In the cold climate of the upper Midwest, air-source VRF systems have difficulty meeting heating loads when the outdoor temperatures drop below -5ºF. Because of this difficulty during common cold spells, they are either oversized (adding to system cost) or supplemental heat is added (adding to operating cost). Cold temperatures can also cause frost issues around outdoor units, as well as compressor failure. A VRF system served by a water loop—in place of air—does not have these issues, making the technology more practical and effective in cold climates such as the upper Midwest. A water-source VRF system can be connected to a boiler and cooling tower or, for even higher performance, a ground heat exchanger.