A, for example, is considered a non-toxic substance, however it does have oxygen
displacement characteristics that necessitate careful design and installation of VRF systems. High concentrations
of R-410A in confined spaces can result in severe threat to human life, which requires certain changes to piping
layout and system sizing to ensure adherence to ASHRAE 15. As noted earlier, current ASHRAE 15 standards
prohibits the use of flammable refrigerants in occupied spaces, and until further updates to the standard
currently proposed for allowing refrigerants classified as 2L (including R-32).
These standards are clear, easy to understand, and widely accepted as the way to manage refrigerant safety for
VRF systems. All municipalities and utility programs should reinforce the compliance with Standards 15 & 34.
They establish the Refrigerant Concentration Level (RCL) maximum based on the oxygen deprivation limit. This is
calculated based on the refrigerant characteristics and the volume of space the refrigerant passes through. The
assumption is that all the refrigerant could, in theory, drop directly into the smallest space on the refrigerant
circuit. This “worst case scenario” must still be within safety parameters. By following these standards carefully,
safety of all building inhabitants in ensured.

Figure 15 Illustration of ASHRAE 15 safety requirements for minimum occupied space to refrigerant volume33

33 https://www.daikinac.com/content/assets/DOC/White-papers-/TAVRVUSE13-05C-ASHRAE-Standard-15-Article-May-2013.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 36

There are several design strategies that can be employed to ensure that compliance is maintained. The smallest
space that the refrigerant runs through is generally the bottleneck. By running lines through larger, more open
spaces, the amount of refrigerant in the circuit is less important. Additionally, rooms can be interconnected
using louvers or other cross-ventilation techniques to connect room together. Refrigerant circuit size is another
variable to control in design. By creating multiple, smaller circuits as opposed to fewer, larger circuits, there is
less need to be concerned about room volume. Simply re-routing refrigerant lines away from smaller spaces can
assist in compliance.
Figure 16 Rerouting of refrigerant lines to satisfy ASHRAE 15 safety requirements for minimum occupied space to refrigerant volume34

34 https://www.daikinac.com/content/assets/DOC/White-papers-/TAVRVUSE13-05C-ASHRAE-Standard-15-Article-May-2013.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 37

 Strategy 3c) Efficiency program administrators, state building code officials and industry can
collaborate to support training on best practices for VRF design to mitigate safety, as well as reduce
refrigerant charge to address leak risks. Similarly, site inspection, commissioning and code official
enforcement for proper installations will support broader adoption among HVAC contractors.

Strategy #4: Increase state policy support and program valuation of all energy
savings and non-energy benefits of VRF
VRF is experiencing double digit growth in the HVAC market in part due to the potential energy
savings for customers, but more commonly as a recognition of VRF providing comfort, space, and design
improvements over conventional technologies. With additional verification of performance – as highlighted
earlier in the report – case studies of applications of VRF can serve to educate and support broader adoption of
the technology.

However, most efficiency program administrators are currently limited in program activities to support and/or
claim electric only (kWh) savings from VRF installations and, in some cases, are not allowed to support or claim
for fuel switching applications (e.g. natural gas to VRF electric heating). This frequently creates a misalignment
between state GHG reduction goals tied to fossil fuel use and electric utility ratepayer funded programs.

Recent regulatory orders in individual states have begun to address this market barrier, directing utilities to
prioritize beneficial electrification and peak demand reduction. In Massachusetts, 2019-2021 energy efficiency
plans include plans to support the switch to renewable energy and other clean energy technologies – though all
are required to meet cost-effectiveness requirements.35

However, as part of the cost-effectiveness calculations, assessing the incremental costs of VRF equipment, as
well as the avoided costs associated with less material improvements – including space savings and increased
comfort cooling – will continue to be an area of increased reporting and studies.

35 https://fileservice.eea.comacloud.net/FileService.Api/file/FileRoom/10317061

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 38

To improve the effectiveness of the broader industry message, regional stakeholders should develop a
comprehensive strategy to support new clean energy technologies like VRF.

Strategy 4) Regional state policy and efficiency programs should address policy barriers to the full
valuation of VRF in reducing fossil fuel use through beneficial electrification and peak demand
reduction. Additionally, the development of VRF case studies to show installations in a diverse set of
building types, as well as increased field performance monitoring, will increase the confidence in
VRFs as a solution for building owners and highlight their important role in state GHG mitigation
strategies.

