SOME COST IMPLICATIONS OF ELECTRIC POWER FACTOR CORRECTION AND LOAD MANAGEMENT

SOME COST IMPLICATIONS OF ELECTRIC POWER FACTOR CORRECTION AND LOAD MANAGEMENT BY HERCULES VISSER Dissertation submitted in partial fulfilment of the requirements for the degree Magister Philosphiae in Engineering Management In the Faculty of Engineering at the Rand Afrikaans University Supervisor: Prof. J.H. Pretorius Co. Supervisor: Prof. L. Pretorius May 2001

ACKNOWLEDGEMENTS I would like to thank my Creator for the ability and guidance He gave me during this study. Without His support, this work would not have been possible. What shall I render to the Lord For all His benefits toward me? Ps. 116:12 Then I would like to thank various people for their direct and indirect contributions to this research study: My wife, Ria, for her encouragement and support. Prof J.H. Pretorius and Prof L. Pretorious for the privilege to study under them and for their patience and wise guidance. "Everything should be made as simple as possible, but not simpler." Albert Einstein. 1879-1955

SUMMARY Presently, ESKOM is rated as the fifth largest utility in the world that generates and distributes electricity power to their consumers at the lowest price per kilowatt-hour (kw.h). As a utility, ESKOM is the largest supplier of electrical energy in South Africa and is currently generating and distributing on demand to approximately 3000 consumers. This represents 92% of the South African market. ESKOM was selected as the utility supplying electrical energy for the purpose of this study. ESKOM's objective is to provide the means and systems by which the consumer can be satisfied with electricity at the most cost-effective manner. In order to integrate the consumers into these objectives, ESKOM took a decision in 1994 to change the supply tariff from active power (kw) to apparent power (kva) for a number of reasons: To establish a structure whereby the utility and the consumer can control the utilisation of electrical power supply to the consumer. To utilise demand and control through power factor correction and implementation of load management systems. To identify some cost implications of electrical power factor correction and load management. Consumers with kw maximum demand tariff options had little or no financial incentives to improve their low power factor (PF) by reducing their reactive current supply. Switching to (kva) maximum demand will involve steps to be taken to ensure that the reactive component is kept to a minimum with maximum power factor.

ESKOM has structured various tariff rates and charges with unique features that would accommodate the consumers in their demand side management and load cost requirements, which, when applied, will result in an efficient and cost effective load profile. These tariffs are designed to guide consumers automatically into an efficient way of using electrical power, as it is designed to recover both the capital investment and the operating cost within two to three years after installation of power factor correction equipment. ESKOM's concept of Time-of-use (TOU) periods for peak, standard and off-peak times during week, Saturday and Sunday periods is discussed as load management. Interruptible loads can be scheduled or shed to suit lower tariff rates and to avoid maximum demand charge. The concept of load management will change the operation pattern of the consumer's electricity demand whereby the consumer will have immediate technical and financial benefits. In the last chapter of this dissertation, a hypothetical case study addresses and concludes on some of the technical and cost implications of electrical power factor correction and load management as a successful and profitable solution to optimize electrical power supply to the consumer. By implementing the above, ESKOM ensures that the consumer utilizes the electrical power supply to its optimum level at the lowest cost per kilowatthour (kw.h) generated.

OPSOMMING ESKOM is tans die vyfde grootste verskaffer in die wereld wat elektriese drywing genereer en versprei na kliente teen die laagste eenheidsprys per kilowatt-uur (kw-uur). ESKOM is die grootste verskaffer van elektriese energie in Suid-Afrika en ontwikkel en versprei elektriesie energie op aanvraag na ongeveer 3000 kliente wat ± 92% van die Suid-Afrikaanse mark verteenwoordig. Vir die doel van hierdie studie word ESKOM gekies as die verskaffer van elektriese energie. ESKOM se doelwit is om middele en stelsels te voorsien wat tevredenheid sal besorg aan kliente sodat hulle die beste en mees effektiewe koste-voordeel van elektriese verbruik kan geniet. Om te verseker dat die klient 'n deelname in hierdie doelwitte het, het ESKOM 'n besluit gedurende 1994 geneem om die voorsieningstariewe van aktiewe drywing (kw) na skynbare drywing (kva) te verander vir 'n aantal redes: Om 'n struktuur daar te stel waarby die voorsiener en die klient die bestuur en benutting van elektriese drywingstoevoer optimaal kan beheer. Aanvraag en ladingsbeheer kan benut word deur arbeids-faktor regstelling en die implementering van lading bestuurstelsels. Om sekere koste-implikasies van elektriese en arbeids-faktor regstelling en ladingsbestuur te identifi seer. Kliente met (kw) maksimum aanvraag tarief-opsies het min of geen finansiele voordeel om sodoende die lae arbeidsfaktor (PF) te verbeter deur die reaktiewe stroom lewering te

