Lower Bills Using Power Factor Correction

What Is a Power Factor and How Does it Affect Your Utility Bill?

In electrical engineering, Power Factor (PF) is the ratio of real power to the apparent power flowing to the load from the source. From a business standpoint it’s important to understand how having a low Power Factor raises your plant or factory’s power bill. We present this article to help you identify this value and use corrective techniques to raise it for substantial savings and greater equipment efficiency.

Power Factor is measured between 0 and 1.0 (usually given as a percentage, with 100% or 1.0 being unity) and is usually judged as either leading or lagging, depending on the position of the current waveform with respect to the voltage. If your facility’s PF is below a certain level (typically 96%-95% for many power companies), your provider will charge a reactive power fee. This is because a low PF represents an inefficient load source that is drawing reactive, i.e. ‘non-working,’ power which the utility has to make up for. Unless your facility can raise its PF to 96-95% or above, you’ll continue to see this extra charge every month on your bill.

For maximum efficiency, power in an AC circuit is best used when the voltage and current are in alignment. However in the real world much of your electrical equipment is probably delaying as it draws current, meaning that the current and voltage are instead in misalignment. In this case your equipment has a level of inefficiency depending on how misaligned it is, causing it to draw more current to operate. Therefore your PF value reveals how efficiently your AC power system and equipment are using power.

How Is Power Factor Calculated?

An AC circuit’s Power Factor is calculated using three aspects of its electrical power as they relate to one another, these being:

Real power—Power used to run equipment, expressed in kW.

Reactive power —Power which does not produce work, expressed in kVAr. As your reactive power use increases, your electric system loses more energy, hence the reactive power fee.

Apparent power—The combination of real power and reactive power, expressed in kVA.


Figure 1–Calculating Power Factor

In an electric power system, a load with a low power factor draws more current than a load with a high power factor (near 100%) for the same amount of useful power transferred. These higher currents increase the energy lost in the distribution system and also require larger wires and other equipment. In other words, your Power Factor percentage shows you how much of the total current is being used to do real work, i.e. a PF of 80% means that a full 20% of the current is non-working power. Again, because of the costs of larger equipment and wasted energy, electrical utilities will usually assign a penalty fee to industrial or commercial customers if they have a low power factor.

A high power factor is generally desirable in a transmission system to reduce transmission losses and improve voltage regulation at the load, so it’s often beneficial to correct the power factor of a system to near 100%. When reactive elements supply or absorb reactive power near the load, the apparent power is reduced.

Motors driven by Variable Speed Drives will use the same power as before, but may draw more current. Note that with reduced stored energy in the DC Bus capacitors, they may be more vulnerable to power dips.

How You Can Benefit From Power Factor Correction:

LOWER ELECTRICITY BILLS: PF correction is an actionable way to lower your utility bills. Savings can range from hundreds to tens of thousands of dollars per year, depending on the size of your facility.

AVOID UTILITY REACTIVE POWER FEES: Utility companies routinely charge reactive power fees to consumers with low power factors (less than 96%-95%). For example, this can result in your bills increasing by up to 20%, depending on which company is supplying your electricity.

REDUCE CARBON EMISSIONS: By utilizing power factor correction you can also lower the amount of carbon emissions released into the atmosphere. This can be another great source of savings.

REDUCE I2R LOSSES in transformers and electrical distribution equipment.

ACHIEVE HEAT REDUCTION in cables, switchgear, transformers and alternators which in turn prolongs the lifespan of this equipment.

REDUCE VOLTAGE DROP in cables, allowing the same cable to supply a larger motor and improve the starting of motors located at the end of long cable runs. This also helps to avoid motor failure and damage to your equipment.

How Can You Raise Your Power Factor?

To avoid reactive power fees and improve equipment efficiency, you can raise your power factor by applying several different power factor correction techniques. Individual electrical customers who are regularly charged by their utility for a low PF often install correction equipment to reduce or remove these costs. Power factor correction brings the power factor of an AC power circuit closer to 100%, such as by supplying reactive power of the opposite sign by adding capacitors or inductors that act to cancel the inductive or capacitive effects of the load, respectively.

