Power Factor Correction – Full Overview
Introduction
Power factor (PF) is a key indicator of how efficiently electrical power is used by an AC system. It compares the real power (measured in kilowatts, kW) that does actual work to the apparent power (measured in kilovolt-amperes, kVA) drawn from the network. An ideal power factor is 1.0 (or 100%), meaning all the supplied power is doing useful work. In practice, many industrial and commercial loads exhibit a lower PF due to reactive power, which does not contribute to useful output. Poor power factor not only wastes energy and capacity but also affects power quality and incurs financial penalties, a particularly important consideration in New Zealand’s power market, where some electricity distributors charge customers for sustaining a low PF. This whitepaper explains what power factor is, how lagging or leading power factor arises from common equipment, and how power factor correction (PFC) solutions (capacitor banks, static VAR generators, and hybrid systems) can improve power quality and reduce costs in the NZ context.
What is Power Factor?
In AC electrical systems, voltage and current may not always be perfectly in phase. Power factor is the ratio of the real power (the portion that performs work) to the apparent power (the total power drawn). Mathematically, PF = kW ÷ kVA, and it is also equal to cos(φ), where φ is the phase angle between the current and voltage waveforms. A power factor of 1 (unity) indicates that all the current is aligned with the voltage (purely resistive load), so 100% of the power is used effectively. A lower PF (between 0 and 1) indicates that a portion of the current is out of phase with the voltage, due to reactive components in the load.
Puff, That’s a lot of words and symbols! In essence, power factor is a measure of how much of the electricity you pay for is actually doing useful work in your equipment, with a PF of 1 meaning you get 100% bang for buck, but this is virtually impossible to achieve.
Because power factor is a ratio, it is usually expressed as a decimal (e.g. 0.95) or percentage (95%). Utility companies generally consider a PF of 0.95 or higher to be good, and many set this as a minimum target for consumers. When PF is close to 1, the apparent power (kVA) and real power (kW) are nearly equal, indicating efficient use of the electrical supply. A low PF means the circuit is drawing more apparent power than necessary for the work being done, which has several implications for both the electricity provider and the consumer, as we will explore.
Real Power, Reactive Power, and Apparent Power
To understand power factor, it’s important to distinguish between three types of power in AC circuits:
• Real (Active) Power (P): This is the actual work-producing power measured in watts (or kW). It’s the energy converted into useful output – for example, mechanical work in a motor or heat in a heater. Real power is the component of power that you want, and it is calculated as P = V × I × cos(φ).
• Reactive Power (Q): This is the “wattless” power measured in reactive volt-amperes (VAR, or kVAr for thousands). Reactive power oscillates between source and load, being stored and released by reactive components (inductors and capacitors) each cycle. It is
associated with the establishment of electric or magnetic fields (for example, the magnetic field in a motor’s coils or the electric field in a capacitor). Reactive power doesn’t do useful work on its own (it cannot drive a mechanical load or produce heat), but it is often necessary for the functioning of AC devices. In essence, it supports the energy transfer process by sustaining the electromagnetic fields. However, it loads the network by increasing the total current flow. The unit (VAR) indicates it’s a distinct kind of power. In a purely inductive or capacitive circuit, the phase difference φ = ±90°, so cos φ = 0 and all the power is reactive (Q), with no real work done.
• Apparent Power (S): Measured in volt-amperes (VA, or kVA), apparent power is the vector sum of real and reactive power. It represents the total power “apparently” drawn from the source. By the power triangle relationship, S² = P² + Q². If either reactive or real power increases, the apparent power goes up. Apparent power is what determines the current that flows in the circuit and thus the loading on cables, transformers, and generators. Even if a large portion of S is reactive (Q), the infrastructure must be sized to carry that apparent power.
It’s a cliché classic but… Think of a beer mug where the beer represents real power and the foam represents reactive power. The mug’s total volume is the apparent power. Ideally, you want a full mug of beer with minimal foam. A high power factor means you’re getting mostly “beer” (useful power) and little “foam” (wasted reactive). If there’s too much foam (high Q), you’re effectively paying for a bigger mug to get the same amount of beer. In electrical terms, a low PF means you need a larger capacity (kVA) supply to deliver the same kW of work, due to the excess reactive “foam” taking up capacity, however you still need a little bit of fizz to make it worth drinking!
