Power factor improvement means the power factor has been made closer to 1. If a power station delivers energy to places where the load is significantly reactive (contains capacitative or inductive components) it is expensive for them because they deliver current which actually doesn't do any work. The cosine of the phase angle between voltage and current is the power factor.
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Effective Power = Volts x Amps x Power Factor
Power Factor ranges from 0 to 1. At a Power Factor of 1 the load is pure resistive and the current and voltage are exactly in phase. As the voltage and current get out of phase the Power Factor decreases and you reduce the power. Therefore, a Power Factor of 1 is most efficient.
Power factor is the ratio of the true power to the apparent power of a load, and corresponds to the cosine of the angle by which the load current leads or lags the supply voltage in an a.c. system.
Apparent power (in volt amperes) is easy to measure; it's simply the product of the supply voltage and the line current. To find the true power (in watts), however, the apparent power must be multiplied by the power factor.
A 'poor' power factor means that a load is drawing more load current than is necessary for a given energy consumption. This means that there are higher voltage drops and line losses in the supply system than there need be, and the generators need to supply more reactive power than need be. So the electricity company penalises its industrial (not residential) consumers, if the power factor of their loads falls below an agreed power factor, by imposing penalties on top of the basic energy charges.
Rated power factor
A wattmeter reads the true power of a load, regardless of its power factor.
Power factor is defined as the ratio of real power over total power. Total power is the vector sum of real and reactive power.
The power factor depends on the properties of the load, and if any power factor correction is done it has to happen at the load, so that the current in the transmission lines is reduced. Correcting the power factor at the sending end fails to address the problem.
A resistor doesn't have a power factor. However, if a circuit is pure resistance in nature the power factor will be one when a voltage is applied and a current flows in the circuit. The power factor is a measure of the relative phases of the current and voltage in a circuit.