Strategy #5: Increase HVAC workforce development and training on proper VRF
design, installation and maintenance.
Workforce development is a critical area of focus for states in achieving aggressive goals in GHG
reduction in buildings, as the growth of trained HVAC contractors needs to keep pace with the scale of
deployment of new clean energy technologies. New partnerships between manufacturers, states, and efficiency
program administrators are looking to address barriers to a growing and well-trained HVAC workforce.

NYSERDA has recently committed $70 million over the next 10 years to increasing clean energy workforce
development and training strategies and resources.36 The NYSERDA Clean Energy Workforce Development
program includes the targeted opportunities:

 Energy Efficiency and Clean Technology Training

 On-the-job Training
 Internships
 Building Operations & Maintenance

Strategy 5a) Regional stakeholders, including manufacturers and program administrators, should
increase the level of investment in HVAC workforce development and training to ensure that a
sufficient number of “clean energy contractors” are trained in installation best practices of new
electrification technologies like VRF.

In the United States, VRF is disrupting a traditional commercial rooftop and Variable Air Volume (VAV) market
that has required contractors and building professionals to have specific skills to design, install, and maintain the
necessary ductwork and plumbing. Increases in adoption of VRF will require workforce training and demand for
contractors with the experience and skills for designing, installing and maintaining refrigerant-based systems.

36 https://www.nyserda.ny.gov/All-Programs/Programs/Clean-Energy-Workforce-Development

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 39

 Strategy 5b) In tandem to workforce development and training, program administrators should
require manufacturer certification in the installation of VRF to increase confidence in system
performance and reduce risk of refrigerant leaks. The NEEP working group can assess existing
manufacturer training and value of developing regional best practice guides and standardized
certifications for VRF contractors in critical areas (e.g. proper design, system sizing and start-up
procedures).

Strategy #6: Reduce incremental costs and increased VRF market transformation
through robust, streamlined, and aligned regional, state, and efficiency program
market promotional actions
Various studies and reporting of VRF costs have demonstrated a significant incremental cost of the VRF
equipment, and more importantly, the final installed system cost. There is an important role for more traditional
efficiency program administrators and local and state organizations to influence the selection of not only VRF –
but increasingly the highest efficiency VRF models for commercial new construction and HVAC retrofit
opportunities.

Although incremental costs of VRF over alternative conventional HVAC solutions can be obtained through
inquiries with factory representatives and distributors, capturing the full incremental costs (and avoided costs)
of the system design are typically only available at the project completion phase. For this reason, it is equally
important that programs encourage the final reporting of system costs for evaluating the cost-effectiveness of
the VRF energy savings, as well as ensuring that incentives are set appropriately to achieve the desired
outcomes. Reporting from the Massachusetts Clean Energy Center (MassCEC) program in May 201937
highlighted the following VRF program performance:

 80 projects, with average capacity 544 kBTU/hr

 Seven participating manufacturers and 45 different designer/installer companies
 Over $4.8M in incentives – approximately 45 percent for affordable housing projects
 Approximately 50/50 split of new construction and retrofit projects
 62 percent of projects incorporated heat recovery
 Project costs average $8,600 per 17F heating ton ($6,400 per cooling ton)
 Program anticipated to sunset in June 2019
The MassCEC VRF program provides incentives at a tiered rate based on building ownership type and
incorporation of heat recovery. It is also important to note that the incentives are based on equivalent heating
ton of the system vs. a more common capacity rating based on cooling ton.

37 MA CEC program performance and findings reported by Peter McPhee to NEEP. May 9, 2019.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 40

Table 11 Massachusetts CEC VRF program tiered incentive table for building ownership type and incorporation of heat recovery 38

It is important to highlight that the MassCEC incentives are in some cases approximately an order of magnitude
greater than those provided through regional efficiency programs, enabled in part by the primary goal of GHG
reduction over electricity savings. MassCEC developed incentives based on the following guiding criteria:

 Incentive level sufficient to change minds of project decision makers to upgrade from traditional
heating and cooling to VRF
 Incentive should move the payback for some projects from unattractive to attractive
 VRF incentives are in line with our incentives for less expensive mini‐splits ($625/12,000 BTU/hr)
(5° F) and more expensive ground‐source heat pumps (about $3,000/12,000 BTU/hr)

Strategy 6a) Regional VRF working group members should better track and report VRF costs
(incremental, installed, and avoided), as well as assess the level of incentive necessary to drive
sustainable, yet accelerated growth in the VRF market.

