How power factor control can reduce your bills
How you can reduce your bills by knowing about power factor correction.
If your business uses more than 160MWh of electricity every year, then it may pay for you to look at improving your power factor.
What is power factor?
In an electrical supply, a mysterious thing called ‘power factor’ comes into play. Power factor is simply the measure of the efficiency of the power being used. So, a power factor of 1 would mean 100% of the supply is being used efficiently. A power factor of 0.5 means only 50% of the supply is being used, which very inefficient and wasteful. Typically a power factor correction unit will bring about reasonable savings in businesses that spend $100,000 or more a year and have a power factor of less than 0.8.
Power Factor Correction has the effect of reducing the dollar amount on the KVA line item, which is one of the largest cost items on electricity bills.
Breakers Country Club, NSW
Breakers country club is located in Terrigal on the NSW Central Coast. The club managers did not know if their bills were correct, how they were performing against budget, and what opportunities existed to reduce costs.
Breakers installed some power factor correction technology, which reduced the club’s energy use during peak demand periods. As we have explained in this step, peak demand charges can be one of the largest cost items in a commercial electricity bill.
By using the NRG Insight energy monitoring software, they were able to prove to their energy retailer that they had reduced their peak demand energy use. This enabled them to request a ‘demand reset’ from the energy distributor.
A ‘demand reset’ request is when the distributor is asked to review and potentially change the peak demand charge. In this instance, the request stopped Breakers from being overcharged and saved the club around $3,500 over a 12 month period.
The detailed energy consumption data provided by the NRG Insight software also enabled Breakers to achieve a one-off $15,000 annual saving in their electricity bill when they switched across to a new energy retailer.
Ken Pearson, the CEO of Breakers pointed to the cost saving benefits of monitoring energy use: “NRG Insight provides us with greater cost control of energy.”)[1]
Does the peak demand charge automatically lower when you reduce energy use in peak periods?
No. It’s a common misconception that lower energy use in peak demand periods will automatically result in reduced electricity bills. Even when a company has reduced their energy use at this time of day, in some locations the same peak demand charge can appear on electricity invoices for up to 18 months afterwards.
This is an area where energy monitoring devices and/or the services of an energy consultant can save you money.