Lagging vs. Leading Power Factor. Power factor can be lagging or leading, depending on whether the current lags or leads the voltage in phase. This is determined by the nature of the load:
• Lagging Power Factor: If the current lags behind the voltage, the PF is said to be lagging. This is characteristic of inductive loads, which are extremely common in both industrial and commercial settings. Equipment such as electric motors, induction furnaces, transformers, welding machines, and fluorescent lighting with magnetic ballasts all draw lagging (inductive) currents. In these devices, a magnetic field is established as part of their operation, and that field storage causes the current to peak after the voltage does. The result is that a portion of the current is out of phase (lagging), contributing to reactive power. For example, an induction motor might operate with a PF of 0.8 or lower (especially under light load), meaning 20% or more of the current is not producing useful work. The magnetic fields in inductive devices are what “consume” reactive power – energy is alternately stored in and released from these fields each AC cycle, shuttling reactive energy back and forth between the load and source. This reactive component (measured in kVAr) is often called the magnetising current or wattless energy; it’s essential for the motor’s operation but does not translate into mechanical output. The more inductive loads a facility has running, the more the overall PF skews lagging due to the accumulation of these magnetic field requirements.
• Leading Power Factor: If the current leads the voltage, the PF is leading. This condition is typical of capacitive loads. Purely capacitive circuits (like an unloaded capacitor bank) have current peaking before voltage. In real-world facilities, large leading PF is less common, but it can occur in scenarios such as:
(a) Over-corrected systems; when fixed capacitors or capacitor banks overshoot the needed compensation for inductive loads, especially during times when inductive loads are turned off, the net PF can turn leading.
(b) Lightly loaded electronic devices; many modern electronics (LED lighting drivers, computer power supplies, etc.) include input filter or smoothing capacitors. These devices can exhibit a net capacitive effect on the AC line, particularly if they draw current in short pulses charging capacitors. For instance, banks of LED lights or other devices with switch-mode power supplies may collectively present a small leading PF if they do not have active PFC circuits. Measurements on typical LED lamps have shown that cheap or small LED drivers can have a true power factor around 0.5–0.6 and often capacitive (leading) in nature. In one test, residential LED lamps had a PF of ~0.6 leading, meaning they were feeding a bit of capacitive reactive power back into the grid (albeit only a few VARs per lamp). When hundreds of such lamps are used (for example, in a large retail shop or office with a large amount of flat panel ceiling grid lights), their cumulative capacitive reactance can offset inductive loads or even produce a net leading PF for the site. Leading PF can be just as problematic as lagging PF for the network, as it also implies reactive power flowing (just in the opposite phase direction). For this reason, power companies not only want to prevent lagging PF from dropping too low, but also typically set an allowable limit for leading PF (often 0.95 leading on the upper side) to avoid over-correction scenarios.
Why does it matter if PF is lagging or leading? In either case, a PF significantly different from 1 indicates the presence of excessive reactive power in the system. Whether that reactive power is inductive or capacitive, it represents unused but circulated energy that strains the electrical infrastructure. In practical terms, both a heavily lagging PF (due to lots of inductive load) and a heavily leading PF (due to excessive capacitance) reduce power quality. They can cause voltage regulation issues (voltage drop or rise, respectively), increase losses in cables and transformers (since higher current is flowing for the same useful power), and reduce the overall capacity of the network to supply real power.
So, in short, both leading and lagging PF are the same thing just opposite sides of the curve, its just leading Power Factor is a lot less common because the loads that cause it are usually a lot smaller.
