Importantance of power factor in distribution systems
The significance of power factor lies in the fact that electric utility companies supply customers with volt-amperes (VA), but charge them for watts.
Power factors below 1.0 require a utility to generate more than the minimum volt-amperes (VA) necessary to supply the real power (watts). This increases the costs. For instance, if the load power factor is as low as 0.7, the apparent power will be 1.4 times the real power used by the load. Line current in the circuit will also be 1.4 times the current required at 1.0 power factor. Thus the losses in the circuit will be doubled. Alternatively all components of the system such as generators, conductors, transformers, and switchgear will be increased in size (and cost) to carry the extra current.
Utilities typically charge additional costs to customers who have a power factor below 0.9 to 0.95. Engineers are often interested in the power factor of a load as one of the factors that affect the efficiency of power transmission.
With the rising cost of power and concerns on the efficient power delivery, active power factor correction has become more common in consumer electronics. And in Europe, IEC 555-2 requires power factor correction be incorporated into consumer products.