verminder. Die oorskakeling na kva maksimum aanvraag sal tot gevolg he dat versekerde stappe geneem sal word om die reaktiewe komponente tot a minimum te beperk met 'n maksimum arbeidsfaktor. ESKOM het verskeie strukture met tariewe en unieke kenmerke wat die klient sal skik in sy terrein van bestuurs-aanvraag en ladingskoste vereistes. Wanneer dit wel geimplimenteer word, het dit doeltreffende en koste-effektiewe ladingsprofiele. Hierdie tariewe is ontwerp om die klient outomaties na 'n meer doeltreffende metode van die gebruik van elektriese ladingsbestuur te lei, omdat dit ontwerp is vir beide kapitaal belegging en bedryfskoste herwinning binne twee tot drie jaar na die installering van arbeidsfaktor regstellingstoerusting. ESKOM se konsep vir ladingsbestuur word bespreek en dit behels die gebruik van periodes van tye van drywingsverbruik (TOU) waaronder spits-, standaard- en laagtyd verduidelik word, betreffende weekstye, Saterdae en Sondagperiodes. Onderbroke ladings kan geskeduleer of gekanselleer word sodat die lae verbruikstariewe in aanmerking kan kom en maksimum aanvraag kostes vermy kan word. Hierdie konsep van ladingsbestuur sal die bedryfspatroon van die klient se elektriese aanvraag verander en daardeur sal die klient onmiddellike tegniese en finansiele voordeel geniet. `n Hipotetiese gevallestudie word aangespreek wat van die tegniese en koste implikasies van arbeidsfaktor-regstelling en ladingsbestuur as 'n suksesvolle en winsgewende oplossing uitwys en sodoende die kragvoorsiening na die klient optimaliseer. Deur die

bogenoemde to implimenteer, verseker ESKOM dat die klient elektriese kragvoorsiening optimaal sal aanwend teen die laagste koste per kilowatt-uur (kw-uur).

TABLE OF CONTENTS ACKNOWLEDGEMENTS SUMMARY CHAPTER 1 ELECTRICITY SUPPLY IN SOUTH AFRICA PAGE Introduction 1 1.1 Historical background 1 1.2 Presently 2 1.3 Problem statement 3 1.4 The structure of the study 5 1.5 Objectives of power factor correction 6 1.6 Conclusion 9 CHAPTER 2 POWER FACTOR CORRECTION 2.1 Introduction 10 2.2 What is power factor correction (PFC) 11 2.2.1 Constant kw correction 12 2.3 The importance of power factor correction 14 2.4 Some technical disadvantages of a poor power factor 16 2.5 Some methods of obtaining a good power factor 17 2.6 The need for power factor correction 19 2.6.1 Technical reasons 20 2.6.2 Economic reasons 20 TOC 1

2.7 The impact of poor power factor on the utility 21 2.8 Factors affecting power factor levels 22 2.9 Power factor measurement 22 2.10 Capacitor Rating 25 2.11 Conclusion 25 CHAPTER 3 TARIFF STRUCTURES OF THE UTILITY 3.1 Introduction 27 3.2 The approach 28 3.3 Tariffs 29 3.4 Tariff options 30 3.5 Time-of-use (TOU) tariffs 31 3.6 Tariffs on power factor 32 3.7 Cost implications for time-of-use 34 3.8 Implication of tariffs 34 3.9 Two-part tariffs 37 3.9.1. Capital investment costs 37 3.9.2. Running costs 38 3.10 Conclusion 38 CHAPTER 4 LOAD MANAGEMENT 4.1 Introduction 40 4.2 Load management planning 41 TOC 2

4.2.1. Planning 41 4.3 Load Measurement categories 44 4.3.1 Load factor 44 4.3.2 Interruptible loads 45 4.3.2.1 Interruptible electric service 46 4.3.2.2 Appliance control 46 4.3.2.3 Demand limitations 46 4.3.3 Strategic conservation 46 4.3.4 Energy management 47 4.4 Time-of-use load scheduling 48 4.4.1 ESKOM's Megaflex / Miniflex / Ruraflex 49 4.4.2 ESKOM's night-save 51 4.5 Time-of-use maximum demand 52 4.6 The need for load shedding 53 4.6.1 Primary load shedding 54 4.6.2 Frequency load shedding 54 4.6.3 Manual load shedding 55 4.6.4 Maximum peak power demand shedding 55 4.7 Demand control 55 4.8 Conclusion 57 CHAPTER 5 CASE STUDY 5.1 Introduction 59 TOC 3

