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More about Power Factor and Power Factor Correction

Most commercial and industrial premises have inductive loads such as electric motors, fluorescent lighting, ventilation, refrigeration, air conditioning etc. They distort the power supply making it inefficient.  Power factor is the measure of this inefficiency and is the difference between actual power (kW) and apparent power (kVA), which the equipment actually uses.

Power factor correction works by improving the power factor bringing it closer to 1 (unity) therefore reducing apparent power (kVA).The apparent power is the total requirement that a facility places upon the electric utility to deliver voltage and current, without regard for whether or not it does actual work. Electric utilities typically charge customers a higher rate when power factor falls below a certain level — often 90%.

Low power factor requires an increase in the generation and transmission capacity of the electric utility to handle there active power component caused by inductive loads. Therefore, to avoid the expensive installation of additional capacity, utilities usually charge a penalty for poor power factor and include a demand charge component (based on kVA) in the bill to customers. A low PF means a higher kVA and consequently a higher electricity bill for the same site load (kW). Therefore, demand savings can be achieved by improving a site’s PF.


This monthly bill shows a demand charge of $3.2/kVA for a total of $384

      Figure 1: This monthly bill shows a demand charge of $3.2/kVA for a total of $384
                           (Source: NSW Farm Energy Innovation Program, 2013)

Power Factor Calculation

Power Factor = True Electric Power (kW) ÷ Apparent Power (kVA)


  • Desired power factor (PF) value at a facility:
    50kW ÷ 52kVA = 0.96 (a good power factor of 96%)
  • Poor power factor (PF) value at a facility:
    50kW ÷ 63kVA = 0.79 (a poor power factor of 79%)

kVAr/kW factor from Table below = 0.47

Look up on 0.79 under the appropriate row and 0.95 under the appropriate column: the intersection should be 0.47

Farm Energy Innovation Program

(Source: NSW Farm Energy Innovation Program, 2013)


Factors that could degrade electricity supply quality

Under normal conditions, capacitors should operate trouble-free for many years. However, conditions such as harmonic currents, high ambient temperatures, and poor ventilation can cause premature failures in power factor correction capacitors and related circuitry. These failures can lead to substantial increases in energy expenses and — in extreme cases — create the potential for fires or explosion (Photo 1). Therefore, it’s critical to inspect power factor correction capacitors on a regular basis to ensure they’re working properly. In fact, most manufacturers recommend that preventive maintenance be performed twice a year.

circuit breaker feeding

Photo 1. Damage to circuit breaker feeding a capacitor bank
(Source: ecmbweb.com)

The good news is you can correct low power factor by adding power factor correction capacitors to the facility’s power distribution system. This is best accomplished via an automatic controller that switches capacitors, and sometimes reactors, on and off. The most basic applications use a fixed capacitor bank.

What does Power Factor Correction Unit Do?

  • A power factor correction unit is connected between your incoming power supply and your main distribution panel comprising of capacitors.
  • It offsets the inductive currents by introducing equal and opposite capacitive currents, thereby neutralising the inductive currents.

The capacitors reduce the total current and apparent power (kVA) drawn from the utility company.


Benefits of Power Factor Correction:

  • Power factor correction reduces electricity consumption and therefore electricity bills by reducing drawn current and energy used.
  • Power factor correction reduces or eliminates penalties from utility companies for low power factor.
  • Power factor correction reduces your buildings carbon emissions by reducing your installed energy demand.
  • Power factor correction reduces wear and tear on motors and therefore reduces the maintenance and extends lifetime.
  • Power factor correction provides a degree of protection against voltage spikes and surges.

Power factor correction reduces losses due to improved machinery performance

The Outcome

  • It will reduce your electricity bill. They have been widely installed over a range of sites and, on average, the expected savings can be in the region of 5% – 25% dependent on the type of loads within the building.

In cases where the installation is sized to the maximum demand this will usually give a payback of under two years.

What GEM Energy Australia Can Do for Their Customers

  • GEM Energy Australia can undertake power load monitoring and assessment.
  • We monitor energy consumption

We also recommend suitable power factor correction equipment and oversee the installation. If you have any questions or would like a quote please fill in the information fields below and we will get back to you.

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