What Is Power Factor? A Practical Guide for South African Businesses
Why Power Factor Matters More Than You Think
If your electricity bill seems higher than expected, power factor could be part of the reason. Most South African businesses don’t realise that they’re not just paying for the energy they use – they’re also being charged for inefficiencies in how that energy is delivered and used.
What Your Electricity Bill Doesn’t Show
Your utility bill reflects more than just how many kilowatt-hours (kWh) you’ve consumed. In many cases, you’re also being billed for apparent power demand (kVA) – the maximum amount of power your system draws from the grid in a 30-minute window. If your power factor is low, that means a significant portion of that power is not doing any useful work. It’s simply being wasted, and you’re still paying for it.
How Eskom and Municipalities Charge for Poor Power Factor
In South Africa, Eskom and most local municipalities penalise you indirectly when the power factor of your business is poor. These penalties are added to your bill in the form of Maximum Demand Charges, Network Access Charges, and Reactive Power Consumption Charges , depending on the applicable tariff.
Here’s what that means in practice:
You may be using a maximum of 800 kW of real power, but if your power factor is 0.8, you’re charged for a maximum demand of 1,000 kVA.
The extra 200 kVA is made up of reactive power – which doesn’t do any work but still counts toward your demand.
These penalties can increase your monthly electricity costs by 10%–25%. It’s an avoidable additional cost – and one that adds up quickly.
Power Factor Explained – Without the Jargon
Power factor is a simple way of measuring how efficiently your business uses electricity. It compares how much power you draw from the grid to how much of that power actually gets used to do work.
Let’s break it down.
Real Power (kW), Reactive Power (kVAR), and Apparent Power (kVA)
Real Power (kW) is the useful energy that powers your lights, machines, and equipment.
Reactive Power (kVAR) doesn’t do any “useful” work, but your equipment still needs it – particularly equipment such as motors and transformers.
Apparent Power (kVA) is the total power your system draws – a combination of real and reactive power.
You're billed based on apparent power, even though only real power does the work.
The Beer Glass Analogy
An easy way to understand this is to think about ordering a glass of beer:
The beer is your real power (kW) – the part you actually want.
The foam is your reactive power (kVAR) – it’s necessary in the process but doesn’t refresh you.
The full glass is your apparent power (kVA) – and that’s what you’re charged for.
You’d never want to pay for a full glass of foam – yet that’s what happens when your power factor is low.
Power Factor as a Ratio: How It’s Calculated
Power factor is calculated using this formula:
Power Factor = Real Power (kW) ÷ Apparent Power (kVA)
The result is always a number between 0 and 1. A power factor of:
1.0 means perfect efficiency – all your power is being used productively
0.95 is considered good
0.80 or lower is inefficient and often penalised
Phase Angle and cos φ (Cosine Theta) Explained
The power factor also relates to something called the phase angle – the difference between voltage and current waveforms in your system. This angle affects how much of the power you draw is actually doing useful work.
We express this relationship with cos φ (cosine theta):
φ (theta) is the phase angle
cos φ gives us the power factor
A small phase angle (closer to 0°) means better efficiency and a higher power factor. A large angle (closer to 90°) means your system is wasting more power.
Understanding the Power Triangle
The power triangle is a simple way to visualise the relationship between real power (kW), reactive power (kVAR), and apparent power (kVA). It helps explain how your electrical system’s efficiency is affected by the type of power your equipment draws.
Visualising the Relationship Between kW, kVAR, and kVA
Imagine a right-angled triangle:
The base represents real power (kW) – the power that does useful work.
The vertical side represents reactive power (kVAR) – the power needed to energise magnetic fields in motors, ballasts, electrical magnets, and transformers.
The hypotenuse represents apparent power (kVA) – the total power your business pulls from the grid.
The larger the reactive power component, the longer the hypotenuse, and the poorer the power factor.
Unity, Lagging, and Leading Power Factor
Unity Power Factor (1.0): Ideal condition. All the power drawn from the grid is used effectively. This happens when real power and apparent power are equal, and there's no reactive power.
Lagging Power Factor: Common in businesses with inductive loads like motors and transformers. These devices consume reactive power, causing the current to “lag” behind the voltage. This is the most common cause of poor power factor.