5.2 Problem statement 60 5.3 Case study 60 5.4 Approach to the case study 61 5.5 Power supply and improvements 61 5.6 Summary of the case study 63 5.7 Conclusion 64 CHAPTER 6 CONCLUSIONS AND RECOMMENDATIONS 6.1 Final conclusion 66 6.2 Recommendations 67 ANNEXURE TO THE CASE STUDY 7 Power supply and improvements 69 7.1 Power load distribution 69 8 ESKOM's tariffs and charges for 2001 70 8.1 Annual energy cost before power factor correction 71 8.2 Annual cost saving after power factor correction 71 8.3 Annual energy cost saving after power factor correction 72 8.4 Capital cost to improve power factor correction to 0.96 72 8.5 Pay-back time on capital investment 72 9 Load management (LM) 73 TOC 4

9.1 Annual energy cost before load management 73 9.2 Annual cost saving after power factor correction and load management 73 9.3 Total annual cost saving after load management and power factor correction 73 10 Compound amount of capital 74 10.1 Equal payment series with compound amount after power factor correction 74 10.2 Equal payment series with compound amount after load management 75 10.3 Grand total compound amount on capital saving 75 LIST OF FIGURES LIST OF TABLES BIBLIOGRAPHY TOC 5

LIST OF FIGURES AND TABLES FIG. NO. DESCRIPTION CHAPTER PAGE 2.1 Power vector for constant kw 2 12 2.2 Vector of active, apparent and reactive currents 2 13 2.3 Vector angle between kw and kva with lagging power factor 2 14 2.4 Wave-forms of leading power factor 2 23 2.5 Daily demand versus power factor 2 23 3.1 Comparison of Standard-rate 3 32 3.2 Vector for free charge loads 3 33 3.3 Increase of capacitance required as unity power factor is reached 3 36 4.1 Average cost as a function of load factor 4 45 4.2 Demand periods for weekdays 4 51 4.3 Demand periods for night-save 4 51 4.4 Typical demand profile without demand control 4 56 4.5 Typical demand profile with demand control 4 57 7.1 Power load distribution Annexure 69

8 ESKOM's tariffs and charges for 2001 Annexure 70 8.1 Factory plant working (TOU) schedules Annexure 70 8.2 Proposed change of (TOU) schedules for plant Annexure 70 TABLE NO. DESCRIPTION CHAPTER PAGE 4.1 Average time-of-use cost 4 49 8 ESKOM tariffs and charges for Megaflex Annexure 70

CHAPTER 1 PROBLEM STATEMENT AND OBJECTIVES INTRODUCTION 1.1 HISTORICAL BACKGROUND On 5 June 1873, the British Minister of U.K. decided to change the farm Vooruitzicht in South Africa to Kimberley, the place that some time ago delivered the greatest diamond of all time, the Star of Africa. Kimberley had a population of 20 000 and developed in a short period to the full status of a city. Steam trolley-bus services existed in 1881, which were replaced with electrical trolley-busses in 1902. South Africa has always been well advanced in the use of electricity. Kimberley had electric street lighting in 1882 before the City of London and only three years after Edison started supplying electricity from the Pearl Street Power Station in New York. The first electric reticulation system was commissioned in Kimberley in 1890, and Johannesburg Municipality began to supply electricity in 1891 [26]. Electricity supplies were provided in Pretoria, Cape Town, Durban, East London, Port Elizabeth, Bloemfontein and Pietermaritzburg by 1906 [43, 44]. "The need was recognized for a national electricity authority early in the 1920s and in terms of the Electricity Act of 1922 the Electricity Supply Commission (ESCOM, later changed to ESKOM) was formed by a notice in the Government Gazette of 6 March 1923" [26, 40]. Page 1

A cheap and abundant supply of electricity was provided by ESKOM throughout South Africa [42, 5]. In less than thirty (30) years, ESKOM owned and operated six electricity undertakings. Each undertaking generated and supplied power to the major load centres throughout the country via a transmission network system. For ESKOM to meet the rapid increase in power demand, they had to build seven new power stations between 1950 1961 [41, 43]. "South Africa's first nuclear station using sets of about 1000 MW rating was commissioned near Cape Town in 1982" [26]. Up to 1970, virtually all generation was done in coal-fired stations. The world's largest dry-cooling coal power station, Matimba, was finally commissioned in 1995 near Ellisras in South Africa. ESKOM is rated as the world's fifth largest utility in the supply of electrical power and the lowest cost producers of electricity in the world. (ESKOM's Annual Report 1999) [41]. 1.2 PRESENTLY South Africa has, until recently, been in a position where the utility supplying electrical energy to the different consumer sectors, had adequate capacity to supply its consumers. This situation is rapidly changing due to various factors. ESKOM has introduced a pilot project aimed at the development and introduction of a real-time pricing tariff to its consumers. There are a number of factors that affect the electricity cost to consumers, each of which can be managed by the consumer in order to reduce a consumer's electricity bill. Page 2

