INDUSTRIAL GUIDE

Power Factor Correction UK: PFC Installation Guide for Businesses

Complete guide to power factor correction for UK businesses — what power factor is (kVA vs kW), how DNOs charge for reactive power, automatic and fixed capacitor banks, why standard capacitors fail with VFDs, detuned harmonic-rated banks, savings calculation, and typical 2–4 year payback for industrial users.

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15 min readUpdated 2026-06-10Andrew Moore, Founder of Elec-Mate

Written and reviewed by Andrew Moore, founder of Elec-Mate, against BS 7671:2018+A4:2026, IET Guidance Note 3 and the IET On-Site Guide.

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Power Factor Correction

Calculate capacitor bank sizing for power factor improvement

kW

From energy meter or load calculation

Lagging (typical industrial: 0.7-0.85)

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Key Takeaways

  • 1Power factor is the ratio of real power (kW, which does useful work) to apparent power (kVA, which the supply must provide). A power factor of 0.7 means 30% of the supply capacity is wasted on reactive current.
  • 2Most UK DNO commercial and industrial electricity tariffs include a reactive power charge (kVArh charge) or a maximum demand charge based on kVA rather than kW — poor power factor directly increases electricity bills.
  • 3Automatic power factor correction (APFC) banks use a controller and multiple capacitor steps to maintain a target power factor (typically 0.95 or better) as the load changes throughout the day.
  • 4Fixed capacitor banks are simpler and cheaper than APFC banks but only correct for a constant base load — they can over-correct at light load, which reverses the power factor and can increase charges.
  • 5Capacitors in systems with significant harmonic distortion (from VFDs, UPS systems, or non-linear loads) can cause resonance that amplifies harmonics — always assess harmonic content before installing standard capacitor banks.
  • 6Detuned capacitor banks (with reactor in series with each capacitor step) are the safe solution for systems with harmonics — the reactor shifts the resonant frequency to below the 5th harmonic, preventing amplification.
  • 7BS 7671 Reg 559.5.6 requires discharge resistors for compensation capacitors exceeding 0.5 µF. Reg 462.4 requires a warning label on the enclosure stating the discharge time before it can be safely opened.
  • 8Commissioning power factor readings must be taken at representative production load — not at light load or standby. Measurements taken under non-representative load produce misleading before/after figures and do not verify that the APFC controller steps are operating correctly.
01 · Industrial Guide

What Is Power Factor? kVA vs kW Explained

Power factor is one of the most important — and most misunderstood — concepts in industrial electrical engineering. Understanding it correctly is essential both for diagnosing billing issues and for correctly specifying power factor correction equipment. There are three types of power in an AC electrical system, and they are related by the power triangle.

  • Real power (kW) — the power that does actual useful work: driving motors, producing heat, lighting. This is what the kWh meter records. Also called active power. Measured in watts (W) or kilowatts (kW).
  • Reactive power (kVAr) — the power that flows between inductive or capacitive loads and the supply. Inductive loads (motors, transformers) absorb reactive power (lagging); capacitive loads supply reactive power (leading). Reactive power does no useful work but must be supplied by the generator and carried by the cables and switchgear. Measured in reactive volt-amperes (VAr) or kilovolt-amperes reactive (kVAr).
  • Apparent power (kVA) — the vector sum of real power and reactive power. This is the total power the supply must provide and the transformer, switchgear, and cables must be rated for. kVA = √(kW² + kVAr²). Measured in volt-amperes (VA) or kilovolt-amperes (kVA).
  • Power factor formula — PF = kW ÷ kVA = cos(φ), where φ is the phase angle between voltage and current. PF ranges from 0 (purely reactive load) to 1.0 (purely resistive load). A typical industrial site without PFC has a power factor of 0.7–0.85 lagging. The target with PFC is 0.95 or better.

Consider a practical example: a factory with 500 kW of real load at 0.75 power factor draws 500 ÷ 0.75 = 667 kVA of apparent power. The cables, switchgear, and transformer must all be rated for 667 kVA, even though only 500 kW of useful work is done. Improving power factor to 0.95 reduces apparent power to 500 ÷ 0.95 = 526 kVA — freeing up 141 kVA of supply capacity for additional real load without any infrastructure upgrade.

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02 · Industrial Guide

DNO Reactive Power Charges

Distribution Network Operators charge industrial and commercial customers for reactive power consumption through several mechanisms, depending on the tariff type and metering arrangements. Understanding which mechanism applies to a specific site is essential for calculating the potential savings from power factor correction.