Leading Power Factor: Less common, but can occur in systems with capacitive loads. In this case, the current “leads” the voltage. While rare, this can also create inefficiencies if not managed properly.
How Vector Relationships Impact Efficiency
The relationship between these three types of power can be described using vectors. When reactive power is high, the angle between the real power vector and the apparent power vector increases. This means:
The power factor drops (cos φ becomes smaller)
More power is drawn from the grid than is actually used
Your system runs less efficiently and costs more to operate
Improving power factor shortens that triangle’s hypotenuse – making your system more efficient and reducing your electricity bill.
What Causes Poor Power Factor?
The problem starts with the type of equipment installed in your facility. Certain machines and devices naturally draw power inefficiently – and the more of them you have, the worse your power factor tends to get.
Inductive Loads and Common Culprits
Most businesses rely on inductive loads – equipment that uses coils or windings to create magnetic fields. These devices consume both real and reactive power.
The most common culprits include:
Electric motors (pumps, fans, compressors)
Transformers
Welding machines
Fluorescent lighting systems
HVAC units and refrigeration systems
These devices cause the current to lag behind the voltage, which results in a lower power factor. In simple terms, they draw extra energy that doesn’t actually do useful work.
Linear vs Non-Linear Loads
To understand more advanced power factor issues, it helps to know the difference between linear and non-linear loads:
Linear loads draw current in a smooth, consistent waveform. Even if they use reactive power, the power factor remains relatively predictable.
Non-linear loads, like variable speed drives (VSDs), LED lighting, and computers, draw current in sharp bursts. This distorts the waveform and introduces harmonics – unwanted frequencies that can disrupt your electrical system.
Harmonic Distortion and THD (Total Harmonic Distortion) Explained
Harmonics are high-frequency currents caused by non-linear loads. They distort your electrical waveform, increase energy losses, and reduce equipment lifespan.
The level of this distortion is measured as Total Harmonic Distortion (THD). High THD doesn’t just reduce your power factor – it also leads to overheating, equipment malfunction, and even compliance issues with Eskom or your local municipality.
In other words, poor power factor isn't just about motors and lagging current anymore. Modern electronics introduce a new layer of complexity that can only be solved with the right analysis and correction tools.
How Poor Power Factor Affects Your Bottom Line
A poor power factor doesn’t just look bad on a report – it directly impacts your electricity costs, equipment performance, and future expansion plans. Many businesses are shocked to learn how much they’re losing without even realising it.
Penalty Charges and Maximum Demand
In South Africa, Eskom and most municipalities charge penalties which can increase your electricity bill by up to 25% – and they're not always listed clearly, so you might not know you're being charged until it's too late.
A poor power factor affects your maximum demand, which is the highest amount of power your facility draws in a 30-minute window, during a particular billing month. A higher maximum demand leads to higher monthly charges, even if your actual usage doesn’t increase.
System Losses and Equipment Strain
A low power factor means more current is needed to deliver the same amount of useful power. This extra current causes:
Increased cable losses (wasted energy in the form of heat)
Voltage drops that affect sensitive equipment
Overheating of transformers and switchgear
Shorter equipment lifespan
In short, your entire electrical system works harder to do the same job – which means more maintenance, more downtime, and more unplanned costs.
Measuring Power Factor – Tools and Techniques
You can’t fix what you don’t measure. Whether you're trying to avoid penalties or just understand where your inefficiencies lie, measuring your power factor is the first step.
What to Check on Your Utility Bill
Start by looking for any line items labelled:
kVA demand
Power factor
Network access
Maximum demand
Reactive power consumption
If you don’t see power factor listed, that doesn’t mean you’re in the clear. Eskom and many municipalities bundle penalties into your demand charges. A sudden spike in these charges could be a sign of poor power factor.
Types of Power Meters and Analysers
To measure power factor accurately, you’ll need the right tools. These include:
Clamp meters with power factor functions – good for spot checks
Multifunction power meters – installed at distribution boards
Portable power quality analysers – ideal for diagnostic work and audits
For full visibility, many facilities install permanent power monitoring systems that track power factor and other metrics in real time, online.
Digital vs Analog Measurements
Digital meters are far more accurate and user-friendly than older analog versions. They typically:
Show real-time power factor values
Store historical data
Trigger alerts when values drop below acceptable thresholds
Analog meters can only provide rough estimates – and in many cases, may miss transient events that indicate underlying issues.
