The ROI of Power Factor Correction – A Whitepaper

Issues surrounding escalating production costs, energy efficiency and a trend towards kVA based maximum demand charges are driving mining companies to re-think how they optimise their electricity supply and distribution infrastructure.

Often located at the end of the grid and characterised by heavy start up loads, mine sites are particularly susceptible to power quality issues. These issues can interrupt production and drive up operational costs. Mines are also being targeted by electricity supply companies to address their power quality issues to meet electricity supply standards and connection agreement conditions.

Power quality equipment is increasingly being considered to alleviate problems associated with poor power quality, reduce kVA demand charges and avoid capital outlay when looking to increase capacity.

What is power factor?

Power factor is a measure of how efficiently electrical power is being consumed on site. The way a business manages their power and electrical infrastructure is important, as poor power factor can have a number of financial or operational implications.

While a power factor of 1 (or unity) is ideal, in most cases it is not economically viable. It is widely accepted that a power factor of 0.95 or higher is an efficient use of power.

Poor power factor can cause electrical losses and voltage instability in the system which can result in equipment overheating, motor start issues and loss of torque at the cutting face, causing costly damage or reduced life expectancy of production equipment as well as possible production downtime.

Power factor correction (PFC) systems compensate for some of the problems associated with the dynamic loads characteristic of mining networks. A PFC system will monitor and regulate a site’s power factor by energising optimally sized and designed capacitor steps to locally supply the required reactive power to connected loads.

Benefits of installing Power factor correction systems

  • Tariff savings – Reduces costs where tariffs are related to KVA maximum demand. These charges can often be a large percentage of an electricity bill, with some as high as 25% of a total electricity bill.
  • Capital avoidance – Reduce the loading on electrical equipment and therefore avoiding or deferring capital outlay on upgrading or purchasing new equipment.
  • Mitigation of network problems – Provide voltage stability which reduces or eliminates issues associated with voltage fluctuation such as difficulty with large motor start, low torque issues for cutting machines and starting fully loaded conveyers. Additionally, a PFC system can be designed to filter harmonic distortions which can cause premature failure of electrical equipment, nuisance tripping, breaching of connection agreements or impact the validity of Ex certifications of flameproof motors.


An underground coal mine in Queensland has a power factor of 0.8. The 66kV metered customer’s billing is partially calculated on kVA maximum demand and capacity charges with an Authorised Demand structure. The existing infrastructure features a 66kV /11kV transformer with 11kV switchyard, currently distributing to both the underground and surface operations.

One 11kV circuit supports an 11KV/415V transformer with several ventilation fans. Another 11kV circuit supplies the underground, including continuous miners.

At present the mine is experiencing motor start issues with their ventilation fans and loaded conveyers.

The mine is planning on expanding their operations to accommodate an additional continuous miner. To achieve this they have determined they will need to:

  • Install new, larger capacity cable for several kilometres underground to allow for increased electrical demand
  • Upgrade the 66/11kV transformer
  • Upgrade the 11kV/415V transformer

The mine investigated two options to achieve increased energy supply and mitigate operational problems.

Option A: Capital expenditure – installing new/ upgrading existing equipment

To cater for additional electrical capacity, the following upgrades are required:

  • Increase transformer capacity at the 66/11kV transformer by installing cooling fans
  • Replace the existing 11kV/415V transformer with one of larger capacity to support an additional vent fan
  • Upgrade cable size underground to support the electrical load from an extra continuous miner

An initial estimate of these total upgrades would require over $600,000 in capital expenditure.

There are no electricity bill savings from this project/option.

It is noted that Option A does not mitigate the existing operational problems with starting certain motors.

Option B: Installing power factor correction

The installation of the following two PFC systems will yield the same increase in energy supply capacity as the upgrades outlined in Option A, as well as mitigating the motor start issues being experienced:

  • Install a low voltage PFC system on the 415V side of the transformer ventilation substation
  • Install a medium voltage (11KV) PFC system in the underground drift

An initial estimate of these systems would require $650,000 in capital expenditure.

This project will deliver a reduction in electricity charges of $180,000 annually based on the existing tariff structure.

Business case comparison

The decision as to which project to proceed with is obvious by comparison:

Option A has a Capital cost of $600,000, but no reduction in Electricity Network charges.

Option B has a Capital cost of $650,000 and a reduction in Electricity Network Charges of $180,000 annually.

Additionally, Option B is delivering the capacity increase provided by Option A. The incremental capital for Option B is $50,000 more than for Option A. This means Option B’s incremental investment has a Return on Investment of 360% or 0.33 year simple payback taking into account the reduction in electricity charges of $180,000 annually.

Read and download the ROI for Power Factor Correction White Paper HERE, or view more White Papers HERE.