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the cold line from evaporator to compressor will gain tons of heat on a super hot day even with insulation. if they put the compressor right outside the evaporator, both of the long lines will be hot and there will be a bit of free cooling. why don't they do something so obvious? there must be a very good reason right?

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    $\begingroup$ I’m assuming you’re talking about split system A/Cs or heat pumps. For one thing, compressors aren’t quiet, and they put off a fair amount of heat which is counterproductive to cooling. $\endgroup$
    – Secundus
    Jan 6 '20 at 2:42
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The evaporator is usually in the area to be cooled ie where the people work, read etc

As the compressor takes space and tends to be noisy it is located away from that area. That makes the system in the « active » area smaller and quieter.

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What you describe is quite common where there isn't any problem with power and noise. It requires a bit more sophistication to manage the superheat. And yes, you need to quiet the thing some. I replaced a '60s era 20 ton compressor in a restaurant's dining room AC closet while they were serving dinner. This is also a good idea near the coast to keep the salt off the thing and protect the expensive compressor from hurricanes. I've only seen it on bigger systems, though.

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