This model captures the economics of power factor correction via installing capacitor banks upstream of inductive loads.
Specifically, these capacitors prevent power drops and unnecessary I2R losses by keeping voltage in phase with current, even when power is supplied to components such as motors, electric arc furnaces, LED lights, computing infrastructure.
In our base case scenario, a 10% IRR is derived from a capacitor bank costing $30/kVAR, reducing real power losses by 0.5%, and thus earning its keep through a combination of 8c/kWh electricity prices (75% of savings), $3.5/kW demand charges (15%) and a $20/ton CO2 price (10%).
Therefore rising power prices, demand charges and CO2 prices would all support greater deployment of capacitor banks.
Please download the data-file to stress test the economics….
Recent commentary: please see our report on capacitor banks.