The U.S. Department of Energy’s EERE Information Center receives a multitude of questions about the energy savings associated with installation of power factor correction capacitors for electric motors in industrial facilities. In fact, it seems that power factor is poorly understood by many people. This article highlights key questions from industrial customers, and seeks to set the record straight about what power factor correction can and cannot do.

Question: An equipment vendor claims that his devices can produce energy savings on the order of 10 percent. Is this true? Is it even possible?
Answer: Myths about power factor are sometimes exploited by marketers of power factor correction equipment. Misunderstandings often occur when marketers mislead prospective customers into thinking they are saving significant amounts of energy by doing “before and after” tests with just an ammeter. While power factor correction does reduce line currents supplied to low power factor loads, it does not result in a significant corresponding reduction in the load’s power requirements or annual energy consumption.

Q: How significant is power factor correction in industrial settings?
A: Power factor is low in industrial settings where most of the plant energy is used to power electric motors. It is lowest when the induction motors tend to be oversized and under-loaded. A lagging (less than 1.0) power factor causes some additional energy loss because more current is required – compared to an in-phase sinusoidal current – to deliver a certain amount of power. Correcting power factor can be an appropriate and cost-effective measure, but not because of energy savings.

Q: How much energy can be saved by installing correction capacitors?
A: Power factor correction does not save much energy – usually less than 1 percent of load requirements – but even that benefit depends upon how low the power factor is to begin with and how heavily loaded are in-plant distribution system conductors. Note that power supplied to your motor driven-equipment is proportional to Volts × Amps. Energy losses in your in-plant distribution system coincide with your voltage drop. If your transformer supplies power at 480 volts and the voltage at your motor terminals is 470 volts, you have a voltage drop of 10 volts, or approximately 2 percent of 480 volts. The total power loss in the in-plant distribution system upstream of connected load equipment seldom exceeds 2 percent of the load requirement.

The loss fraction saved through the installation of capacitors at the motor is:

If your original power factor was 80 percent, and the system power factor is raised to 95 percent following the installation of capacitors, then the resistance or I2R losses in your in-plant distribution wiring will drop by 29.1 percent. Multiplying (29.1%/100) × 2% yields an expected energy savings of 0.58 percent of the load requirement. If you correct power factor at the switchyard or plant service entrance instead of very near the inductive loads (e.g. motors), you do not reduce in-plant distribution system losses at all because the correction only happens on the line side (the upstream, utility side) of where the capacitors are tapped in.

Q: Under what circumstances are capacitor corrections warranted?
A: Despite the slight energy savings, correcting power factor can bring significant savings in energy bills when the utility imposes a low power factor penalty in their rate structure, as most utilities do for industrial customers. The simplest penalty is imposed through basing demand charges on kilovolt-amperes (kVA) instead of measured kilowatts (kW). Another penalty approach is to calculate a billable monthly demand charge that is equal to the measured demand times the ratio of the desired power factor (often 95 percent) divided by the measured power factor. How much you can save through installing capacitors depends upon your initial power factor, the level you correct to, motor horsepower rating and loading, and how the penalty charge is calculated by the utility.

Keep in mind that power factor correction reduces currents in conductors and transformers ahead of where the capacitors are installed. Simply correcting power factor does not change the current or operating condition of motors or other loads. Depending upon their location, installing capacitors can free up system capacity, and reduce voltage drop somewhat, but significant energy savings do not occur. The utility benefits because the current reductions decrease electrical energy losses in their transformers and transmission and distribution lines.

Q: How are power factor correction capacitors available?
A: Three-phase motor power factor correction capacitors are sold by kVAR at a particular voltage rating. Normally they are sold in a trio of three capacitors, which may or may not be packaged in a single enclosure. When power factor correction capacitors are to be switched with an induction motor, the maximum value of corrective kVAR should not exceed the value required to raise the motor’s no-load power factor to unity (1.0). Avoid overcorrecting into a leading power factor condition. NEMA Standard MG1 Part 14 offers the following warning: “In no case should power factor improvement capacitors be applied in ratings exceeding the maximum safe value specified by the motor manufacturer. Excessive improvement may cause over excitation resulting in high transient voltages, currents, and torques that can increase safety hazards to personnel and cause possible damage to the motor or to the driven equipment.”

Capacitor boxes often contain some surge suppression circuitry. Experts widely agree that surge suppression also saves virtually no energy. Yet, it may be highly beneficial in protecting valuable equipment if there are actually serious voltage spikes on the circuit.

Q: Should power factor be considered in the purchase of a motor?
A: Motors are generally loaded below their rating some or all of the time and an underloaded motor will operate with a power factor below its nameplate rating. However, with correction capacitors installed, the power factor of an underloaded motor actually improves as the load decreases because the capacitor continues to provide its full rating in leading kVAR. Some motor or motor-driven equipment purchasers attempt to minimize power factor penalty problems at the source by selecting motors that maximize both efficiency and power factor. This can be done when selecting common motor sizes if you have access to multiple manufacturers to ensure plenty of motor models from which to choose. DOE’s MotorMaster+ is an excellent tool for choosing from many hundreds of motors; power factor at full and part-load is listed for each motor.
The old slogan “buy for efficiency and correct for power factor” tends to still be valid for several reasons. Even with the most severe power factor penalties, a point more of motor efficiency tends to save much more money on the energy bill than a point of power factor improvement. A good recommendation is to shop for the best efficiency. Consider power factor in the purchase if you are choosing between two motors of equal efficiency. After identifying the motor to be purchased, select correction capacitors if your rate structure penalty or in-plant distribution system limitations necessitate improving power factor.

Additional Reading

  • Power Factor Correction: A Guide for the Plant Engineer (PDF 428 KB), July 2004. Download Adobe Reader. The information in this 26-page Eaton/Cutler-Hammer guide is very helpful. It covers topics like how much money you can save on your utility bill by eliminating power factor penalties, how to size capacitors, the pros and cons of potential capacitor locations (i.e. at the load or at a central bank), and power factor correction in the presence of non-linear loads like adjustable speed drives.

  • Exploring power factor myths,” Energy Services Bulletin, August 2004. This article discusses power factor myths in layman terms.

  • Industrial Power Factor Analysis Guidebook, Bonneville Power Administration, March 1995.

About the EERE Information Center
Through the U.S. Department of Energy’s EERE Information Center, you can access the full portfolio of Industrial Technologies Program (ITP) resources to help make your industry more energy efficient, productive, and competitive. The Center can help you find resources such as publications and software, or information about working with ITP and cost-sharing opportunities. The Center is also a resource that specializes in providing technical advice about motor, steam, process heating and compressed air systems.

EERE Information Center engineers and technical staff expertly answer a wide range of industrial efficiency questions, Monday-Friday, 6 a.m. to 4 p.m. Pacific Standard Time. The center also has access to industry experts around the country. Call the EERE Information Center at 877-337-3463, or go to for additional information.

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