Impact of Poor Power Factor on Power Quality and Costs
A poor power factor has tangible effects on both the electrical quality and the cost of power for a facility:
• Strain on the Electrical Network: When PF is low, the current in the system is higher for the same amount of real power delivered. This higher current causes additional heating in conductors and equipment, and greater voltage drops across the network impedance. Over time, these effects can lead to premature aging of equipment (insulation on cables, transformer windings, etc.) and can make voltage less stable, especially under peak loads. For example, in the case of a motor with PF 0.75, the motor draws ~33% more current than it would at unity PF for the same mechanical output. That extra current means the upstream cable and contactor/overloads must be ~33% larger
in capacity, or else they run hotter and incur more losses. In New Zealand’s distribution networks, which include long rural lines in some areas, excessive reactive current can exacerbate voltage drop issues and reduce the effective reach of the network.
• Wasted Capacity and Efficiency Loss: A low PF means the infrastructure’s capacity is not being efficiently used. Generators, transmission lines, and distribution equipment have finite capacity (amps). If a chunk of that capacity is consumed by circulating reactive power, the system can deliver less real power than otherwise. It’s like paying for a bigger pipeline to carry a mix of useful fluid and useless foam (there’s the beer thing again!). This inherently reduces overall system efficiency. The line losses (I²R losses) in the system are higher with more current, so poor PF indirectly causes more energy to be lost as heat in the grid. Improving PF can therefore yield energy savings by cutting these losses and reducing the total current drawn. (It’s worth noting that while PF correction reduces losses in the distribution system, it doesn’t significantly reduce the real energy consumed by the load itself – the main savings on the customer side come from reduced billing penalties and possibly slight reductions in internal distribution losses within the facility).
• Power Quality Issues: Large reactive currents can interact with the network impedance to cause voltage fluctuations. For example, switching large inductive loads on can cause momentary sags, while switching large capacitor banks can cause transient over-voltages. A poor PF also often accompanies other power quality issues. Notably, many loads that cause leading PF (like uncontrolled rectifiers in electronics) also inject harmonics into the system. These harmonics distort the voltage and current waveforms, which can interfere with sensitive equipment and cause additional heating (more on harmonics later in the context of modern PFC equipment). In summary, a facility with poor PF may experience or inflict on the grid issues like voltage instability, flicker, and higher total harmonic distortion (THD), all of which are detrimental to power quality.
• Utility Charges and Penalties: Perhaps the most immediate impact for businesses in New Zealand is financial. A growing number of New Zealand electricity distribution companies (lines companies) impose reactive power or power factor charges on larger customers if their PF falls below a certain threshold (commonly 0.95 lagging). These charges are designed to incentivise users to correct their PF and thus reduce strain on the network. Typically, the charge is levied per kVAr of reactive power drawn in excess of what a 0.95 PF would require. For example, one major NZ distributor (Vector in Auckland) historically set a threshold of 0.95 – any reactive consumption above 33% of the real consumption (corresponding to PF < 0.95) incurred a penalty. Around 2013, Vector and other networks dramatically increased these charges: from a token $0.03 per kVArh to around $2.00 per kVArh, and later up to around $8.00 per kVArh. In practical terms, a site that used to pay only a few dollars a month in PF penalties suddenly faced thousands of dollars per year if they didn’t improve PF. Today, across New Zealand, many North Island networks and some South Island ones have standardised these reactive charges at roughly NZ$8–9 per kVAr per month of poor PF demand. For example, Powerco’s 2022 pricing schedule specifies a reactive charge of $7.00 per kVAr per month for installations with PF below 0.95. These charges can substantially increase an electricity bill. We can do a quick example to illustrate this. Imagine a manufacturing plant with a with a 500 kW pump running at PF 0.8 (which means they draw 500 kW and 375 kVAr; apparent power approx. 625 kVA). If they improved to PF 0.98, they would only
draw approx. 510 kVA, freeing up around 115 kVA worth of capacity. If they do not correct it, that extra 375 kVAr could incur a charge: at ~$8 per kVAr/month, this is about $3,000 per month in penalties (on top of paying for a higher kVA demand). Even half that level of reactive load could mean tens of thousands of dollars annually in avoidable charges. Moreover, many NZ commercial electricity contracts include peak demand charges measured in kVA. Therefore, a low PF not only triggers a reactive penalty, but also inflates the measured peak demand, because the apparent power is higher. So, sites with poor power factor can actually be “double charged” for this sin in the eyes of the Power dispensers! Once via direct reactive penalties, and again through higher demand tariffs.
