Reducing Electric Utility Bills with Power Factor Correction

The power factor of an electric load can be defined as the ratio of real power to apparent power.

• Real power is, as implied by its name, the actual power the load is consuming. It is represented by the letter P and measured in kilowatts (kW).
• Reactive power is a type of power drawn by inductive or capacitive loads - it flows back and forth between the load and the voltage supply, without being consumed. It is represented by the letter Q and its measurement unit is kilovolt-ampere reactive (kVAR).
• Real and reactive power are out of phase by 90°, and their vector sum is apparent power. It is represented by the letter S and its measurement unit is kilovolt-ampere (kVA).

Why is this important for electric utility bills?

The main contributor to a low power factor is normally motor loads, which may include:

• Heating and cooling equipment
• Pumps and fans
• Industrial machinery

In residential buildings, these types of loads are minimal, so residential electric rates typically ignore the power factor. However, this is not the case for commercial and industrial consumers. Normally, the minimum power factor is defined by the electric utility company.

• A minimum power factor may be required, for example, 90%.
• Alternatively, the reactive power (kVAR) may be capped in the function of real power (kW). For example, an electric company might bill consumers whose reactive power exceeds 40% or real power (this would correspond to power factors below 92.85%).

In either billing approach, the fee paid by the consumer increases as the power factor decreases - the bill may rise considerably in the case of large industrial consumers.

Conclusion

Strictly speaking, power factor correction is not an energy-saving measure (real power remains the same). However, it is a cash-saving measure. Given that one of the main purposes of energy efficiency is to save money, power factor correction is typically carried out along with energy efficiency retrofits. There are slight energy savings through the reduction of line currents, but the effect tends to be negligible compared with eliminating the power factor fee from the electric bill.

Power factor is likely to be an issue in buildings with considerable motor loads, especially very dated buildings where motors may be old models with a low power factor.