  • kVArh reactive energy charge — applied to half-hourly metered customers. The charge applies to reactive energy consumed when the power factor falls below a threshold (typically 0.95 lagging). The kVArh charge rate varies by DNO and tariff — typically £0.005–0.020 per kVArh. A site consuming 500 kW at 0.80 PF for 4,000 hours per year incurs approximately 375,000 kVArh of reactive energy — a cost of £1,875–£7,500 per year at typical rates.
  • kVA maximum demand charge — some tariffs charge for the monthly peak kVA demand rather than (or in addition to) kW maximum demand. Since kVA = kW ÷ PF, improving PF from 0.80 to 0.95 reduces kVA demand by (kW × (1/0.80 − 1/0.95)) = kW × 0.197, reducing the monthly maximum demand charge accordingly.
  • Agreed supply capacity — the connection agreement between the customer and DNO specifies an agreed supply capacity in kVA (or kW with a stated PF). Where the customer's apparent power demand exceeds the agreed capacity, excess capacity charges apply. Improving power factor reduces apparent power demand and may allow additional real load to be connected within the existing agreed capacity.
  • Identifying charges on the bill — reactive power charges appear on the electricity invoice under various descriptions: "reactive energy charge", "kVArh charge", "excess reactive power", "availability charge (kVA)", or "maximum demand charge (kVA)". Request a copy of the supply contract and meter data (half-hourly kW and kVArh data) to quantify the current reactive power cost.
03 · Industrial Guide

Automatic Capacitor Banks (APFC)

Automatic power factor correction (APFC) banks are the standard solution for industrial and commercial premises with variable loads. A microprocessor-based power factor controller monitors the supply power factor and switches capacitor steps in or out to maintain the target power factor as the load varies throughout the day.

  • PFC controller — samples voltage and current from a current transformer (CT) on the supply incomer. Calculates power factor in real time (typically 100 ms sampling interval) and switches capacitor steps via contactors to maintain the target PF. Modern controllers display kW, kVAr, kVA, PF, voltage, current, harmonics (THD), temperature, and step status.
  • Capacitor step sizing — equal steps (e.g., 5 × 20 kVAr = 100 kVAr total) provide 5 levels of correction. The step size should not be larger than approximately 15% of the transformer rated kVA to avoid voltage steps on switching. Smaller steps provide smoother correction; more steps add cost. Most APFC banks have 6–12 steps.
  • Contactor switching — each capacitor step is switched by a dedicated AC capacitor duty contactor with peak voltage suppression resistors (to limit switching transients). Contactors must be rated for capacitor switching duty (utilisation category AC-6b). Step switching is controlled with a minimum reconnection delay (typically 60–180 seconds) to allow the capacitor to discharge before re-energisation.
  • Cable sizing for capacitor circuits — cables feeding each capacitor step must be rated for the full capacitor reactive current (Irc), not the nominal load current. The reactive current is calculated as Irc = 2π·f·C·Ur, where f is frequency (50 Hz), C is capacitance in farads, and Ur is rated voltage. Sizing cables for the nominal load current rather than Irc is one of the most common and costly capacitor bank installation errors — the capacitor draws its rated reactive current continuously, not just at peak load.
  • Location — APFC banks are most effective when connected at the main distribution board (correcting the overall site power factor before the metering point). Individual motor correction (fixed capacitors connected directly at each motor terminal box) is also effective and reduces cable loading, but requires more individual components and maintenance access.
04 · Industrial Guide

Fixed Capacitor Banks

Fixed capacitor banks provide a constant kVAr output regardless of the load. They are simpler and lower cost than APFC banks but are only appropriate for applications where the reactive load is relatively constant. Incorrect application of fixed capacitors can lead to over-correction at light load, which is as undesirable as under-correction.

  • Suitable applications — fixed capacitor banks are suitable for individual large motors running continuously at full load (e.g., large compressors, fans), transformer magnetising current correction, and industrial processes with constant 24/7 loading. The capacitor is sized to correct the specific reactive load of the equipment it is connected to.
  • Over-correction risk — if a fixed capacitor bank is sized for peak reactive load and the load reduces (night, weekends), the capacitors continue to supply reactive power to the system. The system power factor becomes leading (capacitive), which can cause voltage rise on the supply, increased kVAr charges on some tariffs, and potential instability in generator installations.
  • Motor-specific correction — connecting a fixed capacitor directly at a motor terminal box corrects the reactive current that flows between the motor and the distribution board. The capacitor kVAr rating should not exceed 90% of the motor no-load reactive current (to prevent self-excitation and runaway voltage on loss of supply). The motor nameplate and manufacturer's data provide the recommended capacitor kVAr.
05 · Industrial Guide

Harmonic Distortion and Standard Capacitors

In modern industrial premises, a significant proportion of the load is non-linear — variable frequency drives, UPS systems, electronic motor starters, switched-mode power supplies, and electronic lighting all generate harmonic currents. These harmonic currents interact with capacitor banks in ways that can cause equipment damage and make the electrical system worse rather than better. Harmonic assessment is a prerequisite for capacitor bank specification on any site with non-linear loading.