• Compliance Requirements: Beyond charges, some network companies set explicit power factor requirements as part of their connection standards. For instance, a network may require that customers maintain PF within the range of 0.95 lagging to 0.95 leading at all times. If a site consistently operates outside these bounds, the utility might require corrective measures to be installed as a condition of continued service (especially for large industrial connections). These rules exist to maintain overall network health. The trend in NZ (and globally) is that as power systems get more optimised, tolerance for poor PF is decreasing – utilities either pass through the cost of poor PF or insist on correction. Notably, a few NZ lines companies that historically did not charge for PF (e.g. PowerNet in the lower South Island) have indicated they are now considering introducing such charges to curb “wasteful” demand on their networks. Yes, I said optimised, but really what I meant was, stretched to the point of beginning to break, patched up and then re-stretched.
Overall, the message is clear: improving your power factor can directly improve power quality and directly save money. It reduces unnecessary loading on both your internal electrical systems and the national grid infrastructure, aligning with New Zealand’s goals for efficient energy use. Once again, by efficient energy use, read trying to stretch our limited power capacity as far as we can.
The next sections discuss how power factor is corrected using various technologies.
How Power Factor Correction (PFC) Works
Power factor correction involves adding components to the electrical system that counteract the reactive effects of the load. The fundamental principle is simple: inductive loads (lagging PF) can be corrected by adding capacitance, and conversely capacitive loads (leading PF) can be corrected by adding inductance. In practice, almost all PFC in commercial/industrial facilities is about correcting a lagging PF (from motors, etc.) by installing capacitor banks. When switched on, capacitors draw a leading current that can supply the reactive energy needed by inductive loads, thereby relieving the supply from providing it. The goal of a PFC system is to continuously adjust the amount of correction so that the net PF seen by the grid stays near unity (typically a target of 0.98 lagging is used, as some slight lag is acceptable).
There are several types of power factor correction solutions used in New Zealand industry today:
Capacitor-Based PFC (Automatic Capacitor Banks)
The most common solution is the use of capacitor banks with an automatic controller. These are often installed at a facility’s main switchboard or distribution panels. A power factor controller monitors the site’s load in real-time (measuring voltage and current to calculate PF) and connects or disconnects capacitor steps as needed to maintain the PF within a desired band, typically above ~0.95–0.98 lagging. Each capacitor step is usually a three-phase capacitor or a group of single-phase capacitors, often combined with series detuning reactors if there are significant harmonics (to avoid resonance which is a whole other topic!). In operation, when a large inductive load (like a motor) turns on and causes PF to drop, the controller will sense the shift and switch in one or more capacitor steps to provide reactive power (leading VARs) to the system, thereby bringing the net PF back up. When inductive loads turn off or during light load periods, the controller will switch off capacitor steps to avoid over-correction.
Advantages of capacitor-based PFC units: they are simple, proven, easy to maintain and cost-effective. Capacitors offer a relatively inexpensive source of reactive power. For installations with fairly steady or predictably varying loads, a well-sized capacitor bank can maintain PF in the desired range most of the time. This translates directly into avoidance of network penalties and reduced apparent power demand. Also, capacitors have low losses, they draw only a small amount of energy (for dielectric losses) compared to the reactive power they supply.
