Power factor penalty in power bills

We've found that many people struggle to understand how Power Factor (PF) impacts demand charges. Frequently, end use customers pay a significant premium each month in demand charges because their PF is below a threshold set by the utility in the rate tariff. Oftentimes its not obvious to the untrained eye when there are extra charges associated with a bad PF on the customer bill. In this blog post, we are going to walk through PF and hopefully make it more understandable to the average commercial and industrial consumer.

Utilities must desig their systems with oversized equipment to accommodate reactive current. In order to pass along the expense of the larger equipment required and the system losses from the flow of the reactive current, many utilities will charge their customers a penalty for low power factor. There are a variety of means in which this penalty is calculated by the utility.

A typical power bill consists of charges for the power demand placed on the system by the customer (measured in kVA, kW or kvar) plus charges for the energy consumed by the customer (measured in kWh). Typical costs for the demand range from $1.00 to $11.00 per kVA, kW or kvar. Typical costs for the energy consumed range from $0.02 to $0.12 per kWh. The power factor penalty is usually applied only against the demand portion of the bill.

Electricity retailers charge for the creation of this distorted electricity via the kVA demand charge. kVA (known as Apparent Power) includes a measure of power factor in its calculation. Power factor is measured on a scale between zero and one, with 1.0 representing optimal efficiency.

The penalties for poor power factor can be high and add a significant cost to your monthly bill.

Solution of reducing electricity panelty

Power factor correction equipment reduces the kVA demand charge on your electricity bill.

The equipment uses capacitors or Static Var Generators to remove the distorted power. Relating to the image above, the froth is removed and you only pay for the liquid. In electrical terms, when the Reactive Power is removed, the Apparent Power (kVA on your electricity bill) then equals the Real Power. Thus you are no longer paying a financial penalty for the reactive power.

Products Design

The design of PFC equipment is important for its longevity. For instance, the harmonic blocking reactors (which are necessary to filter out harmful harmonics which otherwise damage the capacitors) can generate a lot of heat. High-quality properly engineered PFC units have these reactors physically segregated from other sensitive components. This prevents the heat generated from causing damage and reducing the lifespan of the equipment.

Many cheaper units do not physically segregate the reactors from other components. While this enables a lower initial cost, it can result in major additional costs and safety issues in the long run.

Low voltage Capacitor Banks

Low voltage Static Var Generator

Low voltage Active power filter

Medium voltage capacitor banks

Medium voltage Statcom