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Power Factor Correction

Businesses in some states will already be fully aware of Power Factor Correction and exactly what it means.

In May 2015 Gem Energy had exclusive training with NHP, arguably Australia’s leading manufacturer of Electrical Engineering products including Power Factor Correction Units. NHP are an Australian entity still manufacturing in Australia and were established in 1968. We have seen an increasing demand for PFC’s and have seen a large contingency of operators entering the market without any experience or skill. Like everything Gem Energy do we have learned and understood the ins and outs of product and the various pitfalls that are associated with an incorrect installation or servicing before we went to market with the product. There are many companies that just buy and sell these units but really have no idea what they are doing. Gem Energy are able to offer absolute confidence and reassurance to our customers through our unique relationship with NHP as a direct partner. All of our PFC units are professionally engineered and custom built in Melbourne by NHP for each customer.

Those on the Energex and Ergon networks in QLD will soon be learning more about it and will unfortunately most likely find out the hard way.

Network operators like Energex & Ergon are shifting from KW demand billing to KVA and then KVAR billing over the next 2 years. This won’t mean much for the average person but when we draw power from the grid there are 2 types of power being Real Power and Reactive Power. We consume Real Power when doing everyday normal activities like lighting and heating or cooling and the Reactive Power is the energy stored in the load and then returned to the source – similar to the water hammer effect. The total demand on the network is the total of the Real Power and the Reactive Power which is known as the Total Power. If you have lots of heavy load appliances like high bay lights, pumps, motors, welders and other similar machinery there could be a possibility you have a low power factor as these appliances draw Reactive Power. Other transformer based appliances like laptops and computers also have high Reactive Power draw. You can see the transformer in the power cable of your laptop.

The Real power is what we are currently billed (KW) and the networks have already started transitioning to KVA billing which is effectively the Total Power taken from the grid. The networks will also start billing for excessive KVAR consumption.

Understanding what this means

Let’s say your appliances are using 7KW of Real Power but draw a total of 10KVA of Total Power from the grid which means you have a Power Factor of 0.7 at the property. This means you are drawing 7KW of Real Power which is what you will see on your power bill and 3KVAR of Reactive Power totalling 10KVA. Let’s have a look at this picture below:












The problem the energy companies have here is that you are getting a lot of essentially free power and more importantly, their infrastructure of the local electricity grid has to be capable of delivering the full 10KVA of power demand. If you were to install a Gem Energy Power Factor Correction Unit we can (as an example) improve your power factor to 0.9 which would reduce the total power demand on the network from 10KVA to 7.7KVA with 7KW of Real Power and 0.7 of Reactive Power (KVAR). Immediately we have reduced the total demand on the network infrastructure by 23% and the network are only giving away 0.7KVAR of Reactive Power as opposed to 3KVAR. This will inevitably lead to cheaper network costs which could potentially get passed on as a saving as they now have 23% less energy being used by that single property.

How does this look financially? Currently assuming $20 per KW Demand Charge you would receive a power bill of $140 ($20 x 7KW). By switching to KVA billing you will be charged $200 (10KVA x $20). Furthermore, you can expect to pay a minimum of $4 per KVAR which in your current circumstance is $12 (3KVAR x $4). You can see the difference is substantial therefore it is imperative to have a good Power Factor on site. You can read about this in the Ergon report below titles Understanding Electricity Demand.

If we have a look at this power bill below for example we can see under Network Charges within the red box the Demand Charge. The threshold essentially means that the minimum this customer will get charged is 120kW per month regardless of the amount of energy drawn from the grid. They are not charged for this under the Demand Charge line item of the power bill but they are charged for it in the Service Availability Charge line item under Network Charges which is essentially the first 120kW Demand Charge passed on as a fixed charge.

The remaining kW Demand over the threshold is 361.73kW which is charged at $30.07 per KW. Within the red box at the bottom of the bill you can see Actual Demand- 481.73kW which is the total of the 120kW threshold and the 361.73kW over the threshold that we have just mentioned which is what they are currently billed for. Underneath this, still within the red box at the bottom of the bill, you can see Actual Demand- 554.43 kVA. This shows that the customer has a Power Factor of 0.86 which is quite reasonable. We have worked this out by taking the 481.73 KW Actual Demand and dividing it by the Actual kVA Demand of 554.43 kVA.

What does this mean on your power costs? Instead of receiving a power bill for the 120kW threshold plus the 361.73 kW Demand they will receive a bill for the 120kW threshold plus 434.43 kVA which is the balance of the 554.43 kVA Actual Demand less the 120kW threshold. This translates to a difference of 72 kVA and at just over $30 per kVA that is an increase to their bill of $2,181 per month.

If we were to correct the power factor to 0.95 (we never go more than this for technical reasons) then the customer would receive a bill for 380 kVA instead of 434 kVA which represents a saving of  54 kVA or $1,620 per month.

Download (PDF, 26KB)

Get expert advice in preparation for Energex and Ergon tariff reforms in July 2015. For an assessment on how you can benefit from Power Factor Correction please fill in your details below and we will arrange a call from Ben Kolle our technician.

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