Disadvantages/limitations: Traditional capacitor banks switch in discrete steps, so the correction is not perfectly smooth; the PF may still fluctuate between steps (e.g. hovering between 0.95 and 1.0). If the load changes very rapidly, capacitors (which are typically switched by electromechanical contactors or solid-state thyristors) may not respond fast enough to catch transient PF dips – very fast changes can also lead to short-lived over- or under-compensation. Another limitation is that capacitors only supply reactive power in one direction (leading). They are excellent for offsetting inductive (lagging) loads, but if your site ever goes net capacitive (leading PF), a fixed capacitor bank cannot supply inductive VARs (in fact it is the source of leading VARs). Because capacitors cannot correct a leading PF the usual strategy is simply to switch them off when PF goes leading. Additionally, capacitors can be stressed by high levels of harmonic distortion in the current (harmonic currents can cause overheating or resonance in capacitor banks). To mitigate this, detuned reactors are often used with PFC capacitors in environments with lots of harmonics (e.g. VSDs or large nonlinear loads). This adds to cost and complexity. Capacitor banks also require maintenance: over time, capacitors can degrade (losing capacitance or failing, especially if run hot), and contactors or fuses may need replacement. It’s generally recommended to have PFC units inspected yearly to ensure all steps are functioning and the capacitors are healthy. If a capacitor bank is accidentally left in a failed state (e.g. some steps not working), the site may fall back into poor PF and incur charges again. Therefore, while capacitors are a relatively low-tech solution, they are not “set and forget” forever, periodic tuning or component replacement is needed to keep them effective.
You also need to make sure you properly design and size a capacitor-based PFC system for the specific site’s load profile. Using or specifying (here’s looking at you, electrical engineers) an off-the-shelf unit without analysis can result in under-correction (PF still too low) or over-correction at certain times. For instance, if the capacitor steps are too large in size, the PF controller might overshoot and make the PF leading when only a small inductive load is on. On the other hand, if undersized (not enough kVAr), the unit will never achieve the target PF during peak loads. In New Zealand, there are specialized engineering firms and equipment suppliers that analyse a facility’s half-hourly data or conduct site measurements to tailor a PFC bank – this ensures the capacitor stages are well matched to the load increments and that harmonics are accounted for
(with detuning reactors if necessary). An appropriately designed capacitor PFC bank, installed by professionals, can typically maintain a site’s PF around 0.98 and pay for itself quickly through avoided penalty charges. (It’s often noted that the “wrong capacitor is worse than none at all,” emphasising the need for correct specification.)
Static VAR Generators (SVG) – Active Power Factor Correction
Static VAR Generators – also known as Active Power Factor Correction units or, if you speak American, Static Synchronous Compensators (STATCOMs). SVGs represent a more advanced solution for power factor correction and power quality improvement. An SVG is a power-electronic device (essentially a high-speed inverter system) that can generate or absorb reactive power on demand. It does not use large, switched capacitors or inductors; instead, it uses semiconductor switches to synthesize AC currents that are phase-shifted as needed to counteract the load’s reactive component. Think of it as a VSD drive working in reverse.
An SVG system continuously monitors the phase angle between voltage and current (as well as other factors like load harmonics or imbalance, depending on design). Using this information, it injects a current into the network that is either leading or lagging the voltage by 90° to supply the required reactive power (leading current to cancel a lagging load, or vice versa). The response time of modern SVGs is extremely fast, usually only a few milliseconds. For example, some units can correct to the desired PF within less than one cycle of the AC waveform, which is pretty damn quick! This real-time, stepless compensation means that an SVG can maintain power factor virtually at unity at all times, even during rapid load fluctuations or momentary transients. It also corrects both lagging and leading PF automatically: if a facility’s load goes capacitive, the SVG will sense the leading phase angle and start absorbing VARs (acting like an inductor) to bring the PF back to unity. Similarly, if the load is inductive, the SVG generates capacitive VARs.
One common non beer related analogy for an SVG is noise-cancelling headphones, but for reactive current. Just as the headphones sample the unwanted noise waveform and inject an opposite waveform to cancel it, the SVG measures the load’s reactive current and injects an equal and opposite reactive current, thereby cancelling out the net reactive component seen by the grid. The result is the source only needs to supply real power, with near-zero reactive demand (or whatever small bias is allowed as a setpoint, like 0.99 PF). Another big advantage of SVGs is that being inverter-based, they can also be designed to filter harmonics and even correct load imbalance. Many SVG products double as active harmonic filters, targeting distortion (typically the lower order harmonics like 5th, 7th, etc.) by injecting compensating currents. This can dramatically improve overall power quality: not only is PF corrected, but voltage/current waveforms are cleaner.
