For a machine to perform work it must be supplied with energy. In the case of electric motors, more electricity must be supplied than actually appears as useful work at the motor shaft. A certain amount of electricity is required just to maintain the necessary magnetic field and does not produce any useful work. This component is known as reactive (or magnetizing) power. Utility companies will provide a limited amount of reactive power at no cost, however customers with high reactive power loads are charged extra for the reactive component.

Power Factor (PF) is the name given to the ratio of the active or usable power measured in kilowatts (KW), to the total power (active and reactive) measured in kilovolt amperes (KVA).

ie: Power Factor = KW / KVA or Power Factor = Usable Power / Total Power Available

The value for the power factor can theoretically vary between 0/% and 100%, where a value of 100% — also called unity power factor – delivers all of the power as active power. A value of 0% would mean all the power is supplied as reactive power; no motors would turn and no useful work could be accomplished. Electric utility companies must supply the entire KVA (total power) demand. Since a customer only achieves useful work from the KW (usable) portion, a high power factor is important. The reactive power used by electrical equipment like transformers, electric motors, welding units, server banks, lighting systems and static converters adds additional load to generators, transmission lines, transformers, switchgear and cables. Reactive power can also cause considerable loss of energy through heat dissipation.

Power Factor Correction is the process of maximizing the efficiency of an electrical system to deliver the most possible power as active power. The benefits of power factor correction include significant cost savings  & environmental benefits through improved energy efficiency & reduction in electricity consumption throughout your power system.