Power Factor Correction Requirements
What You Need to Know
Power factor measures how well your building uses its electricity supply. A perfect power factor is 1.0. Most commercial buildings sit between 0.75 and 0.85 without correction. In NSW, the law says you must keep it at 0.9 or above. Fall below that, and your energy bills go up - you pay higher demand charges for wasting capacity on the grid.
A power factor correction (PFC) system fixes this by adding capacitors to your main switchboard. They offset the reactive power drawn by motors, chillers, lifts, and lighting. Most systems pay for themselves in 1 to 3 years.
The Rules
- Your power factor must be at least 0.9 (NSW Service and Installation Rules, Section 1.10.11)
- Capacitors must comply with AS/NZS 3000:2018, Clause 4.15 - capacitors above 0.5 µF at up to 650 V must have a discharge path that reduces terminal voltage to 50 V or less after disconnection (Cl 4.15.3)
- In the Ausgrid network area, all PFC equipment needs Ausgrid inspector approval before you can switch it on (NSW Service and Installation Rules, Section 4.17.1)
- Energy distributors charge demand in kVA, not kW - a low power factor inflates your kVA reading and increases your bill
- After installing PFC, submit a Network Tariff and Threshold Change Application to reset your capacity charge - without it, the old charge can stick for up to 12 months (Ausgrid ES7, Appendix A, item 3B)
- Individual motor capacitor correction must not exceed the motor's no-load reactive power, to avoid self-excitation (AS/NZS 61000.3.6 / IEEE 18)
What This Means in Practice
Take a commercial office building with a 400 kW electrical load running at a power factor of 0.80. At that power factor, the building draws 500 kVA from the grid. The distributor bills you on the full 500 kVA.
Install a PFC system that lifts power factor to 0.95, and the same 400 kW load only draws 421 kVA. That is a 79 kVA drop in demand. At typical network demand charges of $8 to $12 per kVA per month, you save $7,600 to $11,400 per year.
To size the capacitor bank, use the standard formula:
For our 400 kW example at 0.80 going to 0.95: the multiplier is 0.421, so you need about 168 kVAR of correction. A supplier would round up to a 180 kVAR automatic panel with six 30 kVAR stages.
Most commercial buildings use automatic PFC panels. A controller measures the power factor in real time and switches capacitor stages on and off as loads change through the day. Fixed capacitors only make sense for constant loads like a single large motor.
If your building has variable speed drives, LED drivers, or other harmonic-generating equipment, you need detuned reactors in the PFC panel. Standard capacitors without reactors can resonate with harmonics and fail early. Detuned reactors (typically 7% or 14% impedance) block harmonic currents and protect the capacitors.
Key Design Decisions
Central Correction vs. Local Correction
Central correction puts one PFC panel at the main switchboard. It is cheaper to install and easier to maintain. Local correction puts smaller capacitor banks at each large motor or distribution board. Local correction reduces cable losses throughout the building but costs more and needs more maintenance.
Target Power Factor
Aim for 0.95 to 0.98 - not 1.0. Over-correction pushes the power factor into leading territory, which can cause voltage rise, equipment damage, and penalties from some distributors. A target of 0.95 gives you a safe margin and still captures most of the savings.
Standard Capacitors vs. Detuned Reactors
If total harmonic distortion (THD) at the switchboard is below 5%, standard capacitors are fine. Above 5% THD, fit detuned reactors. In a typical commercial building with VSD-driven chillers and LED lighting, THD often exceeds 5%. Measure first - a power quality logger running for 7 days will tell you.
Switchboard Space and Location
A 180 kVAR automatic PFC panel is roughly 800 mm wide, 2000 mm tall, and 500 mm deep. It needs to go in or beside the main switchboard room, with ventilation to remove heat from the capacitors. Allow 600 mm clear space in front for access.
Who Needs to Know What
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References
- AS/NZS 3000:2018, Electrical installations (known as the Australian/New Zealand Wiring Rules), Clause 4.15 - Capacitors
- NSW Service and Installation Rules, Section 1.10.11 - Power factor requirements
- NSW Service and Installation Rules, Section 4.17.1 - PFC equipment approval in Ausgrid network
- Ausgrid ES7, Network Price Guide - kVA demand tariffs and capacity charges
- AS/NZS 61000.3.6, Electromagnetic compatibility — Limits — Assessment of emission limits for the connection of distorting installations to MV, HV and EHV power systems
- IEEE 18, IEEE Standard for Shunt Power Capacitors
- Eaton, Power Factor Correction: A Guide for the Plant Engineer (SA02607001E)