Key benefits of SVGs:
• Fast and Precise: They provide instantaneous, stepless reactive power compensation. This is ideal for facilities with rapidly changing loads (welding machines, large cranes or elevators, sawmills with big cutter motors cycling on/off, etc.). Traditional capacitor banks might be too slow or clunky for such loads, whereas an SVG tracks the changes in real time.
• Handles Leading or Lagging: SVGs can correct any type of PF continuously within their rating – from -1 to +1 as needed.
• No Switching Transients: Since it’s electronic and stepless, there are no switching surges or transients which sometimes occur when capacitor steps are switched. The output from an SVG ramps smoothly, avoiding voltage spikes.
• No Risk of Resonance: Large capacitor banks can interact with the system impedance and harmonic sources to create resonant conditions. SVGs, in contrast, do not pose that risk; they don’t contain fixed capacitors that could amplify certain harmonic frequencies. In fact, SVGs actively dampen potential resonances by consuming or supplying harmonic currents as needed.
• Improved Reliability and Monitoring: SVG systems typically come with digital controllers that allow monitoring of power quality, and they avoid some failure modes of capacitor banks (like leaking or exploding capacitors, burnt contactors, etc.). They do have their own maintenance considerations (cooling fans, capacitor banks in the DC link of the inverter, etc.), but overall, they can be very reliable if properly maintained.
Drawbacks of SVGs:
• Higher Cost: SVGs are more expensive per kVAr of compensation compared to simple capacitor banks. The power electronics and control systems add significant cost. Thus, while prices have been coming down, an SVG is often justified only in specific cases such as, where the utility penalties are extremely high and/or the load is too dynamic for capacitors, or where harmonics are a major issue. A 2017 industry commentary noted that fully active systems were becoming more accessible but remained very expensive and best suited for special situations. In 2025, costs have improved, but the rule of thumb is still that capacitors are cheaper for bulk VAR correction if you can tolerate their limitations.
• Efficiency: While quite efficient, SVGs do have some internal losses (because power electronics are never lossless). Typically, an SVG might have a small continuous power draw (perhaps a couple of percent of the kVA rating) to operate its electronics and due to switching losses. This is minor, but in energy terms a well-designed fixed capacitor has virtually no loss aside from dielectric heating.
• Complexity: The systems are complex and require skilled setup and sometimes tuning. If a fault occurs, repairs may require specialised technicians. By contrast, a blown capacitor or contactor in a conventional PFC unit might be serviced by a general electrician with readily available parts.
SVGs have been successfully used in New Zealand to solve challenging power factor and power quality problems. Such systems are especially valuable when a site has a mix of nonlinear loads (drives, LEDs, UPSs) and motor loads, as the SVG can tackle both issues (reactive power and harmonics) simultaneously.
In summary, a Static VAR Generator offers state-of-the-art power factor correction, acting as an active source of reactive power that keeps the system in perfect balance. Think of it as a PF correction “amplifier” that instantly compensates for whatever reactive component the loads create, ensuring the grid sees nearly pure resistive demand.
Hybrid PFC Systems (Capacitor + SVG Combination)
For some facilities, the optimal solution is a hybrid system that combines the cost advantages of capacitors with the performance of an SVG. In a hybrid PFC unit, large capacitor banks supply the bulk of the reactive power (particularly the steady-state or slowly varying VAR demand), while a smaller SVG module is integrated to “trim” the PF to unity in real-time and to handle any rapid fluctuations or lead/lag reversals. Essentially, the capacitors do the heavy lifting of supplying base reactive power, and the SVG provides fine-tuning and fills in the gaps, correcting any residual PF error and addressing issues that capacitors alone can’t (such as dynamic changes and harmonic filtering). This arrangement also reduces stress on the capacitor bank – since the SVG can quickly compensate for transients, the capacitors are not switched in and out as frequently, which can extend their life. The SVG can also prevent overshoot: if the capacitors alone would have pushed the system into a leading PF at some point (over-correction), the SVG can automatically absorb the excess VAR to keep the PF at the target (preventing a leading condition).