  • Parallel resonance — the capacitor bank (capacitive impedance) and the supply system inductance (inductive impedance) form a parallel resonant circuit at a frequency fr = 50 Hz × √(Ssc/Q), where Ssc is the short-circuit power of the supply and Q is the capacitor bank kVAr. If fr coincides with a harmonic frequency present in the system (250 Hz for 5th harmonic, 350 Hz for 7th harmonic), the harmonic current is amplified dramatically.
  • Effects of resonance — harmonic resonance causes overheating of capacitors (capacitor current increases with frequency — I = V × 2πfC), which leads to premature capacitor failure. It also overloads cables, switchgear, and transformer windings; causes nuisance tripping of protective devices; interferes with electronic equipment and communications; and can cause voltage waveform distortion that affects the accuracy of metering equipment.
  • Harmonic survey before specification — before specifying any capacitor bank, measure the existing harmonic voltage and current distortion using a power quality analyser. BS EN 61000-3-6 and ER G5/5 (Engineering Recommendation G5/5, Planning Levels for Harmonic Voltage Distortion and the Connection of Non-Linear Equipment to Transmission Systems and Public Distribution Networks) provide the framework for harmonic assessment. If THDi exceeds approximately 25%, standard capacitors are not suitable — detuned banks must be specified.

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06 · Industrial Guide

Harmonic-Rated and Detuned Capacitor Banks

Detuned capacitor banks incorporate a series reactor (inductor) in series with each capacitor step. The reactor shifts the parallel resonant frequency of the LC circuit below the lowest significant harmonic frequency (the 5th harmonic at 250 Hz), ensuring that no resonance occurs at a harmonic that is actually present in the system. Detuned banks are the standard solution for sites with significant harmonic distortion.

  • Detuning factor (p) — the reactor is specified by its detuning factor p = (fr/f1)². Standard detuning factors are p = 0.07 (7%), giving a resonant frequency of fr = 50 Hz ÷ √0.07 ≈ 189 Hz (between 3rd and 5th harmonics); or p = 0.14 (14%), giving fr ≈ 134 Hz (between fundamental and 3rd harmonic). The 7% detuning factor is the most common choice for general industrial use.
  • Capacitor and reactor rating — because the reactor adds inductive voltage, the capacitor must be rated for a higher voltage than the system voltage. With 7% detuning on a 400 V system, the capacitor is typically rated at 440 V. The reactor must be rated for the fundamental frequency and all harmonic currents flowing through the capacitor step — use reactors with a defined harmonic current capability (typically up to the 13th harmonic).
  • Harmonic filtering effect — unlike passive harmonic filters (which are tuned exactly to a harmonic frequency and actively absorb that harmonic), detuned banks do not filter harmonics. They only prevent resonance. Where harmonics must be reduced (to comply with ER G5/5 planning levels or to prevent equipment interference), active harmonic filters (AHF) or passive filters tuned to the offending harmonics must be specified in addition to or instead of capacitor banks.
  • Reactor heat dissipation — series reactors dissipate heat (I²R losses). The panel enclosure must provide adequate ventilation for the combined heat dissipation of capacitors and reactors. Reactor operating temperature affects the inductance value — use thermally stable, iron-core reactors, not air-core reactors, for detuned PFC applications.
07 · Industrial Guide

Savings Calculation for PFC

The financial justification for power factor correction must be based on actual meter data and current tariff rates, not on generic estimates. Request half-hourly kW and kVArh data from the electricity supplier (available from the meter operator for all half-hourly metered sites) and the supply contract tariff schedule before preparing any PFC proposal.

