Air conditioning system with capacity control and controlled hot water generation

An HVAC system for conditioning air in a space, comprising:

• a compressor to circulate a refrigerant through a refrigerant circuit, the compressor having a discharge outlet port and an suction inlet port;
• a source heat exchanger operable as either a condenser or an evaporator for exchanging heat with a source fluid;
• a first load heat exchanger operable as either a condenser or an evaporator for heating or cooling air in the space;
• a second load heat exchanger operable as a condenser for heating water;
• a first reversing valve positioned downstream of the compressor to alternately direct the refrigerant from the discharge outlet port of the compressor to one of a second reversing valve, a first 3-way valve, and a second 3-way valve and to alternately return the refrigerant from one of the second reversing valve and the second 3-way valve to the suction inlet port of the compressor, wherein the first 3-way valve is configured to selectively direct the refrigerant to the second load heat exchanger from one of the first and second reversing valves, and the second 3-way valve is configured to selectively direct the refrigerant to the first reversing valve and the first load heat exchanger;
• a bi-directional expansion valve positioned between the source and first load heat exchangers;
• a first bi-directional valve positioned downstream of the second reversing valve to selectively convey the refrigerant to at least one of the first 3-way valve, the second 3-way valve, and a second bi-directional valve, wherein the second bi-directional valve modulates exchange of heat in the first load heat exchanger when the first load heat exchanger is operating as an evaporator and controls flashing of the refrigerant entering the source heat exchanger when the source heat exchanger is operating as an evaporator;
• and
• a controller comprising a processor and memory on which one or more software programs are stored, the controller configured to control operation of the compressor, the first and second reversing valves, the first and second 3-way valves, the bi-directional expansion valve, the first and second bi-directional valves, a first variable speed pump for circulating water through the second load heat exchanger, and a second variable speed pump for circulating the source fluid through the source heat exchanger.