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This paper investigated the energy saving potential of modulation control of hydronic fan-coil units (FCUs) relative to traditional on-off control. Building load profiles were first generated by using a hotel building model in EnergyPlus under five different climates. The typical performance of variable air variable water FCUs was represented by a group of empirical curves derived from experimental data. A system model consisting of multiple thermal zones served by FCUs, a variable speed pump, and a chiller was constructed by connecting the component models following the mass and energy balance approach. The simulation results showed that the modulation control could save 20-30% in FCU fan energy, 50-70% in pump energy, and 2-7% in total HVAC energy compared with the traditional on-off control.