How much can I save by keeping the power factor near to unity? The precise answer is that power factor correction does little to reduce energy usage. Commonly power factor correction is installed because of a false knowledge of energy savings. There are benefits of decreased line losses and reduced voltage drop but the main incentive for power factor correction is avoiding a low power factor penalty from utility companies, which is very likely.

It is important to understand the tariff structure before determining the need of power factor correction. Moreover there are many damaging effects from installing capacitors if care is not given to preventing overvoltage switching transients and harmonic heating. There are many power factor correction gizmos marketed for residential homes. There is no need to provide power factor correction in the residential market, and every product marketed for home use is a scam. Usually applying power factor correction for an industrial/commercial facility is cost effective.

**What is Power Factor?**

Power factor (PF) is the ratio between real power and apparent power. In a circuit with no reactive power the ratio of real power and apparent power is equal to 1. When there is an equal amount of real power and reactive power the PF is 0.707 i.e. 70.7% of the apparent power is real power. PF enables to know how much of the apparent power (kVA) in your system is used for real power (kW).

**How does Power Factor Correction Work?**

There are two types of reactive power, inductive and capacitive. Inductive loads store energy in a magnetic field. The peak current draw for an inductive load lags voltage peak by 90 degrees. A capacitive load stores energy in a magnetic charge. The peak current draw for a capacitive load leads voltage peak by 90 degrees.

Most industrial loads have a lagging current from induction motors. Inductive current and capacitive current have an inverse relationship. Capacitors discharge current when inductors are conducting current, and inductors supply current capacitors are charging. By matching capacitors to an inductive system, reactive current can be canceled out reducing the demand on upstream electrical equipment. For an inductive load with a .707 power factor, the apparent current is 1.4 times the real current. The distribution system needs to be sized for 1.4 times the power used create real work. Adding capacitive reactance, the power factor can theoretically be increased to 1 resulting in 100% of the apparent power (kVA) supplied being used for producing real work (kW).

**Utility Company Penalty**

Although the utility company has to supply apparent power (kVA), their bill is based on energy consumption (kWh). The utility company has the added cost of distribution equipment, when they cannot bill for the full amount of power supplied. Since a customer with a low PF has a larger overhead cost than a customer with a higher PF, some utilities charge penalties for operating with a low PF. When a company is penalized for low PF, then installing PF correction often makes financial sense.

**Line Losses**

When the utility company supplies reactive power, the current must flow from the utility meter to the inductive load. The wires between the meter and the load have resistive heating losses. This is where customer is billed for reactive power because line losses convert reactive power into real power. The amount of line losses depends on the feeder sizes, length and load. It is best to install PF correction close to inductive loads, reducing line losses by reducing the length of current travel

**Infinite Current**

There are several issues that arise from installing capacitors on your system. Most of these issues are rooted in the response of a capacitor to instantaneous voltage change. Capacitor banks ideally operate with a 50 hz (in India) smooth voltage sine wave. When voltage transients or voltage harmonics are present, a capacitor’s impedance greatly reduces which causes the capacitor to draw or supply infinite current. When capacitors are switched they can cause voltage ringing of up to 200% nominal voltage, potentially damaging sensitive equipment. Issues arise with voltage transients, switching capacitors, voltage harmonics, and utility switching.

Installing detune reactors with capacitor banks will help protect electrical equipment from capacitive ringing and protect the capacitor from overheating. If capacitors banks are frequently switched or voltage sensitive loads are present, switching should be done with zero voltage turn-on solid state relays. This is the ideal way to energize a capacitor bank as it eliminates capacitive ringing by energizing the capacitor when the voltage differential is zero.

**Selecting the right capacitors**

There are two basic types of capacitor installations: individual capacitors on linear or sinusoidal loads, and banks of fixed or automatically switched capacitors at the feeder or substation.

Advantages of individual capacitors at the load:

- Capacitors cannot cause problems on the line during light load conditions
- No need for separate switching; motor always operates with capacitor
- Improved motor performance due to more efficient power use and reduced voltage drops
- Motors and capacitors can be easily relocated together
- Easier to select the right capacitor for the load
- Reduced line losses
- Increased system capacity

Advantages of bank installations at the feeder:

- Lower cost per kVAR
- Reduces or eliminates all forms of kVAR charges
- Automatic switching ensures exact amount of power factor correction and eliminates over-capacitance.

**Case 1:**

A XYZ warehouse in Haryana has an average monthly electrical bill of 50,000 kWh and the power factor is 0.92. The bill is calculated based on the energy charges of 585 paise per unit. Therefore the total monthly bill of the XYZ is 50,000 * Rs.5.85 = 292,500 + other charges and taxes. Since the company is not penalized for low power factor, there is no obvious incentive for improving it.

But a closer look into Schedule of Tariff^{[1] }of Uttar Haryana Bijli Vitran Nigam Limited shows that there are two possible options for a customer to get billed.

- Option 1: 526 paise per kVAh
- Option 2: 585 paise per kWh

If XYZ opts for option 1 then the bill would have been (50,000/0.92)*5.26 = 285,870.

It translates into an monthly saving of Rs.6,630 i.e. annual savings of Rs.79,560. This is without any investment. If the PF is now improved to 0.99 then the annual savings would have been over 320,000. Obviously this will involve some cost of implementation, but the payback of such investment is usually less than 2 years.

So we can understand that even though there is no penalty involved there is good incentive for maintaining high PF

**Case 2:**

For Tata Power Delhi Distribution Limited^{[2]} the domestic customers and low tension customer up to 10 kW demand are billed for the kWh consumption. There is no upfront penalty or rebate related to PF. In such case there is no direct financial incentive to maintain high PF.

This assumption does not take into account the line losses and the equipment efficiency while operating at high PF. However these factors have significant impact only if PF is very low.

**Case 3:**

For Paschim Gujarat Vij Company Limited^{[3]} (PGVCL), the charges and rebates are as follows:

- Energy Charges: Rs.4.45 per kWh
^{[4]} - PF rebate for each percent excess of 95%: 2.4%
- PF penalty for each percent drop below 90% up to 85%: 1%
- PF penalty for each percent drop below 85%: 2%

For a foundry having monthly consumption of 60,000 kWh, the monthly energy charges would be 267,000. The possible rebates or penalties based on different power factor can be –

- PF at 0.99: Rebate = 2.5% of 267,000 =Rs. 6,675 per month or Rs. 80,000 annually
- PF between 0.9 to 0.95: No rebate or Penalty
- PF at 0.85: Penalty = 5% of 267,000 = Rs. 13,350 or Rs. 160,200

There is a clear incentive to maintain PF at least 0.9. Above that the rate of return for investment in capacitor banks may differ from case to case.

**Footnotes:**

[1] http://www.uhbvn.com/documents/circular/SC2013/SC_U_28_2013.pdf

[2] http://www.tatapower-ddl.com/UploadedFiles/107_1105_2013_8_1_41_27_364.pdf

[3] http://www.pgvcl.com/tariff/TARRIF%20APR13/Tariff%20Schedule%20.pdf

[4] Demand between 500kVA to 2500 kVA for supply of electricity at high tension

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