To understand the economizer concept refer to what is the airside economizer. The waterside economizer is used in a certain AC units such as “Self Contained unit” which have water cooled condenser and serving by a cooling tower. In these units there are two coils back to back, the DX coil (refrigeration system) and water coil, when system switches to the economizer mode the compressor and DX coil will shut down and condenser water goes to the water coil and provides cooling for space.
Another application of waterside economizer is in central plant. A plate heat exchanger will be installed in parallel with the chillers, in cool climate which the condenser water coming from the cooling tower for serving the chillers is low enough (lower than 60°F), chiller will shut down and plate heat exchanger will act as a chiller and provides cold water for AC units.
Waterside economizer like the airside economizer can significantly saves energy.