In an electrical installation, a load with a low power factor draws more current than a load with a high power factor for the same amount of useful power transferred. The higher currents increase the energy lost in the distribution system and require larger wires and other equipment. Because of the costs of larger equipment and wasted energy, your energy retailer typically charges commercial customers at a higher rate where there is a low power factor.
There are two scenarios causing power factor displacements – operating power factor and harmonic power factor. The first displacement is caused by any inductance in an electrical load, (such as a motor in your HVAC system) causing the delivered current to be out of phase with the supply voltage, while the latter displacement results from any non-linear switching, such as the case when using power semiconductor devices and rectifier circuits.
Fortunately, there are ways to correct sub-par operating power factors and greatly reduce or eliminate frequency harmonics to ensure higher cost efficiency of an operating electrical system.