Power factor measures how effectively your facility converts electrical current into useful work. A power factor of 1.0 means all the current flowing through your wiring does productive work. A power factor of 0.7 means 30 % of the current serves only to magnetize motor windings and transformer cores. It does no work but still heats wires, loads transformers, and may trigger utility penalty charges.
Most industrial facilities run at 0.75–0.85 power factor due to induction motors, VFDs, fluorescent lighting, and welding equipment. Correcting to 0.95 or above reduces demand charges, frees up transformer and switchgear capacity, and lowers I²R losses in feeders. The investment in capacitor banks typically pays back in 12–24 months through lower utility bills alone.
The Power Triangle
Real power (kW) does actual work: turning motors, producing heat, running compressors. Reactive power (kVAR) magnetizes inductive loads but performs no work. Apparent power (kVA) is the vector sum of the two, and it is what the utility must generate and deliver. Power factor equals kW divided by kVA, or equivalently, the cosine of the angle between the real and reactive power vectors.
A 200 kW load at 0.80 power factor draws 250 kVA from the utility and requires 150 kVAR of reactive power. Correcting to 0.95 power factor reduces the apparent demand to 210 kVA and the reactive component to 66 kVAR. The real power stays the same (your motors still do the same work), but the utility delivers 40 kVA less, your feeders carry less current, and your transformer runs cooler.
Power Factor Correction Calculator
Calculate capacitor bank sizing for power factor correction with cost savings analysis.
Utility Penalty Structures
Utilities penalize low power factor in several ways. The most common is a kVA demand charge: you pay for apparent power, so a lower power factor means higher demand charges for the same real power. Some utilities apply a direct power factor penalty: a surcharge of 1–2 % on the total bill for each 0.01 below a threshold (typically 0.90 or 0.95). Others apply a reactive power charge per kVAR consumed.
Review your utility bills to find which structure applies. Look for line items labeled "demand charge," "reactive demand," "power factor adjustment," or "kVA demand." A facility with a $10,000 monthly bill and 0.78 power factor may be paying $1,500–2,500 in penalties that capacitor correction would eliminate. The utility will usually tell you your power factor if you call and ask. Some print it on the bill.
Sizing Capacitor Banks
Once you know the required kVAR correction, choose between fixed and automatic switched banks. A fixed bank is a single set of capacitors energized whenever the main breaker is on. It suits facilities with steady loads like water treatment plants or continuous manufacturing lines. An automatic bank has multiple steps that switch in and out based on a power factor controller monitoring the incoming line. This is the right choice for variable loads.
Size the bank to correct from your measured power factor to your target at the average load condition, not peak. If you size for peak and the load drops, you can overcorrect and push the power factor leading, which causes voltage rise and potential resonance problems. For a 500 kW facility at 0.80 PF targeting 0.95 PF, the required capacitor bank is about 185 kVAR.
Power Factor Correction Calculator
Calculate capacitor bank sizing for power factor correction with cost savings analysis.
Installation and Switching
Install capacitor banks at the highest voltage available to reduce current and conductor size. A 100 kVAR bank at 480 V draws 120 A, but the same bank at 4,160 V draws only 14 A. Large banks (above ~300 kVAR) are typically installed at medium voltage (2,400–4,160 V) for this reason.
Each capacitor step needs a contactor rated for capacitor switching duty. Standard motor contactors will weld shut from the inrush current. Use contactors with pre-insertion resistors or zero-crossing thyristor switches for banks that switch frequently. Provide a discharge resistor to bleed stored charge within 5 minutes (per NEC 460.28) and fuses or circuit breakers rated for capacitor fault current, which can be 10–15 times the rated current.