Reasons behind low power factor (theoretical)

(Note that all these issues result in a change of reactive/ real power)

1. Inductive loading – 90% of the industrial load consists of induction machines (single and three phase). Such machines draw magnetizing current to produce the magnetic field and hence work at low power factor.
2. Variations in power loading – When the system is loaded lightly, the voltage increases and the current drawn by the machines also increases. This results in a low power factor.
3. Harmonic currents
4. A condition known as 3 phase power imbalance occurs, due to improper wiring or electrical accidents. This results in low power factor too.

Reactive power is utilized by giving rise to no useful work. Thus, we pay for the apparent power, but utilize only the real power. When you have a low power factor, you are not fully employing the electrical power you are paying for. Utilities often penalize customers for low power factor as an incentive to compensate for this inefficiency.