Advanced Monitoring for Large Facilities
Larger facilities with multiple feeds, generators, or renewable energy systems should consider:
Networked power analysers for each distribution point
SCADA integration for real-time control and visibilityCloud-based dashboards for energy managers and consultants
These systems provide the detailed insights needed to justify correction investments and track ongoing performance.
How to Correct Poor Power Factor
Once you’ve identified a poor power factor, the next step is to fix it. The right solution depends on your load type, variability, and facility size – but in most cases, it starts with the right correction equipment.
Fixed and Automatic Capacitor Banks
Capacitor banks are the most common and cost-effective solution. They work by providing reactive power locally, reducing the amount you draw from the grid.
Fixed capacitor banks: Best for steady loads like lighting or HVAC and pumping systems that don’t fluctuate much. They’re simple, low-maintenance, and affordable.
Automatic (step-controlled) capacitor banks: Ideal for variable loads. They switch capacitors on or off as needed to maintain a consistent power factor, even as your operations change throughout the day.
Active vs Passive Correction
Passive correction uses traditional capacitors and harmonic filters to compensate for reactive power. It’s effective for predictable inductive loads.
Active correction uses power electronics to inject the precise amount of reactive power in real time. This is better for dynamic or distorted loads, especially in facilities with significant harmonic content or highly fluctuating loads.
Static VAR Generators (SVGs) and Synchronous Condensers
For high-load or sensitive environments – like mining, manufacturing, or data centres – you may need advanced solutions:
SVGs: These fast-response systems continuously adjust reactive power using thyristor-controlled reactors and capacitors. They’re ideal for voltage-sensitive operations.
Synchronous condensers: These are large synchronous rotating machines that provide reactive support and stabilise voltage. They're used in large-scale utility and industrial applications where precision and resilience are critical.
When to Consider Hybrid Systems
No single technology fits every application. Many facilities benefit from hybrid systems that combine fixed capacitors for base load correction with active or passive systems for fluctuating loads and harmonics.
A qualified power engineering team can assess your load profile and design a system that matches your operational needs, maximises efficiency, and delivers a measurable return.
What You Could Save – Real-World Financial Impact
In South Africa, Eskom and municipalities often charge based on maximum demand – not just energy consumption. Poor power factor inflates this demand figure, pushing your bill up unnecessarily. Improving your power factor reduces your kVA demand, directly lowering these charges.
Power factor correction isn’t just a technical fix – it’s a financial strategy. The numbers speak for themselves.
Sample ROI Calculation
Let’s say your business has:
Real power: 500 kW
Apparent power: 625 kVA
Power factor: 0.80
Maximum demand cost: R300/kVA
That means you’re only using 80% of the power you’re paying for. If you correct your power factor to 0.95, you could:
Reduce your apparent power to roughly 526 kVA, a saving of 99 kVA
Lower your monthly maximum demand charges by R29,700
With the right power factor correction system, businesses often see an investment payback period of 6 to 18 months.
Typical Savings for SA Businesses
Most commercial and industrial clients save 10% to 20% on their electricity bills after implementing a power factor correction solution. In some industrial sectors like manufacturing, milling or cold storage, savings can exceed 25%, especially when demand charges are high or penalties are applied.
Before-and-After Case Study
A plastic components manufacturer was running at a power factor of 0.72. Their system kept tripping under load, limiting production.
After installing a tailored PFC system:
Power factor improved to 0.99
Capacity increased by 27%
All machines could run at once
Payback in under 3 months
Instead of upgrading infrastructure, they scaled production almost immediately.
Industry Applications – Where Power Factor Really Counts
While nearly all businesses benefit from improving power factor, some industries feel the impact more than others. These are sectors where equipment-heavy operations and strict uptime requirements make electrical efficiency a priority.
Manufacturing and Heavy Industry
Factories use large motors, welding equipment, compressors, and variable speed drives – all of which draw reactive power. Poor power factor in these settings:
Increases maximum demand
Triggers indirect penalties from Eskom and local councils
Can reduce equipment life due to poor voltage stability
Correcting power factor here not only lowers costs but helps stabilise the electrical system across multiple production lines.
