Power factor
What is power factor?
Power factor is one of the more technical things on a business electricity bill, and also one of the few where a physical fix can pay for itself. In plain terms, it measures how efficiently your site uses the electricity it draws. A poor power factor means you are pulling more from the grid than you actually convert into useful work, and on a larger site that inefficiency shows up as real charges. The good news is that it is fixable. Here is what power factor is and when it is worth doing something about.
On this page
Power factor matters mainly to larger sites with motors and inductive equipment. It sits behind reactive power charges and availability charges, and it is one of the rare bill items you can improve with equipment rather than just a better contract.
What power factor is
Power factor is a measure of how efficiently a site converts the electricity it draws from the grid into useful work. It is expressed as a number between 0 and 1. A power factor of 1 means every bit of power supplied does useful work; a lower figure, say 0.8, means a chunk of the supplied power is not doing useful work and is effectively wasted from the network’s point of view.
A “good” power factor is close to 1. Anything much below around 0.95 starts to matter on a larger site, both for efficiency and, potentially, for your bill.
kW, kVAr and kVA
Three related quantities explain power factor, and they form what engineers call the power triangle:
| Quantity | What it is |
|---|---|
| kW (active power) | The power that does useful work, running motors, lights and equipment |
| kVAr (reactive power) | Power that does no useful work but is needed to run inductive equipment |
| kVA (apparent power) | The total the grid must supply, combining active and reactive power |
Power factor is simply the ratio of useful power to total power: power factor = kW ÷ kVA. The more reactive power (kVAr) your site draws, the further your kVA exceeds your kW, and the lower your power factor falls.
Why it matters
A poor power factor means your site draws more current from the grid than the useful work would suggest. That extra current uses up network capacity without producing anything, which is why network operators and suppliers care about it. For your business, it can mean paying for reactive power, using up more of your agreed kVA capacity than you need to, and running your infrastructure harder than necessary.
Power factor and reactive power
Power factor and reactive power are two sides of the same coin. Reactive power is the portion of supplied power that does no useful work but is needed to run certain equipment, and it is exactly what drags your power factor below 1. The lower your power factor, the more reactive power your site is drawing. For the detail on the charges this produces, see our page on reactive power charges and the glossary entry on reactive power.
What causes a poor power factor
A poor power factor is usually caused by inductive loads, equipment that uses magnetic fields to work. Common culprits include:
- Electric motors, pumps and fans
- Refrigeration and air-conditioning compressors
- Welding equipment and induction heating
- Older fluorescent lighting with magnetic ballasts
This is why power factor is largely an issue for manufacturers, workshops, cold stores and similar sites, and rarely a concern for a small office.
How it shows up on your bill
On a half-hourly metered site, a poor power factor typically appears as reactive power charges, billed in units called kVArh, and it can also push up your peak demand in kVA, which affects capacity charges. Smaller sites on simple meters usually are not billed for reactive power at all, which is why power factor mainly concerns larger users. If you see reactive power or excess capacity charges on your bill, power factor is the likely reason.
A worked example
Say a site draws 100 kW of useful power but the grid has to supply 125 kVA to deliver it. Its power factor is:
100 kW ÷ 125 kVA = 0.80
Correcting the power factor to 0.98 would cut the apparent power the grid must supply to about:
100 kW ÷ 0.98 = ~102 kVA, a drop of roughly 23 kVA.
Example only. Real figures depend on your load and the correction fitted, so treat this as illustrative.
That 23 kVA of freed-up capacity means lower reactive power charges, headroom before you hit your agreed capacity, and less strain on your infrastructure, which is the whole case for correction.
Power factor correction
The fix is power factor correction: installing equipment, usually capacitor banks, that supplies the reactive power locally so your site draws less of it from the grid. Done well, this raises your power factor towards 1, cuts or removes reactive power charges, frees up capacity and reduces strain on your infrastructure. It is a physical piece of kit installed at your site, not a change to your supply contract.
