Low power factor has both direct and indirect costs. The direct costs are the reactive power charges levied by the electricity supplier. Most commercial and industrial tariffs in the UK include a reactive power charge — typically measured in pence per kVAr per month — that is applied when the site's average power factor falls below a threshold, usually 0.90 or 0.95. Some suppliers calculate maximum demand charges based on kVA rather than kW, which penalises low power factor even more heavily.
Example: A factory draws 200 kW at a power factor of 0.70. The apparent power is 200 / 0.70 = 285.7 kVA, and the reactive power is sqrt(285.7² - 200²) = 204.1 kVAr. If the supplier charges based on kVA, the factory is paying for 285.7 kVA of capacity when it only needs 200 kW. If the maximum demand charge is £5 per kVA per month, the factory is paying £1,428.50 per month instead of £1,000 — an excess of £428.50 per month, or £5,142 per year. Correcting the power factor to 0.95 would reduce the kVA to 210.5, cutting the excess charge to just £52.50 per month.
The indirect costs are equally significant. Higher current flow means higher I²R losses in the distribution cables, which appear as wasted heat. The cables, switchgear, and transformer run hotter, reducing their lifespan and increasing the risk of failure. The available capacity of the installation is reduced: a 500 kVA transformer supplying a load at 0.70 power factor can only deliver 350 kW of useful power, whereas the same transformer at 0.95 PF can deliver 475 kW. Improving power factor effectively increases the available capacity of existing infrastructure without any physical upgrade.
For electricians working on commercial and industrial sites, understanding power factor and being able to recommend correction solutions is a valuable skill that can generate additional revenue. A power factor survey followed by a correction installation is a high-value service that pays for itself through energy savings, often within 12 to 18 months.
BS 7671 Design Obligation
BS 7671:2018+A4:2026 Regulation 331.1(l) places a direct obligation on designers: power factor shall be assessed as a characteristic of equipment likely to have harmful effects upon other electrical equipment, services, or the supply. Where assessment reveals a poor power factor, designers shall consider power-factor correction as part of the installation design. This regulatory duty applies to new installations and significant alterations alike — making power factor analysis a mandatory part of any thorough electrical design, not an optional extra.