Power factor correction: it does not reduce the energy you use.
This is the claim to test every time. Correction reduces apparent power — the kVA your network delivers — and it can remove a reactive-power penalty. It does not reduce the kWh your equipment consumes, because that energy was doing real work. So whether correction saves you anything depends entirely on how your bill is structured, and for a site billed on energy alone the honest answer is that it saves nothing at all.
Reviewed by the Mission Green commercial team · Updated August 2026
Three kinds of power,
and only one is energy.
Get this straight and most correction sales pitches answer themselves.
Real power
Power converted into actual work — rotation, heat, light. Integrated over time this is your kWh, and it is what your energy charge bills.
Reactive power
Power that shuttles back and forth building magnetic fields in motors and transformers. It does no net work, but the network still has to carry it.
Apparent power
The vector total of the two — what the network actually has to be built to deliver. Demand charges are usually levied on this.
Power factor is the ratio of real power to apparent power. A site at unity is drawing only what it converts into work. A motor-heavy site can sit well below that, drawing considerably more apparent power than the real power it uses.
Correction equipment — usually capacitors — supplies the reactive component locally instead of pulling it through the network. The motor behaves exactly as before. Your kWh does not change. What changes is the kVA measured at your connection point.
Which means the whole question is not electrical. It is: does your bill charge you for kVA?
When correction
genuinely earns its money.
There are real cases. They are narrower than the sales material suggests.
You are billed a demand charge in $/kVA. This is the main one. If your demand charge is levied on apparent power, cutting apparent power cuts the charge directly. On an annual-ratchet tariff, where a single peak half-hour can bill for twelve months, that effect compounds.
Your network applies a reactive-power penalty. These exist and are published. SA Power Networks lists an Excess kVAr incentive charge applied "in accordance with Power Factor requirements outlined in SA Power Networks' Service & Installation Rules", measured on the most recent regulatory year and applied to the upcoming one. If you are paying one, correcting to the required threshold removes it.
You are constrained at your connection. If poor power factor is consuming capacity you need for new plant, refrigeration or EV charging, correction can free headroom — and that can be far cheaper than a connection upgrade. The saving here is avoided capital, not a smaller bill.
When correction
saves you nothing.
If a proposal cannot show which line on your bill goes down, this is why.
If you are billed on energy alone, correction has nothing to reduce. Many smaller commercial sites are on tariffs with fixed supply charges plus $/kWh usage and no demand component at all. Correcting power factor on such a site changes the apparent power flowing to it and changes not one line of the bill.
If your power factor is already good, there is nothing to correct. Sites dominated by electronics, resistive heating or LED lighting often already sit close to unity. You cannot save a penalty you were never paying.
Correction does not reduce your kWh. If a proposal claims a percentage saving on your total energy bill, ask which component that percentage applies to. Real power is doing real work and correction does not reduce it. A claim of "X% off your electricity bill" from correction alone is a claim to check line by line before it is believed.
So what should
your business actually do?
Short version.
Read your bill before you take a quote. Look for a demand or capacity charge and check its unit. kVA means there is a case to investigate; no demand line means there probably is not.
Check whether you are being penalised for reactive power. It appears as its own line or as an excess kVAr charge. If it is there, that is the most direct saving available and it is easy to quantify.
Ask for the saving to be shown against your actual bill lines, not as a percentage of the total. The arithmetic is not complicated once someone is willing to do it in front of you.
Treat it as a separate decision from solar. Correction and solar solve different problems — one reduces apparent power, the other reduces imported energy. Bundling them into one payback number hides which is actually carrying the return.
Confirm against your own network's rules. The charges quoted here are SA Power Networks' published ones, used as a worked example. Power factor requirements and penalties vary by distributor.
Power factor correction:
your questions, answered.
No. Correction reduces apparent power (kVA) by supplying reactive power locally. The real power your equipment converts into work is unchanged, so the kilowatt hours your meter records for energy are unchanged. Any claim that correction reduces your energy consumption should be checked against the actual bill lines.
Through the way networks bill. If your demand charge is levied per kVA, reducing kVA reduces that charge. If your network applies a reactive power penalty — SA Power Networks publishes an Excess kVAr incentive charge applied under its Service and Installation Rules — correcting to the required threshold removes it. Both are billing effects, not energy effects.
Often not. Many smaller commercial sites are billed on a fixed supply charge plus energy usage with no demand component, and on those tariffs correction has nothing to reduce. It becomes worth investigating when you have a kVA demand charge, a reactive power penalty, or a connection capacity constraint.
Motor-heavy ones — workshops, manufacturing, refrigeration, pumping, older HVAC plant. Induction motors and transformers draw substantial reactive power, especially when lightly loaded. Sites dominated by electronics, resistive heating or LED lighting usually already sit near unity.
Networks set power factor requirements in their service and installation rules, and can apply charges where a site sits outside them. That is a connection-agreement matter with your distributor rather than a general legal obligation, and the requirements differ between networks, so check the rules that apply to your own connection.
They address different lines on the bill, so it is not really an either/or. Solar reduces imported energy; correction reduces billed apparent power. Model them separately. If someone presents a single blended payback for both, ask which one is carrying the return — that is usually the more interesting number.
Where these figures come from.
One distributor's published charges, used as a concrete example of how reactive power gets billed. Your network will differ — check your own tariff before acting on any of this.