The table of regional efficiency program promotional activity for VRF earlier in the report (and referenced in the
Error! Reference source not found.Error! Reference source not found.) reflects a somewhat diverse approach
and level of investment in supporting VRF. There are notable differences in the VRF performance criteria,
incentive levels, and program delivery (project level, customer-oriented downstream incentives, and equipment-
level, distributor-oriented midstream incentives). Although midstream HVAC programs are a relatively new
advancement in program delivery for regional HVAC programs, the results from increased program participation
and streamlined incentive delivery and industry promotional partnerships are getting strong recognition in the
industry. However, as distributors are frequently operating at a regional level, increasing the level of
coordination of program strategies, performance criteria and less critical incentive levels can increase the
market impact and efficiency. One important element often lost in shifting away from downstream incentives is

38MA CEC rebates were reduced recently from these original levels, and the program incentives are anticipated to end on June 30,2019
with a transition towards utility program implementation. https://files-cdn.masscec.com/get-clean-energy/business/clean-heating-
cooling/VRF_Program_Manual_EFFECTIVE_FEB_2019.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 41

the level of detailed project-level data and building owner engagement that is important for informing early
program decisions.

Performance-based incentives may offer another future mechanism for long-term building investments in VRF
systems. NYSERDA is introducing a pay-for-performance (P4P) for residential and small commercial buildings,39;
nationally and regionally, P4P and other market-based solutions are anticipated to play a critical role in the build
out of efficiency in buildings.

Strategy 6b) Energy efficiency and renewable heating and cooling programs should evaluate
opportunities to align program delivery strategies – notably midstream distributor partnerships – and
coalesce around regional performance criteria similar to the success of the ccASHP specification.
Programs should also seek to leverage industry partnerships and conduct standardized surveys to
continue to gather detailed cost and system design data to inform program design improvements.

Increasing confidence in VRF performance and reducing risk/impacts of refrigerants will give greater emphasis to
adopting VRF as a standard technology in sustainable/high performance building programs, voluntary programs
(i.e. ENERGY STAR Commercial Buildings, LEED, etc.), and future building energy codes. NEEP VRF stakeholders
have emphasized the need for educating architects, engineers, contractors, designers, and other building
professionals on the existence of VRF, opportunities, costs, and so on. These building professionals are the
“decision-makers in building design” and an increased awareness of VRF systems, along with their attributes and
advancements in performance, will improve acceptance and installation rates.

Strategy 6c) Regional VRF working group members should work to develop a multi-year market
transformation strategy for increased voluntary building and equipment efficiency standards, as well
as educate building professionals, to support VRF adoption and accelerated transition to low-carbon
national and state building energy codes.

Strategy #7: Promote integration of existing building management systems and

advanced VRF controls to increase coordination and efficiency between building
heating and cooling systems and other occupancy type controls.
Although not all VRF projects require interaction between VRF controls and other building systems, the majority,
especially in relation to maximizing the efficiency of the VRF and separate building ventilation systems and other
occupancy driven controls (e.g. lighting), benefit from integrated controls.

A whitepaper on VRF and Building Integrations (Mitsubishi 2017)40 breaks down VRF building integration into
several options:

39https://www.recurve.com/blog/nyserda-and-dps-announce-plans-for-pay-for-performance-efficiency-in-new-york
40“VRF and Building Integrations - Options and How to Choose Among Them”. Mitsubishi August 2017.
https://www.esmagazine.com/ext/resources/images/WhitePapers/Building-Integrations.pdf

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 42

  Non-integrated Standalone Building Controls System
 Third-party Integration
 Third-party Integration… With a Boost From the VRF Manufacturer’s Controls Engineers
 Manufacturer-specific Controls That Can Handle Other Manufacturers’ Products
Each option includes benefits and “pitfalls” that may be driven in magnitude by the complexity of the building
systems and the level of comfort, efficiency, and control that building owners or managers require.
The report earlier highlighted the importance of current federal working group efforts to better assess VRF
controls impact on system performance and the need to develop appropriate test procedures and standards to
reflect real-world operation. It is equally important for regional VRF stakeholders to prioritize integration of VRF
and building energy management system controls to achieve the highest efficiency performance at a building
level. Including building control integration with VRF would be an important metric to capture as part of any
verification or study of VRF performance in building installations.

