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PQ Services -Economic Benefits of Power Factor and Harmonic Studies

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  • PQ Services -Economic Benefits of Power Factor and Harmonic Studies

Many Power utilities in India are billing their industrial and commercial consumers based on Active Energy Consumption (Kwh) along with fixed charges and other charges. Kwh consumption when multiplied by the applicable tariff for the consumer will give energy charges payable by the consumer. The effect of reactive energy is considered through power factor penalty/ incentives which varies from state to state across India.


In Maharashtra state, the consumers are charged based on Kvah consumption combining Kwah & Kvarh, an extract from MSEDCL circular is attached for further information. The prime objective of Kvah based billing is to encourage the consumers to maintain near unity power factor to achieve energy loss reduction, improve system stability, good power quality and voltage profile.


Many industrial and commercial facilities can reduce their active energy (Kwh) and apparent energy (Kvah) charges by reducing the current depended wattage losses in their distribution system. The major factors that contribute to high wattage losses in a network is explained in this article. These wattage losses can be reduced by improving the power factor closer to unity and reducing the voltage and current harmonic distortion below 5%.


The average wattage losses in a typical industrial facility can be 15-20 % of total demanded power. This would mean substantial savings on Electricity bill charges depending on the Kvah or Kwh based Tariff structure and penalty/ incentives based on power factor or lag/lead reactive energy (Kvarh) consumption.


The Power factor value computed by utilities for the purpose of penalty/incentive is called Total Power Factor. The Total power factor has 2 components, namely Displacement Power factor and Distortion Power factor, as shown below.


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True/Total PF = Displacement PF * Distortion Factor


The distortion power factor is contributed by the harmonics in the network and reduction in harmonic levels can improve the total power factor to reduce the overall Energy cost.


The following list is a simplified overview of several of the more important loss factors in an industrial or commercial facility, including a broad range estimate of reasonable loss values attributable to each stated effect. Note that all these losses are current dependent and can be readily mitigated by any method that reduces facility current load.


Hysteresis Losses

Hysteresis loss is caused by magnetization and de magnetization of the core as current flows in the forward and reverse directions. Hysteresis losses increases proportional to frequency as the magnetic particles of the core tend to align with the changing direction of magnetic field. The continuous movement of the magnetic particles, as they try to align themselves with the magnetic field, produces molecular friction. The energy to accomplish this realignment of the magnetic domains comes from the input power and is not transferred to the secondary winding. It is therefore a loss and results in to heat.

  • Typical hysteresis losses as a percentage of Power Demand: 1% -2%

  • Eddy-Current Losses

    Eddy current losses are the result of faraday’s law. Any change in the environment of a coil of wire will cause a voltage to be induced in the coil, regardless of how the magnetic change is produced. The induced EMF will cause a circulating current called as Eddy current, proportional to the square of frequency based on the resistivity of the path of current. As in any other electrical circuit the power loss is the product of the square of the current times the resistance. In a similar manner to hysteresis losses, the eddy-current loss manifests itself as heat contributing to the maximum operating temperature limit of the equipment.

    Eddy current losses occur in protective circuit breakers, lighting ballasts, power supply transformers, magnetic motor starters, voltage reducing or isolation transformers, current overload relays, control contactors and relays, all motor windings, and even building wiring, when the wiring is in circular proximity to steel or iron structures, such as electrical enclosures, distribution panels, or terminal or distribution blocks.

  • Typical eddy current losses as a percentage of Power demand: 2 % to 3%

  • Skin Effect Losses

    When an AC Current is applied to a conductor, the current concentrates near the surface of the conductor. This is due to the alternating magnetic flux created by an alternating current interacts with the conductor, generating back EMF which tends to reduce the current in the conductor. The lines of force are higher at the center of the conductor and decreases at the edges making the effective area for current flow lesser increasing the overall resistance of conductor and higher watt losses.

    Harmonic loading increases skin effect losses by the square of the increase in frequency above nominal line frequency, and so is responsible for a substantial lost wattage in any facility with large populations of nonlinear equipment loads, such as VFDs, DC drives, rectifiers, induction heating or other arcing or switching power supply devices.