1.3 PROBLEM STATEMENT For many years, the gold mines and large power users enjoyed a special dispensation with respect to electricity in the previous ESKOM-era structure via kilowatt-hour (kw.h) tariff rate [25, 40]. The mines and other large consumers enjoyed kw maximum demand tariff as opposed to the kva maximum demand tariff for the rest of the country. A one-hour block demand integrating period was allowed to calculate the kw maximum demand in contrast to the half-hour block demand integrating period for the kva maximum demand tariff. ESKOM specified that consumers use the kw maximum demand tariff to maintain an average power factor for each one-hour integrating period to be greater than 0,85 (i.e. the kvar.h units consumed to be less than 62% of the kilowatt-hour units consumed, for each integrating period). This was seldom enforced on the consumers with no effect of any financial penalty [25, 40]. Many consumers on the kw maximum demand tariff option had power factors below the contractual limits as there was little or no financial incentive due to the special dispensation for improvement. Consumers on the half-hour kva demand tariff paid significantly more than consumers on the one-hour kw demand tariff for electricity. However, notification was given to all kw demand tariff users that their privileged position would be terminated. Financial opportunities were made available to change to a half-hour kva demand tariff and the simultaneous installation of power factor correction equipment [25]. Page 3

It was announced in an advertisement in the Business Day (11 January 1998) that "ESKOM proposed an amendment to standard prices and the promulgation of a charge for excess demand on Standard-rate and Night-save tariffs" [25]. With effect from 1 April 1998, ESKOM introduced charges for excess demand on kw demand consumers whose power factor was below 0,85, based on the kva and kw demand readings in the one-hour block interval during which the kw maximum demand was registered, as follows: "Excess demand = (kva demand x 0,85) (kw demand)". (1.1) It was then decided that active power (kw) demand consumers with a power factor at maximum demand of less than 0,85, would be financially penalised [25]. For the following four years, the Standard-rate and Night-save active power (kw) demand charges were progressively increased by 1,42% per annum above the average annual increase applicable to the apparent power (kva) demand tariff. The implementation of the above actions turned out that the apparent power (kva) demand tariff was more attractive to the consumers. This resulted that after a few years, kw demand consumers with a power factor greater than 0,85, benefit more by changing to kva demand tariff, with effectively no cost penalty, and with the opportunity of very significant cost savings in their electricity bill by installing power factor correction equipment" [25]. Page 4

Distribution power economy, a company in load management, offered a comprehensive tariff analysis and tariff impact study service. This included design, engineering, supply, installation and management of effective power factor correction and demand side management projects. In most cases, these projects can be fully financed by the savings in the electricity bill effected by the installation of the power factor correction equipment. This capital outlay on the power factor equipment was usually paid back within one to two years, which was indeed a good investment opportunity [25]. 1.4 THE STRUCTURE OF THE STUDY In the light of the above mentioned historical background and problem statement, this study will cover some cost implications of power factor correction and load management that are considered to be necessary to improve the utilisation of electrical power supply to the consumer. The following factors will be covered in Chapter 2, i.e. what is power factor correction, the relationship between active power (kw), apparent power (kva) and reactive power (kvar), the importance of power factor correction, technical and economical reasons affecting the power factor (PF) levels. The tariff structure in Chapter 3 will address the impact of the various tariff options for the consumer that are applicable to power factor conditions, time-of-use tariffs and two-part tariffs. Load management is the second factor in this study Chapter 4 will cover load management planning, categories of load management, time-of-use (TOU), load scheduling, maximum demand control are all factors when implemented and managed correctly. This should reduce the load demand to the Page 5

consumer and ultimately turn into financial savings. A hypothetical case study in Chapter 5 addresses and concludes the above mentioned methods and implications with cost analysis, conclusions and final recommendations. 1.5 OBJECTIVES OF POWER FACTOR CORRECTION Financial benefits in the installation of certain specialised equipment can be achieved in an industrial or mining installation in the following three areas: "Savings on electrical tariff charges. Enabling additional installed capacity without additional cost. Increased operational efficiency of electrical equipment, including reduction of maintenance costs" [24]. Any sizable electrical system is usually charged with a tow-part tariff by nature: "A unit charge based on the number of units consumed per month. A charge based on the highest half hour (or one hour) maximum demand over a monthly period" [24]. Currently, there are two methods in operation to measure maximum demand: kva (kilo-volt Amp), and kw (kilowatt). ESKOM prefers to measure maximum demand in apparent power (kva), and it is now mandatory for all new installations to be installed and charged on this basis. The active power (kw) method is in the process of being phased out, and certain financial incentives for existing installations to switch from active power (kw) to apparent Page 6