To begin with there are a few simple methods you can use to raise your PF without buying expensive devices. For example, check your existing equipment to see if any pieces are operating above the voltage it’s been rated for. You can also cut back on how often your plant is running motors with a light load and avoid running idling motors for extended periods.

Linear loads with a low power factor such as induction motors can be corrected using a passive network of capacitors or inductors. In the electricity industry, inductors are said to consume reactive power and capacitors are said to supply it, even though the energy is really just moving back and forth on each AC cycle. For example, you can offset the inductive effect of motor loads by using locally-connected capacitors. If a load has a capacitive value, connect inductors (also known as reactors in this context) to correct the power factor.

Capacitors prevent equipment from having to draw reactive power from the grid. Non-linear loads such as rectifiers distort the current drawn from the system. In such cases, you can use active or passive power factor correction to counteract the distortion and raise the power factor. The devices correcting the power factor may be located at a central substation, spread out over a distribution system, or built into power-consuming equipment.

However, reactive elements cannot simply be applied without engineering analysis. The reactive elements can create voltage fluctuations and harmonic noise when switched on or off. They will supply or sink reactive power regardless of whether there is a corresponding load operating nearby, increasing the system’s no-load losses. In the worst-case scenario, reactive elements can interact with the system and with each other to create resonant conditions, resulting in system instability and severe overvoltage fluctuations.

Another option is to use an automatic power factor correction unit, consisting of a number of capacitors that are switched by means of contactors. These contactors are controlled by a regulator that measures power factor in an electrical network. Depending on the load and power factor of the network, the power factor controller will switch the necessary blocks of capacitors in steps to ensure that the power factor stays above a selected value.

Instead of using a set of switched capacitors, you can utilize an unloaded synchronous motor to supply reactive power. The reactive power drawn by the synchronous motor is a function of its field excitation. This is referred to as a synchronous condenser. Started and connected to the electrical network, it operates at a leading power factor and puts vars onto the network as required to support a system’s voltage or to maintain the system PF at a specified level.

For power factor correction of high-voltage power systems or large, fluctuating industrial loads, power electronic devices are seeing increasing use. These systems are able to compensate for the sudden changes of power factor much more rapidly than contactor-switched capacitor banks, and being solid-state they require less maintenance than synchronous condensers.


By using a device to identify the Power Factor of your plant or factory’s equipment, you can realize substantial savings, improve the efficiency of your electrical equipment, and help prevent shutdowns or delays due to overheating machinery. It may take some preliminary analysis and/or investment in energy-efficient equipment, but you can realize long-term energy savings by measuring your facility’s power factor and applying suitable PF correction techniques.


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Kansas Utility proposes Higher Rates for Solar Customers

Solar advocates wary of rate case ruling

Westar proposal sign of things to come as utilities cope with rooftop solar growth



Westar Energy faces a challenge — or at least it’s anticipating a challenge — in the growing number of Kansas homes sporting solar panels on their roofs.

Like other utilities, Westar relies on a pricing structure that largely depends on customer usage. The company charges a small monthly fee for customers to access its grid. But for the most part, how much customers pay each month depends on the number of kilowatt-hours of electricity they use.

As more customers install rooftop solar and feed homegrown electricity back onto the grid, those per-kilowatt-hour charges get lower and lower. But the company still has significant fixed costs to serve those customers — costs for things like building new power plants, upgrading old ones and maintaining electrical cables.

So Westar, like other utilities across the nation, is trying to find new ways to account for the value of solar users’ access to its grid and infrastructure.

But Westar’s latest proposal to do so has solar advocates burning mad.

“This is an attack on rooftop solar,” said Aron Cromwell, owner of Cromwell Environmental Inc. in Lawrence, during a recent phone interview.

