In the initial part of this tutorial, we were able to calculate the size of the power factor correction capacitor bank required to improve the power factor of a plant from 0.75 lagging to 0.95 lagging. In this part of the tutorial, we shall be able to calculate the savings generated from the improved power factor.

Depending on the power utility company, the following values may vary.

Example : Utility Company A has the following charges.

Average Cost /khw : \$0.09 (Other costs such as demand charges are already integrated in this value)
Power Factor Charges:
Below 0.80 lagging : +5.00 % x Total Energy Consumption
Above 0.90 lagging : -3.75 % x Total Energy Consumption

As shown above, if a plant's power factor is within the 0.80 to 0.90 lagging, there is a minimal advantage of power factor improvement in terms of utility discounts. The savings saving will be on the improvement of the plant energy efficiency (we shall be dealing with this on the next tutorial).

The installed cost of a Power Factor Correction capacitor bank ranges from \$100 - \$200/kVAR.The price variation depends on so many factors beyond the scope of this tutorial.

Let us choose the upper value for purposes of this tutorial.

Installed Cost Power Factor Correction

Installed Cost = 100 kVAR kwh x \$200 / kVAR
Installed Cost = \$20 000

Note : The 100kVAR was taken from the previous tutorial Power Factor Correction - Tutorial

Without Power Factor Correction

Energy CostNO PFC = 125 000 kwh x \$0.09
Energy CostNO PFC = \$ 11 250.00
PF Charges : \$ 11 250 x (5.0/100) = \$ 562.50

Total ChargesNO PFC = \$ 11 812.50

With Power Factor Correction

Energy CostPFC = 125 000 kwh x \$0.95
Energy CostPFC = \$ 11 250.00
PF Charges : \$ 11 250 x (-3.75/100) = -\$ 421.88

Total ChargesPFC = \$ 10 828.12

The saving from the electricity billing per month with be

Total Savings = Energy CostNO PFC - Energy CostPFC Total Savings = \$ 11 812.50 - \$ 10 828.12 Total Savings = \$ 984.38

Using simple math, without considering interest rates, the Power Factor Capacitor bank will be paid for by the saving generated from the billing in 20 months.

This does not include the increase in overall plant efficiency due to the higher plant power factor.

Conclusion: Savings from power factor correction is tangible, notwithstanding your possible contribution to the reduction of green house gases due to the increase overall plant efficiency.