power (kva) basis have been offered by ESKOM. The apparent power (kva) of a load comprises two components: The kw or active component (which can be converted directly into useful work), and The kvar or reactive component (which cannot be converted directly into useful work) [24, 25]. The reactive component of electrical load indicates the measure of the power factor of an installation. The utilisation of items of equipment that has inductance and requires magnetic fields to operate (i.e. electric motors and transformers) tends to have higher reactive components. To improve the efficiency of the plant, system or electrical distribution network, the reactive component is to be kept to a minimum throughout the system. The power factor in a system ranges theoretically from zero to one. When a plant or system has a power factor of one, the operation has maximum efficiency. As the system current drops, it provides a clear evidence that the system's efficiency has improved when plant losses decrease and output increases, i.e. less motor burn-outs and the starting of motors improves. ESKOM' s new charge for maximum demand on installations (apparent power) is directly related to the power factor, as is shown in the following equation: [24] Power factor = active power (kw) (1.2) apparent power (kva) S 2 p2 ± Q2 Where S = apparent power P = active power Q = reactive power Page 7

When the reactive component decreases, the apparent power component will decrease, the power factor will increase and the maximum demand charge will decrease, which will result in a tangible cost saving. However, the maximum demand charge is not affected by the power factor for those installations still operating on active power (kw) maximum demand basis. Depending on the nature of the electricity usage by the operation, a strategy could be devised to reduce the maximum demand charge. Switching to apparent power (kva) maximum demand will involve steps to be taken to ensure the measurement basis of the strategy is and that the reactive component is kept at a minimum, with maximum power factor [8, 24, 25, 40]. Various methods are available to ensure that a high power factor of 0,98 to 0,99 is maintained during plant operation. This will require the correct design and installation of specialised equipment for the purposes of power factor correction. The operational efficiencies of the installation will also enhance the importance and attractiveness of such power factor equipment [24]. Page 8

1.6 CONCLUSION Power factor correction with its attendant cost savings both in the short and long term are an issue, which should be investigated thoroughly by all managers who are serious about improving their financial performance. The system to perform a complete service analysis in the area of power factor correction is available from preliminary investigation through to design, supply and implementation. To reveal the possible cost savings and pay-back period, preliminary sophisticated measuring and reporting facilities could be used and followed by a more tailored design, manufacture, installation and maintenance plan. Page 9

CHAPTER 2 POWER FACTOR CORRECTION 2.1 INTRODUCTION ESKOM changed the power supply tariffs from active power (kw) to apparent power (kva) in 1994 and introduced a maximum demand tariff that aims at forcing the consumer to improve the power factor to 0.96. Eric Granger [5] states that power factor correction is a method of using alternating current in the most economic fashion. It can reduce current, reduce losses and, as a possible consequence, reduce electricity charges. It is a method ensuring that the voltage and current remain substantially in phase with each other, producing the optimum power [5]. This chapter will cover the following aspects of power factor correction: What is power factor correction [4]? Constant active power (kw) correction. The importance of power factor correction [5]. Some technical disadvantages of a poor power factor [3]. Some methods of obtaining a good power factor [3]. The need for power factor correction [1]. The impact of poor power factor on the utility [1, 5]. Factors affecting power factor levels. Page 10

Power factor measurements. 2.2 WHAT IS POWER FACTOR CORRECTION? All electrical operational plants comprise two kinds of current, namely active current and the reactive component. These components effect the power factor Cos 4). The definition of power factor as stated by Theodore Wildi is "the power factor of an alternating current circuit is the ratio of the active power P to the apparent power S, given by the equation; Power factor = P / S = Cos 4) (2.1) Where P = active power (W) S = apparent power (VA)" [6] The active current (or working) is the current that the equipment requires for useful work, while the reactive current is the wattless current that is produced by different types of loads. W.G. Hutcheon defines that the power factor may be expressed as the ratio of working current in a circuit to the total current in that circuit, and its value is exactly equal to the ratio of active power (kw) or the working power to the total apparent power (kva) [4]. Power factor = Iw = active power (kw) = Cos (2.2) It apparent power (kva) Where Iw = working current = active current It = total current = apparent current Page 11

2.2.1 Constant active power (kw) correction If static capacitors are used to correct a power factor from Cos 4)1 to Cos 4)2, the apparent power (kva) diagram is as in Figure 2.1. P kw Q kvar Figure 2.1 Power vector diagram for constant active power (kw POP Cos 4 = active power (kw) apparent power (kva) OA = kva of load before correction. OD = kw of load. DA = kvar lagging before correction (This indicates an inductive load). OB = kva of load after correction. DB = kvar lagging after correction. AB = the required leading kvar. = DA DB = OD (Tan (I) 1 Tan 4) 2)- [4, 8, 10]. Page 12