Cromwell’s business installs solar panels. He and others in the industry are closely watching a $150 million Westar rate case before the Kansas Corporation Commission that would set customers with rooftop solar apart from those who don’t have it.

It’s a case that could be a harbinger, as utilities across the country cope with the growth of customers with solar installations. It has drawn the attention of the Alliance for Solar Choice, a national rooftop solar advocacy group that has petitioned to intervene in the rate case.

Westar challenged the alliance’s right to participate and the KCC agreed to block the group, which alliance spokesman Nate Watters said has not happened in other states.

“Kansans should be aware that the nation’s largest solar rooftop industry organization, created to protect consumer’s choice for solar energy, is being rejected from entry into a discussion that will significantly affect them,” Watters said.

Westar, the largest electric utility in Kansas, says it’s merely trying to protect the nearly 700,000 customers it serves in 55 counties — including those without solar who could end up paying more to subsidize the grid’s infrastructure for those who have solar.

“Customers who choose to install solar on their homes still use that infrastructure 24 hours a day, so the proposed rates recognize that everyone who uses the grid should help pay for it,” said Jana Dawson, Westar’s director of corporate communications.

The rate issue will be decided by three KCC commissioners: Shari Feist Albrecht, Jay Emler and Pat Apple. Emler and Apple are newer KCC commissioners appointed by Gov. Sam Brownback in 2014.

    “There’s a huge push in the electric industry across the country to increase the customer charges to get more out of customers, because they see solar coming down the line and it really sort of wreaks a level of havoc with the utility’s cost structure.”

    – David Springe, lead counsel for the Citizens’ Utility Ratepayer Board

But first there are public hearings scheduled for July 21 and 23 and a series of evidentiary hearings with interested parties, including Westar, in August.

The Citizens’ Utility Ratepayer Board, an independent state agency related to the KCC, will argue on behalf of Westar’s customers. In that role, CURB’s lead counsel, David Springe, must represent Westar’s rooftop solar customers and those without solar panels.

Springe said he has serious reservations about Westar’s approach in the case but applauded the company for bringing the rooftop solar issue to the forefront.

Right now only a tiny fraction of Westar’s customers — about 300 — have rooftop solar, Springe said. But as the panels get more efficient and less costly, that number is sure to rise. The utility, Springe said, is being proactive about what could become a major disruption to its cost structure and that of hundreds of companies like Westar.

“This is industry-wide,” Springe said. “There’s a huge push in the electric industry across the country to increase the customer charges to get more out of customers, because they see solar coming down the line and it really sort of wreaks a level of havoc with the utility’s cost structure.”

The proposal

Westar’s proposal in the rate case is to split its current billing structure into three options, although only two of those would be available to future solar customers.

The first option would follow the existing design, with customers paying a $15 monthly fee ($3 more than the current rate) to access the grid and about 8.2 cents per kilowatt-hour for the first 1,000 kilowatt-hours used.

The second option would be to pay a $50 access fee, coupled with a much lower 2-cents per kilowatt-hour rate for the first 600 hours and a still-lower 7.8-cent rate for the next 400.

The third option would be to pay the $15 access fee and combine a 4.9-cent per kilowatt-hour usage charge with an additional $3 per-kilowatt “demand charge.” Demand charges are usually calculated based on a customer’s highest average energy needs during the billing cycle. They are meant to determine the capacity utility companies must build to prevent brownouts during times of peak demand.

Most Westar customers would be allowed to choose any of the three plans, including existing rooftop solar customers who would be “grandfathered in.”

“We believe that they made an economic decision to install solar based on the existing costs at the time, and we respect that,” Dawson said. “It makes sense for those folks to continue with their existing plan.”

But if the commission approves the plan, those who install solar after the rate case is decided in October would not be able to choose the first option.

Cromwell said that would instantly destroy demand for rooftop solar installations, because most solar customers are looking to cut their electrical bills by reducing their net usage.

With a cost structure more weighted to a flat monthly fee and less weighted to usage charges, that incentive dissipates.

