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Variable refrigerant flow (VRF), also known as variable refrigerant volume (VRV), is an HVAC technology invented by Daikin Industries, Ltd. in 1982 Like ductless minisplits, VRFs use refrigerant as the cooling and heating medium. This refrigerant is conditioned by a single or multiple condensing units.
VRFs are typically installed with an air conditioner inverter which adds a DC inverter to the compressor in order to support variable motor speed and thus variable refrigerant flow rather than simply perform on/off operation. By operating at varying speeds, VRF units work only at the needed rate allowing for substantial energy savings at load conditions. Heat recovery VRF technology allows individual indoor units to heat or cool as required, while the compressor load benefits from the internal heat recovery. Energy savings of up to 55% are predicted over comparable unitary equipment.  This also results in greater control of the building’s interior temperature by the building’s occupants.
VRFs come in two system formats, two pipe and three pipe systems. In a heat pump two pipe system all of the zones must either be all in cooling or all in heating. Heat Recovery (HR) systems have the ability to simultaneously heat certain zones while cooling others; this is usually done through a three pipe design, with the exception of Mitsubishi and Carrier, whose systems are able to do this with a two pipe system using a branch circuit (BC) controller to the individual indoor evaporator zones. In this case the heat extracted from zones requiring cooling is put to use in the zones requiring heating. This is made possible because the heating unit is functioning as a condenser, providing sub-cooled liquid back into the line that is being used for cooling. While the heat recovery system has a greater initial cost, it allows for better zoned thermal control of a building and overall greater efficiencies. In heat recovery VRF systems, some of the indoor units may be in cooling mode while others are in heating mode, reducing energy consumption. If the coefficient of performance in cooling mode of a system is 3, and the coefficient of performance in heating mode is 4, then heat recovery performance can reach more than 7. While it is unlikely that this balance of cooling and heating demand will happen often throughout the year, energy efficiency can be greatly improved when the scenario occurs.
VRF systems may be air or water cooled. If air cooled, VRF condensing units are exposed to outside air and may be outdoors, and condensing units are the size of large refrigerators, since they need to contain a large condenser (heat exchanger) to transfer heat to the surrounding air, because air doesn’t have a high heat capacity. If water cooled, the condensing units are placed indoors and are much smaller and cooled, using water, possibly by a cooling tower.