The total current required by a plant comprises two kinds of currents, namely working current (in phase with the voltage) and reactive current (90 lagging the voltage). The former is the current that is converted by the equipment into useful work (active current), and the latter is the current that is required to produce the magnetic flux necessary for the operation of induction equipment, and is named the magnetising current (reactive current) or wattless current. The working current flows in phase with the voltage and the inductive reactive current lags the voltage by exactly 90. The total current and the reactive currents are vectorially represented in Figure 2.2 and Figure 2.3. Active current l w Voltage Reactive current I t Apparent current I t Figure 2.2 Vectors of active, apparent and reactive currents 1101 The vector diagram, as indicated in Figure 2.3 represents the working current (Iw) and the reactive current Ir. The total current is defined as follows: It = ir 2 (2.3) The power components in terms of voltage and current components are: Apparent power (kva) = V(kV) x It (total current in It) Active power (kw) = V(kV) x Iw (working current in Iw) Reactive power (kvar) = V(kV) x Ir (reactive current in Ir) Page 13

NOTE: Voltage and current values are root mean square (RMS) values. From the vector diagram, the power factor may also be expressed as the ratio of working current in a circuit to the total current in the circuit [5, 45, 49]. Figure 2.3 Vector angle between active power (kw) and apparent power (kva) with lagging power Factor 110] 2.3 THE IMPORTANCE OF POWER FACTOR CORRECTION Without adequate power factor correction, any industrial load can draw as much as twice the current that is required. This means that a large element of apparent current is drawn from the supply, causing losses in the distribution cables and equipment, etc. These losses have a great impact on the sizes of cables and system equipment that will influence the capital lay-out of the plant [5, 20]. By improving the power factor, the reactive current component will be reduced, which should have a cost saving for the consumer [46]. In 1998, ESKOM undertook to lead the way in energy conservation by replacing the biggest commercial office lighting development in South Africa at Megawatt Park. ESKOM modernised, standardised and upgraded the efficiency of the office lighting, resulting in improving the system's power factor, thereby maximizing the economic benefit of the power usage [2]. Page 14

The purpose was to reduce the reactive power costs of Megawatt Park enough to compensate for the additional capital outlay [2. 4, 5]. "The improvement had the following advantages: Reduce energy consumption figures kilowatt-hour (kw.h). Lower contribution of the lighting installation to the total building maximum demand apparent power (kva). Correction of the lighting's power factor to 0.96. Flicker free fluorescent lighting. Lighting levels continuously within the range specified. Longer lamp life. Lower lamp lumen depreciation over lamp life time. Reduced maintenance cost. Better colour rendition. Reduced noise levels associated with the lighting installation. Reduced heat load to building air conditioning. Improved productivity of building users" [2]. The cost to upgrade the lighting at Megawatt Park was in the region of R3.7 million. The energy cost saving per year was approximately R820 000, with additional maintenance savings of R40 000. The power kilowatt-hour (kw.h) annual saving resulted in approximately R5,5 million capital, which was paid back over four years [I, 2, 52]. From this example, it is clear that power factor correction offers an obvious and immediate cost benefit to consumers who are charged on apparent power (kva) demand with improved power factor system [2, 5]. Page 15

In South Africa, electricity power tariff charges vary across the country due to area and point of supply, i.e. domestic loads will be less costly to supply than an industrial township or agricultural land. Industrial sites are measured and charged with a maximum tariff charge because the amount of inductive equipment working from the power supply is more exposed to power factor correction system due to the apparent current factor (kva). Most of the fluorescent light fittings are equipped with power factor correction capacitors, whereas induction motors and transformers, which are uncorrected, contribute towards poor power factor values [4, 5, 52]. Fluorescent lights in use represent a steady load, because they are fitted with capacitors in the factory and often this installation tends to be forgotten. 2.4 SOME TECHNICAL DISADVANTAGES OF POOR POWER FACTOR The most obvious drawback for a load of low power factor is that the current necessary is greater than for the ideal case of unity power factor. A low power factor will result in low voltage regulation on a transmission line and expensive appliances, i.e. step-up transformers might be needed to ensure that the end-voltage regulation meets the sending end voltage. As induction motor torque is proportional to the square of the applied voltage, a large sudden fall in the voltage could cause the motor to come to a halt [3, 49]. The amount of active power (kw) is not affected by the power factor, but it will be less than the apparent power (kva) capacity of the central station that is affected by the value of the power factor. Although power generators may be Page 16