Strategy 7a) Regional VRF working group members should invest in increased building operation
training, best practices in system design, and assessing program or state building code strategies to
increase VRF control and building energy management system integration. These investments and
collaboration with industry will help achieve the highest building level HVAC energy savings and
comfort in VRF installations.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 43

Regional Market Transformation Goal
Based on our assessment of the regional VRF market, it is clear that while VRFs have established a viable and
growing market, there remains a significant opportunity to further accelerate adoption of the technology and, in
the process, achieve exciting energy, cost, and carbon savings to the Northeast/Mid-Atlantic region. In the
previous section, seven key market strategies were presented that we project will collectively accelerate the
adoption of ASHPs in the region.

NEEP projects that earnest implementation of the recommended market strategies outlined in the Regional
Market Transformation Strategies section will produce the necessary market conditions in order for accelerated
and sustained uptake of VRFs throughout the Northeast and Mid-Atlantic region.
The following graph suggests what a projected market trajectory would will look like if the region is successful in
implementing the key strategies identified in the report. The market transformation scenario is in relation to a
business as usual scenario.
Figure 3: Market Transformation for VRFs in the Northeast/Mid-Atlantic Region

Penetration of VRF as Primary Heating System in Commercial

and Institutional buildings (Northeast/Mid-Atlantic)
60%

50%

40%

30%

20%

10%

0%
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

BAU Market Transformation

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 44

Appendix A
2018 VRF Heat Pump Incentive Summary
Below is an Incentive Summary of Variable Refrigerant Flow (VRF) Heat Pump Promotional Activities that are in place
throughout the region. (July 2018)
Incentive and Requirement Summary

Rebate
State HPSF EER IEER SEER COP
Incentive
For air cooled units ≥5.4
Massachusetts ≥11.0 ≥18.0 ≥3.4
tons = $125/ton
(Mass Save)
For water cooled units
≥12.0 ≥20.0 ≥4.3
≥5.4 tons = $125/ton
For units without heat
recovery ≥5.4 tons =
Must meet the minimum efficiency ratings established in the
$800/ton
ANSI/ASHRAE/IES Standard 90.1-2016 Energy Standard for
For units with heat
Buildings Except Low-Rise Residential Buildings
Massachusetts recovery ≥5.4 tons =
(Clean Energy $1,200/ton
Center)41 For units without heat
recovery <5.4 tons = ≥10.0 ≥11.0 ≥17.0
$800/ton
For units with heat
recovery <5.4 tons = ≥10.0 ≥11.0 ≥17.0
$1,200/ton
Rhode Island Air-cooled units ≥5.4
≥11.0 ≥18.0 ≥3.4
(Program ensures tons
that efficient
Water-cooled units ≥5.4
equipment is ≥12.0 ≥20.0 ≥4.3
tons
available)
New York Flex Tech program: cost-shared energy efficiency technical analyses and strategic energy
(NYSERDA) management assistance to existing facilities, can include investigation of VRF
<5.4 tons = $125/ton
≥8.5 ≥12.5 ≥15.0
(Tier 1)
<5.4 tons = $230/ton
≥9.0 ≥13.0 ≥16.0
(Tier 2)
≥5.4 & <11.25 tons =
≥11.3 ≥14.2 ≥3.4
$125/ton
PSEG- Long Island
≥11.25 tons & <20 tons =
≥10.9 ≥13.7 ≥3.2
$80/ton
≥20 tons = $80/ton ≥10.3 ≥12.5 ≥3.2
Water source unit
≥14.0 ≥4.6
<11.25 tons = $80/ton