Who benefits from hybrid systems? Sites that have a moderate to large constant inductive load plus highly variable loads or intermittent events are prime candidates. For example:
• An industrial plant with big motor loads (compressors, pumps) that run continuously (or as base load), combined with sporadic operations like heavy crane lifts or large welding machines. The base VAR demand could be handled by capacitors, while the SVG tackles the surge when a welder strikes an arc or a crane motor rapidly accelerates.
• Large commercial buildings or hospitals that have substantial HVAC (inductive) systems alongside lots of electronic equipment (which might introduce harmonics or occasional leading PF). A hybrid system ensures you get the efficiency of capacitor correction for the HVAC’s steady VAR needs, and the SVG keeps the overall PF in line during any abrupt changes (like an MRI machine cycle or an elevator bank all starting at once) and filters out harmonics from the IT equipment or LED lighting.
• Facilities upgrading to LED lighting and VSDs for efficiency: these upgrades can create a mix of capacitive and inductive effects. For instance, a factory that swapped out all old fluorescents for LED fixtures might find their existing capacitor bank now occasionally leads the power factor at night when only lights are on. By adding an SVG to an existing capacitor setup, the system can absorb excess VAR at night (preventing leading PF) and still use the capacitors during the day when heavy machinery is on.
Essentially, a hybrid approach optimises cost and performance: you install just enough SVG capacity to manage dynamic conditions and fine control, while relying on cheaper capacitor kVAr for the base load. This often yields a lower overall cost than a purely active solution of the same total capacity, but with nearly the same performance benefits.
When designing a hybrid system, careful control coordination is required so that the capacitor steps and SVG work together without fighting each other. Typically, the SVG is set to maintain PF at unity and will only act on the residual after the capacitors have done their part. Some systems have integrated controllers that treat both the capacitors and the SVG module as part of one package, deciding optimal dispatch of each, while other systems combine a separate SVG/AHF with a Capacitor based system. For many sites, this hybrid strategy is the most economical way to achieve “perfect” power factor and clean power.
Conclusion
Power factor may be an overlooked aspect of electrical systems, but it has very real implications for efficiency, power quality, and cost. Particularly in New Zealand’s power market, where network companies are enforcing PF standards and levying charges for excessive reactive power usage. A facility with a poor power factor is drawing more current than necessary, wasting capacity in both its own electrical distribution and the grid’s infrastructure. This results in higher losses, potential voltage instability, and monetary penalties or demand charges that can cut into the bottom line. This isn’t likely to improve as demand for electricity in New Zealand continues to skyrocket while generation increases at less than a snail’s pace.
The good news is that power factor correction is a well-established and generally straightforward solution. By installing appropriate PFC equipment, whether traditional capacitor banks, modern SVG units, or a hybrid combination, businesses can align their voltage and current waveforms, bringing PF closer to unity (0.98–0.99 typically) and thereby minimising reactive power flow. The benefits include immediate cost savings on electricity bills (through reduced network charges and more available capacity), improved voltage stability, reduced losses and heating, and compliance with utility requirements. Moreover, advanced PFC solutions can tackle multiple power quality issues at once: for example, an SVG can eliminate PF penalties while also filtering harmonics and balancing phase loads, leading to a cleaner and more reliable power supply within the facility.
When implementing power factor correction, it’s important to assess the unique load profile of the site. No single solution fits all scenarios. Some sites may correct their PF sufficiently with a properly sized automatic capacitor bank. Others, especially those with highly fluctuating loads or significant nonlinear equipment, may find that investing in an active solution or a hybrid system provides better long-term value and performance. Facility managers and electricians should work with power quality specialists or engineers to interpret their power usage data (often available from smart meters or power logger surveys) and determine the most effective PFC strategy. Typically, improvements can be quantified in advance – one can calculate expected charge savings and sometimes even reductions in transformer loading or I²R losses. Many PFC investments in NZ have short payback periods, especially after the rise in reactive power charges, we have seen most units pay themselves off within 18 months of install.
