What Is Power Factor?
When your utility delivers electricity, two types of power flow simultaneously. Real Power (kW) does actual work — it runs your motors, lighting, and equipment. This is what you pay for on your energy charge. Reactive Power (kVAR) charges and discharges magnetic fields in motors, compressors, and transformers. It does no useful work but must still be delivered — and sized for — across every wire, transformer, and breaker between you and the substation.
Apparent Power (kVA) is the total power your utility must deliver to your facility — the combined result of real and reactive power together. This is what your utility sizes its entire infrastructure to supply.
Think of a pint of beer. The liquid is Real Power — what you actually paid for. The foam is Reactive Power — you were charged for a full glass but can't use the foam. A low Power Factor means your glass is mostly foam.
Power Factor (PF) = Real Power (kW) ÷ Apparent Power (kVA). A PF of 1.0 is perfect efficiency — every amp your utility delivers is doing useful work. A PF of 0.75 means 25% of all current delivered to your building is wasted as reactive power. Your utility still had to generate it, deliver it, and size every transformer and conductor for it — and they charge you for it.
Where Does Your Facility Land?
Your utility calculates your power factor by measuring reactive kVAR-hours drawn over the entire billing month and comparing that to total kWh consumed. It is a monthly average — not a snapshot.
- Heavy motor loads, welders, older HVAC: often 0.60–0.80 without correction
- Mixed commercial / warehouse: typically 0.75–0.85 — right at or below threshold
- With capacitor correction: 0.93–0.98 — safely above threshold, small credit applied
Most commercial and industrial facilities operate between 0.70 and 0.85 without correction — meaning the majority are at or below the 85% penalty threshold. If you have not had your power factor measured, there is a reasonable chance you are already paying a penalty every month without knowing it.
How Your Utility Bills You For It
Commercial utility tariffs typically set 85% as the baseline power factor. Every percentage point above or below that threshold triggers an adjustment to your entire monthly bill — not just part of it. The entire bill.
- Below 85% → a penalty is applied for each point below the threshold
- Above 85% → a credit is applied for each point above
Because the penalty is applied per kilowatt-hour across your entire monthly bill, a facility with high energy use pays a proportionally larger penalty for the same power factor reading. A facility losing $500/month to a PF penalty at low consumption could be losing multiples of that at high consumption — for the exact same ratio.
System-driven cost is a multiplier on rate-driven cost. Every dollar of correctable inefficiency in your system gets repriced upward every time the utility raises its rates.
What Causes Poor Power Factor
- Electric motors — especially when running at partial load
- HVAC compressors and refrigeration equipment
- Variable Frequency Drives (VFDs) without built-in Power Factor Correction — they worsen facility PF even while saving energy elsewhere
- Older fluorescent lighting with magnetic ballasts (PF as low as 0.50)
- Welding equipment and arc loads
- Lightly loaded transformers
Poor power factor is a systemic building problem — it cannot be solved by any single piece of equipment, any single habit change, or any single upgrade. It requires a systemic solution applied at the facility level.
Why Solar & Batteries Don't Fix It
Power factor is a power quality problem — not a consumption problem. Anything that only reduces kilowatt-hours (kWh) has no meaningful effect on your PF penalty.
Your utility measures power factor at your service entrance — the single point where all power entering your building is totaled. Every motor, compressor, transformer, and piece of equipment contributes simultaneously. The only effective correction is one applied at the facility level, upstream of everything, where the problem is actually measured.
What Actually Fixes It
Capacitor banks are electrical devices installed at your main service panel or near individual motors that generate reactive power locally — so your equipment gets what it needs without pulling it from the grid. Your power factor rises, the penalty disappears, and your apparent power draw drops. Payback on correction equipment is typically 1–3 years, before accounting for additional savings from rate increases.
Automatic Power Factor Correction (APFC) systems monitor your load in real time and switch capacitor stages on and off automatically as your equipment cycles. The result is consistent correction regardless of how your load profile changes throughout the day.
When power factor is corrected, that improvement persists every month going forward. Your demand charge is also calculated from a smaller apparent power draw — meaning PF correction often reduces your demand charge simultaneously.
We don't reduce what your facility does — we reduce the amount of power it takes to do it.