Power factor is the ratio of real power (kW) to apparent power (KVA). This ratio can be a value from 0 to 1, and it indicates how efficiently an AC circuit is using electricity, with a value of 1 representing high efficiency. The third type of power, called reactive power (KVAr), causes electronics to be inefficient and draws the ratio closer to 0 by creating a difference between real power and apparent power.

One of the most frequent topics that I encounter while talking with customers about energy monitoring is the importance of measuring and correcting power factor. In a practical sense, power factor is a ratio of the amount of electrons actually being used by a system divided by the amount of electrons charged to you by your utility. These two values are often very different, especially in commercial buildings where you see large and/or inefficient equipment. While power factor correction gets the majority of attention, other opportunities can provide a less expensive means of achieving efficiency and savings, like demand optimization.