  • Typical skin effect losses as a percentage of Power demand: 2% to 4%

  • Proximity Effect Losses

    Proximity effect is similar to skin effect. With skin effect, the current distribution is affected by the conductor’s own magnetic field, increasing the losses. Proximity effect is caused by the mutual influence of multiple current carrying conductors. Their interaction causes uneven current distribution in the conductors, again increasing the losses

  • Typical proximity effect losses as a percentage of Power demand: 2% to 3%

  • Transformer Losses

    Transformers are normally designed and built for use at rated frequency and sinusoidal load current. A non-linear load on a transformer leads to harmonic power losses which cause increased operational costs and additional heating in transformer parts. It leads to higher losses, early fatigue of insulation, premature failure and reduction of the useful life of the transformer.

    The two primary types of transformer losses are core losses and load losses. The core losses occur in Transformer core by magnetizing current and mainly include Hysteresis losses and Eddy current losses. The former depends on the quality of core lamination and the later on thickness and resistance of the core used to construct the core. The Harmonic voltages are responsible for iron losses due to hysteresis

    Stray losses are also called iron losses. Stray losses are additional eddy current losses in the structural parts and within the winding produced by Leakage flux and causes hot spots in the winding.

    Transformer load losses occur when the Transformer is loaded and the loss is dependent upon the square of the magnitude of that current.


    There are three categories of load loss which occur in transformers:

    Resistive losses, often referred to as I2R losses. Eddy-current winding losses due to the alternating leakage-fluxes Stray losses in leads, core-framework and tank due to the action of load- dependent stray alternating fluxes.


    Resistive losses, as the term implies, are due to the fact that the windings cannot be manufactured without electrical resistance (at least, until commercial superconductors are successfully developed) and are therefore a “fact of life” which cannot be eliminated for the transformer designer


    The leakage-flux occurring in transformer windings is greatest at the winding ends, but is present throughout the entire winding body. Consequential eddy currents are set up that oppose the natural direction of current flow and greatly increase the transformer’s apparent AC resistance.


    Stray losses exist in all transformers, but present more of a problem on larger transformers, because the physical size of the leads and the currents they carry are greater.


    The harmonic currents flowing in Transformers cause an increases in eddy current loses and load losses whereas harmonic voltages are responsible for hysteresis losses. It is generally considered that the load losses increases at the square of THDi (Current THD) and core losses increases linearly with THDu (Voltage THD)

  • Typical transformer losses as a percentage of Power Demand: 2% to 5%

  • Line Losses

    In addition to I2R losses and dielectric losses, cables have other losses such as skin-effect and proximity-effect developed by magnetic induction. For single conductor cables, however, where conductors are not operating close to each other, proximity effect is negligible. Operating together in a typical industrial conduit enclosed distribution system, these various loss factors can sufficiently increase. The harmonic currents can further increase the apparent AC resistance to more than an order of magnitude above nominal DC resistance values.


    It must be noted that I2R losses occur in ALL distribution system conducting components, not only the cables.

  • Typical transformer losses as a percentage of Power Demand: 1% to 3%

  • In an industrial/ commercial facility, various equipment such as Motors, lighting systems, wiring, mechanical terminations, distribution panels, protective devices, transformers, switchgear, and all end of circuit equipment experience a variety of resistance increasing inefficiencies that combine to create high wattage loss.


    Identifying and calculating such loss components is a challenging engineering specialty.The Power quality experts at Jef Techno Solutions have extensive experience and knowledge of all the factors impacting the operating efficiencies of each of these components. Our Power Quality service team are equipped with state-of-the-art test and analysis equipment to conduct site evaluation of electrical system losses and recommend measures to reduce real current, reactive current and /or harmonic current and provide economic gain and rapid pay back to our valued customers.


    Extracts of MSEDCL Electricity Tariff, effective 1st September 2018 .

    The formula adopted by MSEDCL for computation of PF, which violates the formula directed by the Commission is reproduced as under.


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    MSEDCL has further issued following guidelines for implementation of the said new formula of PF, which is available on the web site of MSEDCL.


    a) If PF level is less than 0.90 then penalty shall be as per percentage given in MERC order.

    b) If PF level is greater than 0.95 and RKVAh lag consumption is greater than RKVAh lead consumption then PF incentives shall be given as per MERC order.

    c) If PF level is greater than 0.95 and KVAh Lag consumption is less than RKVAh lead consumption then incentives shall not be applicable.

    d) If the RKVAh lead reading is not available then old procedure of PF computation will be followed.


    As per the provisions of CEA (Technical Standards of Grid Connectivity) Regulation - Part IV dated 21-02-2007, it is mandatory for Distribution Licensees and Bulk Consumers to maintain PF above 0.95 so as to provide sufficient reactive compensation to their inductive loads. PF above 0.95 means it is for both lead and lag.