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What is the ROI of Power Factor Correction?

Posted by James Keys on Dec 20, 2019 8:00:00 AM


What is power factor correction?

Power factor (PF) is a measure of system electrical efficiency. A business that does not manage their PF will likely suffer from financial and operational losses as a result. PF correction is the process of bringing PF closer to 100%, or unity.

Typically, a minimum PF of 90% is required to save money on the electricity bill, though this is dependent on your utility’s connection terms. A PF of 100% is ideal, but due to the non-linear nature of power factor correction (PFC) this is not the most economical approach. The industry standard is typically 95% or better and power is considered efficient after that point.



A facility with poor power factor will have a larger demand for apparent power (kVA) and the utility will be required to supply that extra power. To reduce this demand, most utilities offer an incentive to reduce kVA. For example, a utility may choose to reward their customer’s efficient use of power by charging demand by true power (kW) rather than charge by apparent power. Some utilities always charge by kVA, which can be reduced to the same level as kW at unity PF. Due to the relationship between kVA and kW in the power triangle, kW will always yield the lowest demand charge.
Typical ROI on PFC equipment in Ontario for example, can range from 1 to 4 years depending on how much of an improvement is made. A well built PFC bank can last 20 years before a major refurbishment will need to be made.


Improving system PF lowers system kVA which releases system capacity and permits additional loads (motors, lighting, etc.) to be added without overloading the system. For example, in a system supplied by a 1000kVA transformer, with a PF of 80%, only 800kW of true power could be drawn, as the transformer would be at max kVA. By correcting PF to 100%, that same 800kW can be drawn and kVA is reduced to 800kVA, freeing up 20% capacity on the transformer.

Lowering the apparent power will also lower the current flow through the transformer, allowing it to run cooler, which allows it to last longer. This same concept apples to all system branch circuits with properly sized capacitor banks on motors. Improving power factor will lower losses in the distribution system of the facility since losses are proportional to the square of the current.

Lastly, a good power factor (.95) provides a “stiffer” voltage, typically a 1-2% voltage rise can be expected when power factor is brought to +\- .95. This may make quite a difference in production downtime, allowing machinery to ride out a flicker or brief sag in Voltage.

The ROI on PFC equipment based on operational costs is not for the PFC manufacturer to determine. The best they can offer is a peace of mind, knowing that general power quality has improved which leads to less unplanned maintenance, less production downtime, elimination of future penalties due to poor power factor and longer lasting capital equipment.


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Topics: power factor, ROI

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