Tool
Power factor penalty estimator
Estimate what operating below the billing threshold costs each month, and what correction would save.
A power factor penalty is estimated by comparing billed demand at the present power factor against billed demand at the tariff threshold, then multiplying the difference by the demand rate. Where the tariff charges reactive power directly, estimate it as the excess kVAR above the threshold multiplied by the kVAR rate.
Monthly penalty estimate
Use figures from an actual invoice. Rates vary widely by utility and country.
Estimate only. Utilities differ in whether they meter true or displacement power factor, whether the threshold is a ratchet or a straight line, and whether the reactive allowance is expressed against kW or kVA. Check the tariff sheet before quoting these figures to anyone.
Reading the output
The demand-charge figure is the difference between what you are billed now and what you would be billed at the threshold. It is not a refund — it is the avoidable portion of the current bill.
Where a reactive charge applies, the second figure is calculated on the kVAR above the allowance, typically taken as 50% of kW. That allowance exists because a plant at unity power factor would still need some reactive capability for motor starting, so utilities do not charge from zero.
Turning the penalty into a payback period
Divide the installed cost of the compensation by the monthly saving. Installed cost per kVAR varies more than the headline hardware price suggests, because switchgear, cabling, cooling and outage time all scale with the installation.
| Item | Typical share of installed cost | Note |
|---|---|---|
| Capacitor and reactor modules | 45–60% | Detuned versions cost 20–30% more |
| Controller and switching | 15–25% | Automatic control adds cost, saves on light-load risk |
| Enclosure and protection | 10–20% | Outdoor or corrosive environments push this up |
| Installation and commissioning | 10–25% | Depends heavily on whether the board is live |
A penalty of $1,700 per month against a $10,000 installation pays back in six months. A penalty of $200 per month against the same installation does not, and the honest recommendation in that case is to leave it alone.
Why the penalty sometimes survives correction
Two situations produce a correctly sized capacitor bank that changes nothing on the invoice.
The tariff meters true power factor. If the load is dominated by six-pulse rectifiers, the shortfall is distortion rather than phase shift. Capacitors cannot correct distortion. The plant needs filtration, or an active front end, and a capacitor bank may increase the harmonic current through resonance.
The penalty is assessed on a ratchet or a peak that the bank cannot track. If the billing demand is set by a 15-minute peak that occurs once a month, and the compensation is a fixed bank switched in only during production hours, the peak may pass uncorrected. Automatic control with a fast response, or a static var generator, closes that gap.
Want the payback modelled on your own tariff?
Send the invoice and the tariff sheet. We will show the avoidable portion, the correct compensation size, and the payback — including the case where the answer is that it does not pay.