Energy Save PA <5.4 tons = $100/ton ≥9.0 ≥16.0

41Award levels for Public/Non-Profit = $1,000/ton without heat recovery, $1,400/ton with heat recovery; Award levels for Affordable
Housing = $1,600/ton without heat recovery, $2,000/ton with heat recovery. MA CEC revised incentive levels in early 2019 and plans to
sunset the VRF program in June 2019 for a transition to utilities.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 45

 Rebate
State HPSF EER IEER SEER COP
Incentive
Custom energy <5.4 tons = $150/ton ≥10.0 ≥18.0
calculations
≥5.4 tons and <11.25
required for VRFs ≥11.0 ≥11.2 ≥3.6
tons = $35/ton
≥11.25 tons and <20
≥10.6 ≥10.7 ≥3.6
tons = $35/ton
≥20 tons = $35/ton ≥9.5 ≥9.6 ≥3.5

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 46

Appendix B
Excerpt from NRDC Commissioned 2018 Report - “Ramping Up Heat Pump Adoption in New
York State”42
VRFs are not currently promoted by NYSERDA, but they excel in serving buildings requiring “comfort cooling”
(e.g. offices, multifamily) and have enormous potential to reduce energy use in New York City. Continued efforts
are needed to reduce the soft and upfront costs of ground source heat pumps (GSHPs), which provide highly
efficient cooling and heating and can contribute to peak load reductions (GSHPs exhaust heat to the absorbent,
cool ground as opposed to hot outdoor air).43 NYSERDA should consider the following steps to support emerging
heat pump technologies and applications:
 Develop VRF case studies and marketing materials. NYSERDA can help to educate the commercial
building market on the improved performance characteristics of VRFs and best practices for meeting
building standards. Case studies, testimonials, and marketing materials are needed to counter
misconceptions and raise awareness of many of the non-energy benefits of VRF. Case studies and
examples should address a variety of applications, given the wide variation in climate and building stock
between upstate New York and the New York City metro region.
 Aggressively promote VRFs in commercial and residential new construction and building codes,
consistent with an overarching strategy to encourage all-electric heating equipment in new
construction.
 Evaluate and support accelerated transition of heat pumps to lower global warming potential (GWP)
refrigerants. Although not unique to heat pumps, risk of refrigerant leaks could reduce the significant
climate benefits of the technology. Developing a multi-faceted approach to mitigating refrigerant leaks
includes support for proper design and installation practices, compliance with existing refrigerant safety
standards, and advancement of natural refrigerants to replace use of higher GWP refrigerants.
 Explore distributor incentives for VRF technology. As previously discussed, upstream and midstream
program approaches that engage wholesale distributors are effective because the distributors control
stocking and upselling and directly engage and train contractors, mechanical engineers, and architects.
 Develop regional standards for VRFs in the Northeast. New York stakeholders should work with NEEP
to develop a regional performance specification to promote the highest efficiency VRFs, while
supporting a diverse mix of technologies and manufacturers.
 Review building code barriers to VRF technology. Recent IECC 2015 code adoption has inadvertently
increased costs for VRF applications with requirements for economizers. NYSERDA and state should
review building codes to avoid creating barriers or unnecessary costs for new heat pump technologies.
 Consider creating a VRF “Clean Energy Challenge” as NYPA and NYSERDA did for GSHP technology, to
encourage state buildings to “lead by example” in adopting VRFs.44
 Accelerate NYSERDA’s soft cost reduction strategy for GSHPs and maximize the proposed targeted
cost-shared technical assistance for larger projects to address the higher pre-development costs.45
 Develop and fund demonstration projects that explore the potential for GSHPs to promote grid
flexibility, such as improved load factor or peak demand reduction.

42 https://www.veic.org/documents/default-source/resources/reports/veic-ramping-up-heat-pump-adoption-in-new-york-state.pdf
43 Heat & Cool: Heat Pump Systems, https://www.energy.gov/energysaver/heat-and-cool/heat-pump-systems
44 NYPA. https://www.nypa.gov/about/geothermalchallenge.
45 NYSERDA, 2017. “Clean Energy Fund Investment Plan: Renewable Heating & Cooling Chapter.” https://www.nyserda.ny.gov/-

/media/Files/About/Clean-Energy-Fund/cef-renewable-heating-and-cooling-chapter.pdf.

VARIABLE REFRIGERANT FLOW MARKET STRATEGIES REPORT | 47