Power factor is a notoriously difficult concept to grasp, but let’s try to break it down simply.
Let’s start with the basics. “Work” is what it sounds like – no tricks here. When a motor turns a shaft, it is doing work. Energy is used to do work.
But something else is needed before an electric motor will turn. It needs a little extra “oomph” to get started; a little extra encouragement to get off the sidelines and into the game. That extra something is called “reactive power,” which generates the magnetic field that gets the motor moving.
Reactive power is a type of power that can’t be measured in Amps or Watts. In fact, most people just pretend it doesn’t exist. But increasingly, utilities are charging industrial customers for reactive power because it does have significant effects on the grid.
Effects of reactive power
When a motor starts, it may take a split second to start turning, but the motor is already drawing something from the grid – something the utility needs to supply in the form of reactive power.
If the utility hasn’t built in enough buffer to handle these events, the grid can experience power quality issues which may damage other customers’ equipment. Specifically, they need to install devices called capacitors to avoid voltage swings in the grid. They also need extra generation and transmission capacity.
In short, utilities need to be able to handle lots of motors starting and stopping without impacting other parts of the grid too severely. And when you consider the size of some industrial motors, it’s easy to see why they’d want to charge for this.
What it means for your utility bill
Some utilities still don’t charge for reactive power, but many do.
Often, utilities set a power factor target for industrial facilities. If you use too much reactive power, it lowers your power factor, and you’ll see a surcharge on your bill. If you use less reactive power, you may receive a credit. (See here for a thorough explanation.)
Other utilities account for power factor by measuring demand in kilovolt-amperes (kVA) rather than kilowatts (kW). The kVA measurement is similar, but it accounts for reactive power as well as real power.
Still others charge for reactive power directly by adding a separate charge measured in kilovolt-amperes reactive (kVAR). It all depends on where you are – and if you have facilities in multiple regions, it can be very difficult to compare one location’s bills to another.
The value of a normalized view
Comparing electricity spend across facilities is simple enough. But because utility billing varies so widely, measuring true energy performance is no easy task.
To normalize the data across a portfolio, businesses first need to disaggregate energy use from demand charges, power factor penalties, and other fees (see Demand Management for Dummies). That’s what allows a business to compare sites in an apples-to-apples way.
To truly understand energy performance, industrial customers then need to normalize energy spend according to production data. That’s what allows managers to see their most energy-intensive products and processes so they can make intelligent decisions about where to focus efforts – or where they can comfortably shed load during coincident peak periods or demand response events.