Power Factor Cost Impact
Calculate real power-factor penalty exposure and correction payback, netting out the kVAR allowed at your target power factor, not the full current kVAR.
Payback test
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How this works
Utility power-factor penalties are typically charged only on reactive demand (kVAR) in excess of what a target power factor would allow, not on the full reactive demand at the current power factor. Correcting power factor with capacitors reduces kVAR toward the target, eliminating the penalizable excess.
Key terms
- Penalizable kVAR: the reactive power in excess of what the target power factor would allow, the only portion actually charged the penalty.
Assumptions
- Average load profile is representative, penalty rate and target power factor are stable
Limitations
- Single average load point, not a time-of-day-varying power-factor study
Sources
Standard utility power-factor penalty billing practice (kVA/kVAR/kW relationship).
Worked example
A naive estimate applies the penalty rate to the full current kVAR (510.10), giving a 1.36-year payback that reads as an easy approval. The correct calculation nets out the kVAR still allowed at the target power factor (164.34), leaving 345.76 kVAR actually penalizable, a 2.01-year payback that just misses a 2-year window.
Common use cases
- Deciding whether a capacitor bank correction pays back within budget
- Estimating real monthly power-factor penalty exposure
- Checking a correction proposal against the full-kVAR estimate a vendor might quote