While there are many reasons to correct poor power factor we find that in general a facility will more often than not correct its Power Factor for one or more of the following reasons:
To Reduce Utility Power Billing
Most if not all Hydro Utilities charge a penalty or surcharge for poor power factor. In a lot of cases this penalty can be quite substantial (20-40% of the Demand Charges plus high I2
R Losses). Therefore one of the main reasons for correcting your facilities power factor is to eliminate needless financial losses.
To Increase System Capacity
Improving the Power Factor releases system capacity and permits additional loads (motor, lighting, etc...) to be added without overloading the system. In a typical system with a .80P.F., only 800kW of productive power is able to be used out of a 1000kVA installed. By correcting the system to unity (1.0 P.F.), the kW = kVA. Now the corrected system will support 1000kW, versus the 800kW at the .80 P.F. uncorrected condition; an increase of 200kW of productive power.
Improved System Operating Characteristics
A good power factor (.95) provides a "stiffer" voltage, typically a 1-2% voltage rise can be expected when Power Factor is brought to +/- .95.
Improving Power Factor will also lower losses in the distribution system of the facility since losses are proportional to the square of the current.
Regardless of why you improve the electrical systems Power Factor it will provide a combination of all the things listed above.
Another factor which is becoming very important today but often overlooked is a facilities carbon footprint. It is estimated that for every kVAR of power factor correction installed you will reduce your carbon footprint by 100kg annually.