fully loaded from an output point of view, the load may still be in demand for more current as the generators will not be delivering their full load of true power [3, 49]. 2.5 SOME METHODS OF OBTAINING A GOOD POWER FACTOR "The obvious method is to use, wherever possible, apparatus which has good power factor" [3]. The installation of a capacitor has the effect of decreasing the current taken from the supply but does not decrease the excitation current actively circulating round the capacitor-motor circuit. The current flowing through the capacitor will lead the voltage by 90. The best position for a capacitor is, theoretically, as close as possible to the motor, directly across the motor terminals. This will allow the use of a smaller size of feeder owing to the reduced current taken from the supply. The capacitor should be individually connected to a motor and controlled by the same switch as the motor so that it is brought into service when required. Group and block connection of capacitors requires some method of control as capacitance must be taken out of service when not required. Automatic control is the best type of control. Most of the reactive power can be produced by capacitors installed in parallel with the motor, either as the motor terminals or as starter terminals. When dimensioning the cable to the capacitor, fuses or backup circuit breakers protect the supply cable and the motor. Therefore, the capacitor cable must be rated such that it is protected by a short-circuit device. When setting any over-current relays, the effect of the capacitor is to reduce the current and this must be taken into account. Page 17

It is sometimes possible to correct power factor by means of a common capacitor, such as discharge lamps controlled by a three-phase contactor. Therefore, it does not warrant the installation of many small capacitors due to the higher cost per reactive power (kvar), and the cost of installation and possible cable with glands. A good option would then be that of a centralised power factor correction system, connected to the main distribution board. The reactive power regulator controls the switching of the capacitor steps according to the varying reactive power requirements in an automatic capacitor bank. Inductive and capacitive operating limits for the regulator are set and the amount of reactive power in the system is maintained within these limits, which would diminish problems of over-compensation [48]. Care must be taken in rating cables and feeder circuit breakers connecting power factor correction equipment to the distribution board because capacitors draw a constant current at constant voltage with no diversity factor or load variation, as is the case with other loads, such as motors driving compressors. Capacitor reactive power (kvar) is proportional to the square of the applied voltage and changes in voltage significantly increase the current drawn by the capacitors. Three-phase induction motors are normally supplied uncorrected, which will contribute towards poor power factor figures. Items representing a varying working load, e.g. induction motors, may need a degree of power factor correction. This will vary with their work load, and automatic switching of capacitors is available for this purpose in order to serve complete factories or equipment complexes. Correcting the power factor of individual motors is another factor to be considered. Large motors are generally fitted with their own phase advancer. Small motors can be looked after by installing batteries of static capacitors across the supply terminals. Page 18

The efficiency of the modern capacitors is very high as the dielectric losses are less than 0,5% of the apparent power (kva) capacity of the capacitor. Very little error is therefore made by assuming that they take a current that leads the applied voltage by exactly 90 [3]. 2.6 THE NEED FOR POWER FACTOR CORRECTION "Apart from the technical benefits to the utility (i.e. to mitigate the problems enumerated above), there are also significant advantages for consumers to improve their power factors" [1]. Power factor correction capacitor generally pay for themselves within two or three years, after which any further savings accumulated, will be to the benefit of the client [1, 5, 24]. In the case study in Chapter 5, the power factor was improved from 0.7 to 0.96, and the capital invested was paid back within 2.88 years. Energy losses in the consumer's own networks are very much a hidden factor, and lost energy at full tariff purchased, could also be a great saving investment [4, 5]. Both the consumer and the utility network capacity are affected if the power factor is low or improved [1, 49, 52]. A low plant operating power factor may result in overloaded distribution supply and transformers, and increased copper losses in equipment, which result in a reduced voltage level. Improvement in the power factor can reduce the power losses, raise the voltage, reduce system losses and reduce power cost. Poor power factor has an increasing maintenance burden on any power plant and switch-gear, but with an improved power factor system it should require less maintenance and be less costly to operate [1]. Page 19

2.6.1 Technical Reasons If the power factor was improved to 0,96, the plant would have used much less current and would therefore have extra active (kw) power in reserve. The voltage drop is proportional to the current and will therefore decrease with the current. It therefore follows that the closer the power factor correction equipment is situated to the source of low power factor (load), the greater will be the benefits and results accrued from the correction equipment. It is clear from the above that the apparent power reduces as the power factor improves [6, 8]. The result will be that the apparent current (kva) after the correction is less than before the correction, which means that the live currents have also reduced in the same ratio as the total power. Therefore, the plant connected to the correction equipment will not be as heavily loaded as before the correction. 2.6.2 Economic Reasons From a technical point of view, the kilowatt-hour (kw.h) savings might be small due to the losses in the cables, but without power factor improvement the cable might have to be much larger in cross sectional area in order to carry the apparent power. This includes other plant equipment, which will result in an additional capital lay-out [8, 59]. The main reason for power factor correction is the saving of electrical charges. The distribution and transmission network of the utilities has to accommodate various supply and load conditions on their systems, as consumers individually have different demands in loading, peak currents, maximum demand and power factor levels [8, 14, Page 20

