To clearly understand power factor, it is imperative that resistive and inductive loads be explained.
The resistive loads will use 100% of its power to produce work. WOW! That is not too clear, is it? Let's look at it this way: an electric heater that has a demand of 100 kW will give out 100 kW of heat. No losses! Pure and total "work". Incandescent light bulbs that have a demand of 10 kW, will give 10 kW of lighting. The power used to operate a resistive load is called the kW demand or the "real" demand.
If you would look at the wave form of a resistive load, you would see that the amperage and the voltage are on the same wave, in phase.
On the other hand, inductive loadsuse some of its power to operate, and the balance of the demand to "work". An electric motor uses some of the power to magnetize the core and the balance for "work", produce horse power. Same thing for a transformer, ballast, etc.
The power used to operate an inductive load is called kVA demand, or "apparent" demand. The inductive loads do create a dephasing of the wave : the voltage wave form and the amperage wave form are no longer in phase.
The graphics below are showing the difference between the kW and the kVA wave
forms.

What is power factor? In simple terms, power factor is the ratio of KW versus
kVA. (P.F. = kW/kVA). It is formulated in percentage. (900 kW/1000 kVA=90%).
Thus, it is also the ratio of real demand/apparent demand.
The most frequent answer to that one is very simple: MONEY !
Most utilities will penalize a bad power factor. In general, the acceptance is a 90% power factor. In some cases, penalties will be applied if power factor is below 95% or even 100%. Some utilities will show on their invoices the penalties, some others will not. Some will not show the penalties, but will show the power factor. Some will not even tell you anything. To explain how the penalties are applied on your invoices, we will use the way our local utility does it. On our invoices, the following information is supplied: Power Factor, Real Demand, Apparent Demand, Invoiced Demand.
This is quite complicated, you might think. But, in fact, it is very simple. The regulation is that the utility will invoice the highest of 100% of kW Demand or 90% of kVA Demand. Let's clarify that with an exemple: kW demand = 1000. kVA demand = 1500. Power factor is 66.6% (kw/kva). The utility will invoice the greatest of kW demand (1000) or 90% of kVA demand (1350). Invoiced demand would be 1350, this being the highest between kW demand and 90% of kVA demand.
The penalty in itself might not be shown on the invoice, but in the above situation, the surcharge would be for 350 kW (1350 - 1000). Assuming that the cost per kW demand is approximately $10/kW, and that this condition repeats itself every month, this would represent a monthly penalty of $3,500.00, or an annual potential saving of $42,000.00.
True, power factor improvment can definitely secure interesting savings, but there are other interesting advantages in having a good power factor. One of them is unloading the transformers.
For instance, if you have a 1000 kVA transformer and that the load on this transformer is 1000 kVA with a 70% power factor, improving the power factor to 90% for instance will reduce your load to 778 kVA, allowing you to add loads on this transformer. (1000 kVA x .70 to get the kW demand) /.90 (to determine new kVA at 90% power factor). This would reduce the load on your transformer by 222 kVA.
The most economical and common way to improve power factor is with capacitors. The capacitors will "rephase" your power, thus reducing the kVA demand.
Where should they be installed? There are different ways to do this: on each motor, at the main service entrance, an automatic power factor correction system, on low voltage, on high voltage and finally, a combination of what is best suited for the application.
Our approach is to sit down with our customers and determine what avenue would be best for them. We are available at your convenience to help you evaluate your needs. Do not hesitate to contact us.
Gestelec Inc. offers your top quality products for power factor improvement: automatic power factor correction systems with or without harmonic reactors and static capacitors for wall or floor mounting. Components used in these products are from well known manufacturers for good quality products with high life expectancy in industrial and commercial applications. All Gestelec products come with a one year warranty.