Power factor is an essential part of modern electric power systems and is the simplest, most economical means of increasing the capacity of any power sytem and minimizing energy losses. As with any equipment, an electrical system handles its job to some degree of efficiency ranging from poor to excellent. The measure of electrical efficiency is known as Power Factor. The motors and other inductive equipment in a plant require two kinds of electric power. One type is working power, measured by the kilowatt (kW). This is what actually powers the equipment and performs useful work. Secondly, inductive equipment needs magnetizing power to produce the flux necessary for the operation of inductive devices. The unit of measurement of magnetizing or reactive power is the kilovar (kVAR). The working power (kW) and reactive power (kVAR) together make up apparent power, which is measured in kilovolt-amperes (kVA).

Most AC power systems require both kW (kilowatts) and kVAR (kilovars). The use of capacitors installed near the loads can provide the most economical and efficient way of supplying these kilovars. Low voltage capacitors are traditionally a high reliability maintenance-free device. On the spot delivery of magnetizing current provided by capacitors means that kilovars do not have to be sent all the way from the utility generator to you. This relieves both you and your utility of the cost of carrying this extra kilovar load. The utility charges you for this reactive power in the form of a direct, or indirect power factor penalty charge. In cases where you are charged in KWH, improved power factor will result in less line losses and reduced utility charges.

Low power factors are one of the leading causes of electrical system inefficiencies.