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AC power flow has the three components: Real Power, measured in Watts; Apparent Power measured in Volt-Amperes; and Reactive Power, measured in reactive Volt-Amperes (var). The Power Factor of an AC electric power system is defined as the ratio of the Real Power to the Apparent Power. For a detailed explanation see Wikipedia - Power Factor
Industrial users, who are familiar with tools that measure the energy efficiency of air flow are encouraged to review the definition of electrical power factor. Power factor scams depend on the assumption that "power factor" means what the English suggests. It does not. Please consider this leading air flow meter supplier who describe the science of precisely measuring, calibrating and sensing the power factor efficiency of air flows and thermal efficiency.
Power Factor is one of those subjects about which there seems to be a great deal of confusion and many misconceptions. The culprit is the the assertion that power factor = cos(Phi), Phi being the phase shift between voltage and current. While this is true under certain ideal conditions, there are many real-world instances where it is quite incorrect. This article will give you a basic introduction into power factor, and explain why cos(Phi) is not the whole answer.
The Basics If you connect a sinusoidal voltage source to a resistor, current will flow, power will be dissipated in the resistor and the resistor will heat up. The current is given by I=V/R and the power is given by P=I*V or P=V²/R. The voltage and current are the rms values.
Figure 1 shows the waveforms for this experiment. The top blue waveform is sinusoidal voltage. The voltage is 1V rms giving a peak voltage of 1.414V, The red waveform is the current. It is 1A rms, 1.414A peak. (If you are awake you will deduce that the resistor is 1Ohm). The green waveform is the instantaneous power, i.e. the product of voltage and current from moment to moment.
At the left hand vertical line the voltage and current are both at their peaks, so the power instantaneous power is: 1.414V * 1.414A = 2W
At the right hand vertical line we are at the negative peaks of voltage and current, so the instantaneous power is: -1.414V * -1.414A = 2W
It should not take too much imagination to see that the average of the power waveform is 1W.
Please follow this link for the complete article titled Power Factor: Dissipating the Myths published by David Stonier-Gibson of SPLat Controls. We thank him for the permission to publish this introduction!
Why does this matter? Power factors below 100% require a utility to deliver a higher volt-amperes (Apparent Power) in order to supply the Watts (Real Power) needed by a device. This additional volt-amperes increases both generation and transmission costs. Utilities typically charge additional costs to industrial customers who have a power factor below 85%, and offer incentives to customers for power factors above 85%.
In data centers a reduced power factor results in equipment drawing more amperes per circuit than if the power factor were at 100%. This increased inefficiency means fewer servers per circuit, and an increase in collocation circuit costs.
For businesses the calculations are more complicated. The electricity utility does not monitor the power factor of individual devices and circuits, it only monitors the net power factor at the building/company meter. A company needs to understand the aggregate power factor at their meter/s to understand the cost implications of power factor correction. An excellent starting point is to examine the utility bill for the amount being charged as "Reactive Power"
For consumers, there is NO charge for power factor inefficiencies. Consumers are charged for the Real Power (Watts) consumed only. ALL products that claim to save money by correcting consumer power factor are being deliberately misleading.
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