  • Step 1 — measure existing power factor — from the half-hourly data, calculate the average and peak reactive demand (kVAr) and the corresponding power factor at various times of day. Identify whether the poor power factor is constant or occurs at specific times (e.g., only during production hours).
  • Step 2 — calculate current reactive energy cost — identify the kVArh charge threshold (typically when PF < 0.95) and the charge rate from the tariff schedule. Multiply the chargeable kVArh (from the meter data) by the charge rate to get the annual reactive energy cost.
  • Step 3 — calculate kVAr correction required — using the power triangle: kVAr required = kW × (tan(cos⁻¹(existing PF)) − tan(cos⁻¹(target PF))). For example, 400 kW at 0.80 PF corrected to 0.95: kVAr = 400 × (tan(36.87°) − tan(18.19°)) = 400 × (0.750 − 0.329) = 168 kVAr. Specify a 175 kVAr APFC bank (next standard size up).
  • Step 4 — calculate annual saving — estimated saving = annual reactive energy charge (before PFC) × (1 − residual reactive energy with PFC ÷ reactive energy without PFC). Also include any saving from reduced kVA maximum demand charge and any capacity release value if additional load is to be connected within the existing supply capacity.
08 · Industrial Guide

Typical Payback Period (2–4 Years for Large Industrial Users)

The payback period for power factor correction equipment varies considerably depending on the site's existing power factor, annual electricity consumption, tariff structure, and equipment specification. For large industrial users with significant reactive power charges, payback of 2–4 years is typical. Smaller commercial sites may see longer payback periods if their reactive power charges are modest.

  • Large industrial (500+ kW) — typically 1.5–3 years payback. High reactive power charges, large kVA maximum demand saving, capacity release for additional load. 100–500 kVAr APFC bank, detuned if VFDs present. Total installed cost typically £15,000–£60,000.
  • Medium commercial (100–500 kW) — typically 2–5 years payback. Moderate reactive power charges. 50–150 kVAr APFC bank, detuned if significant non-linear load. Total installed cost typically £6,000–£20,000. Payback depends heavily on tariff structure — sites on kVArh tariffs see better returns.
  • Small commercial (under 100 kW) — often marginal or no financial case. Small businesses on standard NHH tariffs without kVArh charges or kVA maximum demand charges will see no bill reduction from PFC. Check the tariff before specifying PFC — not all sites will benefit financially.
  • Non-financial benefits — reduced cable and switchgear loading (extending equipment life), reduced transformer loading (allowing additional load within existing transformer capacity), reduced I²R cable losses, and improved voltage regulation. These benefits apply regardless of whether there is a direct reactive power charge on the tariff.

PFC equipment requires minimal maintenance — capacitors should be inspected visually annually for bulging or leakage, and the controller should be checked to confirm all steps are operational. Capacitor life expectancy is typically 15–20 years; detuned reactors are essentially maintenance-free.

09 · Industrial Guide

For Electricians: PFC Installation and Certification

Power factor correction installation is profitable specialist work for commercial and industrial electricians. An APFC bank installation at a medium-sized factory or distribution warehouse typically takes 2–3 days and commands a significant margin. All PFC installations require an Electrical Installation Certificate under BS 7671 and should include a commissioning record confirming the PF before and after correction.

Complete the EIC on Site

Use the Elec-Mate EIC app to complete the Electrical Installation Certificate for the PFC installation on your phone. The Schedule of Test Results must include: insulation resistance values (new installations should achieve well above 1 MΩ — values below 20 MΩ warrant investigation per GN3 2.21), earth continuity, earth fault loop impedance (Zs), and polarity. Also record CT ratio, panel rating, step sizes, capacitor discharge time, and initial/final power factor readings — then export a professional PDF before leaving site.

Quote PFC Upgrades to Industrial Clients

When completing an EICR or motor installation at an industrial site, check the power factor using your power quality analyser and calculate the savings potential. Quote the PFC bank immediately using the Elec-Mate quoting app. A well-presented 2–3 year payback calculation makes PFC an easy decision for a finance director.

BS 7671 Compliance — Discharge Requirements

  • Reg 559.5.6 — Discharge resistors (mandatory): Compensation capacitors with a total capacitance exceeding 0.5 µF shall only be used in conjunction with discharge resistors. This is a mandatory requirement for stand-alone capacitor banks; capacitors forming part of the equipment are exempt. Verify discharge resistor presence on every capacitor step before raising the EIC.
  • Reg 462.4 — Warning label: Where residual electrical energy is potentially present (as it is in any capacitor bank), suitable means shall be provided for its discharge. Where relevant, a warning label stating the required discharge time before the enclosure can be safely opened shall be fitted to the enclosure. PWI confirms the typical discharge criterion: residual voltage must fall to 75 V within 3 minutes. Measure and record the discharge time on the Schedule of Test Results.

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