When it is worth fixing
Power factor correction is worth investigating when your bills show meaningful reactive power or excess capacity charges, or your power factor is sitting well below 0.95. The case is strongest on sites with a lot of motor or refrigeration load. Because correction equipment is a capital cost, it is worth checking the actual charges on your bills first, and sizing any correction to your real load, rather than assuming every site needs it. A site with a healthy power factor gains little from correction.
What it means for your business
For most small businesses, power factor is nothing to worry about. For larger, motor-heavy sites it can be a genuine, recoverable cost. The sensible order is to check your bills for reactive power or excess capacity charges, confirm your power factor from your half-hourly data, and only then price up correction against the charges it would remove. It is one of the few bill items where the fix is engineering rather than negotiation, though a competitive business electricity contract still sits alongside it. A bill validation is the quickest way to see whether power factor is costing you anything at all.
Frequently asked questions
What is power factor?
Power factor measures how efficiently a site converts the electricity it draws into useful work. It runs from 0 to 1: a value near 1 means almost all supplied power does useful work, while a lower value means some is effectively wasted from the network’s point of view.
How is power factor calculated?
Power factor is the ratio of useful power to total power, that is kW divided by kVA. If a site uses 100 kW of useful power but the grid supplies 125 kVA to deliver it, the power factor is 100 ÷ 125 = 0.80.
What are kW, kVAr and kVA?
kW is active power that does useful work. kVAr is reactive power that does no useful work but is needed by inductive equipment. kVA is apparent power, the total the grid must supply. Power factor is kW divided by kVA.
What is a good power factor?
A good power factor is close to 1. Anything much below around 0.95 starts to matter on a larger site, both for efficiency and potentially for your bill through reactive power and capacity charges.
Why does power factor matter?
A poor power factor means your site draws more current than the useful work suggests, using up network capacity without producing anything. It can mean paying reactive power charges, using more of your kVA capacity, and running infrastructure harder than needed.
What causes a poor power factor?
Inductive loads, equipment that uses magnetic fields, such as electric motors, pumps, fans, refrigeration and air-conditioning compressors, welding gear and older fluorescent lighting. It is mainly an issue for manufacturers, workshops and cold stores.
What is the link between power factor and reactive power?
They are two sides of the same coin. Reactive power is the portion of supplied power that does no useful work but is needed to run certain equipment, and it is what drags power factor below 1. The lower your power factor, the more reactive power you draw.
How does power factor affect my bill?
On a half-hourly site, a poor power factor typically shows up as reactive power charges billed in kVArh, and can push up your peak kVA demand, affecting capacity charges. Smaller sites on simple meters usually are not billed for it.
How much capacity can power factor correction free up?
It depends on your starting point. As an illustration, correcting a site from 0.80 to 0.98 power factor can cut the apparent power the grid supplies from around 125 kVA to about 102 kVA for the same 100 kW of useful load, freeing roughly 23 kVA.
What is power factor correction?
Installing equipment, usually capacitor banks, that supplies reactive power locally so your site draws less from the grid. It raises your power factor towards 1, cuts reactive power charges, frees up capacity and reduces strain on your infrastructure.
Is power factor correction worth it?
It depends on your bills. It is worth investigating when you see meaningful reactive power or excess capacity charges, or your power factor is well below 0.95, especially on motor-heavy sites. Check the actual charges before investing in correction equipment.
Do small businesses need to worry about power factor?
Usually not. Smaller sites on simple meters are typically not billed for reactive power, and offices have little inductive load. Power factor mainly concerns larger sites with motors, refrigeration or industrial equipment.
How do I find out my power factor?
On a half-hourly metered site it can be calculated from your consumption data, and reactive power charges on your bill are a strong signal it is low. A bill validation or a review of your half-hourly data will confirm it.
What is kVArh on my bill?
kVArh is the unit used to bill reactive power. Seeing it on your bill means you are being charged for reactive power, which is a direct consequence of a power factor below 1. It is the charge power factor correction aims to reduce.
Does fixing power factor change my energy contract?
No. Power factor correction is a physical piece of equipment installed at your site, not a change to your supply contract. It reduces the charges caused by reactive power, while your unit rate is still set by your electricity contract.