In an AC circuit, power is used most efficiently when the current is aligned with the voltage.

However, most equipment tend to draw current with a delay, misaligning it with the voltage. What this means is more current is being drawn to deliver the necessary amount of power to run the equipment. And the more an equipment draws current with a delay, the less efficient the equipment is.

Power factor is a way of measuring how efficiently electrical power is being used within a facility's electrical system, by taking a look at the relationship of the components of electric power in an AC circuit. These components are referred to as Real Power, Reactive Power and Apparent Power:

• Real power (kW) — the work-producing power that is used to actually run the equipment
• Reactive power (kVAr) — the non-work producing power that is required to magnetize and start up equipment
• Apparent power (kVA) — the combination of real power and reactive power