In summary, maintaining a good power factor is a smart operational and financial move. In the context of New Zealand’s energy future, which emphasises efficiency, resilience, and reducing waste, power factor correction is a practical step that helps “clean up” the way we use electricity. By reducing the unnecessary reactive currents (whether caused by magnetising inductors or overzealous capacitors), we ease the burden on the grid and ensure that as much of the generated electricity as possible is doing useful work. For any business or facility that has not examined its power factor recently, this whitepaper serves as a call to action: check your electrical bills or network service agreements for PF indications or charges, measure your current PF, and consider the appropriate correction measures. The technology, from simple capacitor banks to cutting-edge SVGs, is readily available in New Zealand. With expert guidance, you can choose a solution that will improve your power quality, reduce costs, and contribute to a more efficient national grid. It’s an investment in electrical efficiency that pays for itself while enhancing the reliability of your power supply, truly a win-win for both the consumer and the provider.
TL; DR: Power Factor Correction in NZ – What You Need to Know
Power factor is a measure of how efficiently your site uses electricity. A perfect score is 1.0 (or 100%). Anything lower means wasted power.
Most commercial and industrial sites have a lagging power factor, caused by motors and other inductive equipment. This makes your site draw more power than it actually uses.
Some sites – especially with lots of LED lighting or electronics – can go the other way, ending up with a leading power factor from all the capacitors in power supplies.
A poor power factor (too far from 1.0 in either direction) leads to:
Extra charges from your electricity provider
More current flowing, which heats up cables and gear.
Reduced capacity in your system and on the network
Lower power quality and potential equipment issues
Power Factor Correction (PFC) fixes this by adding equipment that balances out your electrical load:
Capacitor banks are a cost-effective option for most sites with stable inductive loads.
SVGs (Static VAR Generators) are smarter, faster systems that handle fast changing or tricky loads (like welding, cranes, or lots of electronics)
Hybrid systems use both: capacitors do the bulk work, SVGs handle the fine-tuning and keep everything stable.
In New Zealand, most electricity networks charge penalties if your PF drops below 0.95. Those charges can be thousands of dollars a year – and avoidable with the right PFC gear.
Fixing your power factor improves efficiency, lowers your bill, and helps the grid run smoother. It’s one of the easiest ways to get more out of your existing electrical setup.
The Marketing Bit
OK, now you have successfully pored through nearly 6000 words on why power factor correction is an amazingly good investment not only for your site but for the good of our poor suffering energy grid. And even if you haven’t understood all of the technical stuff, hopefully you have learned that Power Factor isn’t just airy-fairy electrical wizardry, but in fact a tangible, measurable, and ultimately, fixable, fact of industrial electrical distribution.
This white paper was written by Andy Whitten from kVAr Solutions, who (I’m sure you’ll be shocked to discover), specialise in Power quality systems for the New Zealand electrical industry. We have been designing and manufacturing Power Factor Correction systems here in New Zealand since the 70s and are genuinely interested in the health of the electrical grid here. Seriously, don’t get me started on my thoughts, (Ok, ok, opinions) on how we do electricity in this country, or you’ll be here for another 6000 words! But if you are an electrician, engineer, business owner or site manager I seriously recommend you have a look at the Transpower consolidated live data page – it’s fascinating stuff. Just google “Transpower consolidated live data, or click here: https://www.transpower.co.nz/system-operator/live-system-and-market-data/consolidated-live-data . Oops sorry, tangents already! All I’m saying is if you have read this, I am assuming you have some interest in Power Quality too and if it happens to be because you
run a site with a large electrical load, you’re wondering what that $3000 line on your power bill every month is, or, you’re wondering what that weird big grey cabinet is, the one with the filters on the front that makes a bit of a humming noise and clicks occasionally, please get in touch.
We have some really neat power monitor data loggers we can use to analyse your site’s power consumption, and we’ll write you a report on what corrective action you might want to consider.
We’ll even come to site and service your existing units if they’re needing a birthday.
So, if you’ve got this far through this whitepaper, firstly I’m impressed, most people’s eyes glaze at the mention of phase shift and by the time I get to phase angle they’re visibly looking for angles of escape!
But, if you are reading this 6431st word and are wondering what to do next, get in touch and we can talk about Power Factor.