Reactive power is electrical energy that flows back and forth in an AC circuit without doing any useful work. Unlike the electricity that lights your bulbs or runs your motor, reactive power shuttles between the source and the load, never converting into heat, light, or motion. It’s measured in volt-amperes reactive (VAR or kVAR), and while it doesn’t show up as useful output, every AC power system needs it to function.
Why Reactive Power Exists
In an AC circuit, voltage and current alternate direction many times per second. When you plug in a simple heater or incandescent bulb, voltage and current rise and fall in perfect sync. All the power delivered gets consumed as heat or light. That’s real power, measured in watts.
But most real-world electrical equipment contains components that store energy temporarily rather than consuming it. Motors, transformers, and fluorescent lighting all contain coils of wire (inductors) that build up magnetic fields, then release that energy back into the circuit moments later. Capacitors do something similar with electric fields. This energy that sloshes back and forth, never actually getting used, is reactive power. It doesn’t perform work, but without it, the magnetic and electric fields that make motors spin and transformers operate simply wouldn’t exist.
Real, Reactive, and Apparent Power
Any AC circuit has three types of power working simultaneously. Real power (measured in watts) is the portion that does useful work. Reactive power (measured in VAR) is the portion that sustains magnetic and electric fields. Apparent power (measured in volt-amperes, or VA) is the total power the source must supply to deliver both.
These three form a right triangle, sometimes called the power triangle. Real power is the horizontal side, reactive power is the vertical side, and apparent power is the hypotenuse. The relationship follows the same math as any right triangle: apparent power squared equals real power squared plus reactive power squared. This means a system carrying a lot of reactive power forces the source to deliver more apparent power than the load actually consumes, even though the extra energy isn’t doing anything productive.
How Power Factor Ties In
Power factor is the ratio of real power to apparent power. It tells you what fraction of the total supplied power is actually being used. A power factor of 1.0 (or 100%) means every bit of current is doing useful work. A power factor of 0.75 means only 75% of the supplied power is productive, with the rest cycling as reactive power.
Most utilities and engineers consider a power factor below 95% inefficient. In practical terms, low power factor means the wires, transformers, and generators in a system are carrying more current than necessary to deliver a given amount of real work. That extra current generates heat, causes voltage drops, and wastes capacity.
The Cost of Low Power Factor
For homeowners, reactive power rarely shows up on an electric bill. But for commercial and industrial customers, it can be expensive. Utilities structure their billing to penalize facilities with poor power factor in several ways.
Some utilities bill demand charges in kVA (apparent power) rather than kW (real power). Since low power factor inflates kVA relative to kW, every drop in power factor means more billed demand. A facility drawing 850 kW of real power with a power factor of 85% has an apparent power of 1,000 kVA. If the utility bills at 90% of kVA, that customer pays for 900 kVA of demand, 50 extra units compared to a facility with a power factor of 90% or better.
Other utilities charge directly for excess reactive demand in kVAR. One common tariff structure kicks in when reactive demand exceeds 35% of real demand, charging around $0.40 per kVAR for everything above that threshold. These penalties add up month after month for facilities running lots of motors, compressors, or other inductive equipment.
What Causes High Reactive Power Demand
Inductive loads are the most common culprits. Electric motors, transformers, welding machines, and induction furnaces all need strong magnetic fields to operate, and building those fields requires reactive power. In a typical industrial plant, motors alone can push the power factor down to 0.7 or 0.8 if left uncorrected.
The problem compounds as more inductive equipment runs simultaneously. Each device pulls reactive current from the supply, forcing cables and transformers to handle more total current than the facility’s real power consumption would suggest. This reduces the capacity available for actual productive loads and can cause voltage to sag, making motors run hotter and less efficiently.
Power Factor Correction
The most common fix is installing capacitors. Capacitors naturally produce reactive power in the opposite direction to what inductors consume. By placing capacitor banks near inductive loads or at a facility’s main electrical panel, the reactive current circulates locally between the capacitors and the motors rather than traveling back through the utility’s grid.
There are two main approaches. Individual capacitors can be wired directly to specific motors or machines, correcting power factor right at the source. Alternatively, banks of capacitors can be installed at the main service entrance or feeder level to correct the entire facility at once. Automatic switching systems adjust how many capacitors are active based on real-time demand, preventing over-correction that could cause voltage spikes.
The results can be significant. Correcting a facility’s power factor from around 70% to 95% can reduce apparent power by roughly 35%. According to Eaton, a power engineering manufacturer, that reduction translates into lower utility bills, freed-up system capacity, improved voltage, and reduced losses in wiring and transformers. Correcting to about 95% is the practical sweet spot, since pushing beyond that yields diminishing returns.
Reactive Power on the Grid
Reactive power management isn’t just a concern inside factories. The entire electrical grid depends on it. Transmission lines, transformers, and generators all interact with reactive power, and grid operators must keep it balanced to maintain stable voltage across the network.
Traditionally, large synchronous generators at power plants provided reactive power as a natural byproduct of their operation. Grid operators could adjust the output of these machines to inject or absorb reactive power where needed. For more targeted control, utilities deploy devices like static VAR compensators (SVCs) and synchronous condensers, large rotating machines that exist purely to supply or absorb reactive power.
The growth of solar and wind power has made this more complicated. Solar inverters and wind turbines connect to the grid through power electronics rather than spinning generators, and they don’t inherently produce reactive power the same way. To address this, U.S. federal regulations now require all newly interconnecting non-synchronous generators to provide reactive power within a range of 0.95 leading to 0.95 lagging at their connection point. As of January 2025, the Federal Energy Regulatory Commission has also prohibited utilities from charging generators for providing reactive power within that standard range, treating it as a baseline grid obligation rather than an extra service.
Leading vs. Lagging Power Factor
When engineers describe reactive power, they distinguish between “leading” and “lagging” conditions. In a circuit dominated by inductive loads like motors, current lags behind voltage. This is the most common situation in industrial settings and is called a lagging power factor. In a circuit with excess capacitance, current leads voltage, producing a leading power factor.
Neither extreme is desirable. A lagging power factor means the system is absorbing too much reactive power. A leading power factor, which can happen if too many correction capacitors are installed, means the system is generating excess reactive power and can push voltage above safe levels. The goal is to keep power factor close to 1.0, where real power and apparent power are nearly equal and reactive power is minimized.