Mining and Processing Plants
Mines run high-powered conveyor belts, crushers, fans, and pumps. These systems often run 24/7 and draw significant inductive loads. In remote areas, voltage stability becomes critical – and improving power factor reduces stress on generators and transformers, especially where backup systems are used.
Data Centres and Server Rooms
Data centres rely on uninterrupted power systems and a significant supporting cooling infrastructure which often has a poor power factor. Correction improves:
Equipment reliability
Load balancing
Energy costs, particularly in high-demand urban zones
Food Production and Pharmaceutical Sectors
These industries depend on refrigeration, HVAC systems, mixers, and automated production lines. These are all classic sources of low power factor. In addition, strict compliance and uptime requirements mean any strain on equipment due to voltage issues can disrupt production and lead to losses.
In all these sectors, power factor correction isn’t just about saving money – it’s about ensuring operational continuity and long-term equipment performance.
When Power Factor Correction Isn’t Enough
Power factor correction is a key part of energy efficiency but it’s not the whole solution. In some cases, improving your power factor might still leave you with high electricity costs or ongoing system inefficiencies. Here’s what else to consider.
Load Shifting and Time-of-Use Strategies
Even with a corrected power factor, you can still face high charges during peak times. Eskom and many municipalities apply time-of-use tariffs, where electricity costs more during certain hours.
Shifting non-essential loads or production to off-peak periods can:
Reduce demand charges
Lower your overall tariff rate
Flatten your peak load profile for better efficiency
This is especially useful for businesses with flexible production or HVAC cycles.
Equipment Upgrades and System Design Improvements
Some power factor issues are symptoms of outdated or oversized equipment. For example:
Motors that are too large for the job, run inefficiently
Old transformers may have poor power quality performance
Systems designed without harmonics in mind can amplify distortion
Upgrading to high-efficiency motors, right-sizing equipment, and redesigning the electrical layout can improve both power factor and total system performance.
Integrating PFC with Broader Energy Efficiency Efforts
Power factor correction works best when part of a coordinated energy strategy. Combine it with:
Lighting retrofits
Smart controls and automation
Solar integration and energy storage
By addressing both how much power you use and how efficiently you use it, businesses can dramatically cut costs and improve system reliability.
Choosing a Power Factor Correction Partner
Power factor correction isn’t a one-size-fits-all service. It needs to be tailored to your site’s load profile, business goals, and compliance requirements. Choosing the right partner is critical—not just for installation, but for long-term savings and reliability.
What to Ask Before You Sign a Service Contract
Before bringing anyone on board, make sure you understand:
What’s included – Does the proposal cover site assessments, equipment supply, installation, and commissioning?
Who’s responsible for compliance – Will the provider handle applications and communication with the utility or municipality?
What kind of support is offered – Will they provide monitoring, maintenance, repair and performance guarantees?
Is the system scalable? – Can it grow with your site if your energy needs increase?
Asking the right questions upfront prevents expensive surprises down the line.
Why Experience Matters with Municipal Compliance
A qualified service provider understands:
Local by-laws and supply agreements
Specific Eskom or municipal compliance targets
How to design power factor correction systems that meet those standards without overcompensating
This local knowledge can be the difference between saving money and getting hit with additional charges
How Alpha Power Solutions Delivers Long-Term Results
At Alpha Power Solutions, we’ve spent over a decade helping South African businesses reduce electricity costs through properly engineered power factor correction systems.
Our approach includes:
A detailed site assessment and load analysis
Customised system design using high-quality equipment
Professional installation and commissioning
Ongoing support, monitoring, and maintenance options
We also handle all utility communication to ensure your system meets the correct requirements from day one.
If you’re ready to reduce wastage, extend your equipment lifespan, and take control of your energy costs, we’re here to help.
Start Improving Your Power Factor Today
Poor power factor could be quietly costing your business thousands each year. The good news? You don’t have to guess where the problem is or how to fix it.
Use Our Free PFC Calculator
Our simple calculator helps you estimate how much a poor power factor could be adding to your bill. It’s quick, easy, and free.
Try our free power factor correction calculator.
Book a Site Inspection
A detailed site inspection is the first step to understanding your power usage and designing the right power factor correction system. We’ll assess your load profile, identify issues, and recommend a solution that fits your operations.
Speak to Our Team
Have questions about Eskom tariffs, penalties, or what type of system your facility needs? Our experienced team is ready to help. Contact us today.
