Power factor (PF) is the difference between the total pwr in an electrical circuit vs the effectiveness of the appliances that are using it. There are three things that make up PF. Apparent Power, Real Power and Reactive Power.
Apparent: is the total power that flows through a circuit.
Real: is the power that is effectively used by appliances in a circuit.
Reactive: takes up room in a circuit but it does not contribute to Real Power.
A purely resistive electrical circuit will have a PF of 1, this is perfect. If a circuit had a PF of 0.7 or 0.8 this could be considered poor. It might have a poor PF because it had motors or fluorescent lights in the installation. Motors contain inductors, and inductors create a lagging PF.
Visualising Power Factor

In the above image we can see a glass of beer. This is often used to help explain PF. We can see that the apparent pwr takes up the whole glass and is made up of real pwr and reactive pwr. Real pwr is something we can feel when we drink it, it contains body and substance. Whereas reactive pwr doesn’t give you as much body or substance, it’s just froth, but it still takes up room in the glass. So it’s obvious that we want more real pwr compared to reactive pwr in our glass to have a better drink (seeing as though we paid for the full glass), or in other words we want a more effective electrical installation.
Improving Power Factor

In this image we can see the PF represented in a triangle. If we had a perfect PF of 1, the apparent pwr would be on the same line and length as the real pwr and the reactive pwr would come down to nothing or zero , we would essentially just have a straight line. But seeing as though we do have some reactive pwr, this pushes the apparent pwr away from the real pwr and and lengthens it, creating more apparent pwr but the same real pwr. So to improve the PF we need to shorten or reduce the reactive pwr. This is done by either implementing capacitors or inductors in the circuit. If the circuit has a poor PF caused by lots of inductors (motors) then capacitors are used to improve the PF. If a poor PF is caused by appliances that are largely capacitive, then inductors are used to improve the PF.
To Recap
Power factor is a rating that determines how useful the power in a circuit is. The closer to 1 the better. Apparent power, real power and reactive power all make up PF. Real power is the the amount of power being effectively used by appliances in an electrical circuit.
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