“Under the proposed changes from Westar, you put solar on your roof, you use less energy and you’re staying the same (cost) as you were before,” Cromwell said.

Cromwell and his company also petitioned to intervene in the case, saying Westar’s proposal would hurt it financially.

Westar filed a May 18 brief to oppose allowing Cromwell’s company to intervene, calling talk of financial damage to Cromwell Environmental Inc., or CEI, “purely speculative.”

“CEI’s concern that Westar’s proposals will discourage solar development is invalid,” the brief states. “Westar has an ongoing partnership with CEI. As is discussed below, CEI has installed several solar facilities throughout Kansas that are either on Westar property or are funded by Westar. Westar’s proposals in this docket will ensure that its partnership with CEI can continue in the future and will foster the continued development of solar generation in the state.”

But Springe said he believes CEI has a solid case for being included in the KCC decision-making process.

“If Westar is allowed to do that (rate structure), if you are selling solar panels to someone, the economics have changed a lot,” he said.

The implications

Cromwell said a KCC decision in Westar’s favor would be a knockout blow to a solar industry that has received a couple recent body shots from state government.

Legislators voted this session to reduce the state’s renewable energy standard from a mandate to a “goal” and to limit to 10 years a renewable energy property tax exemption that had been permanent.

Cromwell said both of those measures are small potatoes compared to the Westar proposal.

The change to the renewable energy mandate was largely symbolic because most of the state’s utilities are already at or near the 20 percent renewable energy standard previously mandated for 2020.

Rep. Boog Highberger, a Democrat from Lawrence, made apocalyptic predictions about the property tax change’s effect on the solar industry, but Cromwell said those were largely overstated.

After 10 years of use, he said, solar panels have depreciated in value to the point where property taxes on them will be fairly negligible.

“I honestly don’t believe it will have that big of an effect on us,” Cromwell said.

But if the KCC approves Westar’s rate structure changes, the effect on CEI will be significant, he said.

Cromwell said he’s confused by what he considers repeated “attacks” on his industry.

The Kansas solar community is small, but he said job growth in the industry is ticking along at a 30 percent to 50 percent clip year over year. While other states encourage solar installation through tax credits, Cromwell said Kansas solar companies don’t ask state lawmakers for any such sweeteners.

“Frankly, it’s basically, ‘Don’t make it worse for us,’” Cromwell said of the solar industry’s lobbying philosophy. “Don’t screw this up.”

Environmental advocates are keen to support energy sources like solar and wean the nation off fossil fuels like coal that remain cheaper but carry hidden costs in pollution and health effects.

Dawson said Westar is committed to environmental conservation, with nearly 1,300 megawatts of renewable energy in its portfolio, a wetlands restoration project and new proposals to allow individual customers to voluntarily pay a little extra each month if they want more of their energy to come from solar arrays.

“Westar Energy has continued to make investments in both wind and solar energy, while taking a common-sense approach: Keep electricity reliable and cost-effective while making renewable energy available for everyone,” she said.

Dawson also said that environmental upgrades to lessen the emissions of an existing coal power plant were “one of the key cost items” that caused Westar to seek the $150 million rate package.

Springe said the dispute with the solar industry is only a small part of the $150 million package.

He said his agency will recommend that the KCC split the solar portion from the rest of the rate request and hear it separately, so that it does not become a disproportionate distraction.

That said, Springe believes the solar debate is one worth having, on its own merits.

“We expect solar to grow, so how we price solar or how we design rates on Westar’s system appropriate for solar is a big question,” he said. “I think it’s a question that’s really important we get our hands around and we do it early.”

Springe said splitting the solar dispute into a separate rate case would give his agency the time to bring in experts on solar generation, storage and the grid to help form recommendations fair to both rooftop solar users and non-users alike — before more roofs sport the gleaming panels.

“We’ve got to have some very deep discussions going forward about how we do pricing,” he said. “I think we have time to try and come up with the right answer.”

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