21]. Therefore, the utilities apply a two- or even a three-part tariff. The two-part tariff consists of energy kilowatt-hour (kw.h) charge that indicates the total usage of energy supplied to the consumer during the month. "In certain cases where the utility wishes to reduce the peak during a certain period of the day, it introduces a second demand charge for the period of the day. This charge compensates users who reduce their own demand during the utility's peak demand period" [8, 15]. Consumers that are charged on apparent power (kva) demand tariff can only benefit with an improved power factor system. Figure 2.1 indicates that active power (kw) demand is not affected by power factor correction. The tariffs across the country vary largely due to distance, demand and consumer needs [8, 14]. 2.7 THE IMPACT OF POOR POWER FACTOR ON THE UTILITY Poor power factor impacts negatively on the costs of the system in three main areas: Poor power factor will cause the network capacity not to be fully utilized, i.e. 0,5 power factor will only supply 50% active power. This will result in a premature (unnecessary) upgrade of the system instead of only improving the power factor [1, 5, 52]. Excessive energy losses are due to high current and low voltage from motors and transformers in their magnetic fields [6, 49]. The cost of compensating equipment such as static VAR compensators (SVCs) as well as the cost of generating reactive power, remains an expensive investment by running generators sets in synchronous condenser mode [1]. Static compensation delivers or draws reactive power in order to stabilize the voltage [1, 6]. Page 21

2.8 FACTORS AFFECTING POWER FACTOR LEVELS Power factor has different levels due to the various loads on plant systems that vary with load supply. The maximum demand has an important influence on the power factor rating. The consumer's previous twelve-months electricity account coupled with a good overall knowledge of plant operation and load measurement would be a useful evaluation for the power factor correction specification [8, 20, 40]. 2.9 POWER FACTOR MEASUREMENT Load measurement exposes extensive savings as load management and reactive power compensation go hand in hand. Load management should start with measurement and planning. The following two options are raised in this regard [14, 39, 40]: Power factor usually varies with load [14]. Measurement of the power factor is not only Cos (I) as harmonics can influence current wave-forms from zero crossing as shown in Figure 2.4, and a more rigorous way of measuring power factor must be utilised. Spot measurements could be misleading as the power factor normally varies with the load [33]. Page 22

276 220-165 110-055 E ct 000-055 -110 - -165-220 - -276 I 11 1 1 1 1 1 f I 1 1 1 0.0 2.5 5.0 7.4 9.9 12.4 14.9 17.4 19.8 Time (ms) Figure 2.4 Wave -forms of lagging power factor [39J Before power factor correction or load management can be implemented, it would be sensible to carry out a power survey. The survey could be done with a commercial power analysis. KVA 200 Demand and Power Factor PF 1.00 160 Powe 0.80 0 120 0.60 ea 0 I 080 0.40 0.20 Daily demon 000 06/19 06:00 Figure 2.5 Daily demands versus power factor [391 1 06/19 22:00:00 06/20 14:00:00 Test Time 0.00 06/21 06:00:00 Page 23

Figure 2.5 is a graphic representation of the correlation between the power factor and daily demand which indicates that the power factor varies with the load. Controlling the demand must be undertaken with a detailed knowledge of the nature of the load, the consumption pattern, the power factor variation and an understanding of the likely impact of changes in the plant or environment [14, 39]. "Consider the following example: 80% of the total load consists of four large motors. It would possibly be more economical to install capacitors directly onto the motor terminals, as this would eliminate the need for costly control switch-gear for the capacitors" [8]. The following points are to be noted: Do not fit the motor with a capacitor that is too large, as this could cause the motor to become self-excited when the supply is temporarily disconnected. The motor could generate an over-voltage, which might cause connected lamps to burn out and the failure of the motor insulation due to over-voltages. As the motor current decreases, one will have to reset the motor protection. If the load is constant the load factor should almost be at unity. A fixed capacitance could be fitted to the load into the busbars of the distribution switchboard [8]. However, if the load drops, the power factor of the system will become leading and the system could become unstable [6, 8, 55]. It is essential to monitor the amount of kilovars on the distribution system, and to switch capacitors in and out depending on the load demand. These could be managed by using power factor relays. These relays sense the power factor of the distribution system and switch the capacitors of Page 24

the system on demand. The settings on the power factor relay determine the time delay between the switching of various steps. 2.10 CAPACITOR RATING There are many factors that must be taken into consideration when designing a power factor correction system [4, 8]. Increases in system voltage, the presence of harmonics and the actual tolerance of the capacitors will overload the capacitor rating. "One manufacturer derates his capacitor's so that it can take a 20% over-voltage, a 50% over-current and a 45% increase in power. The international electro-technical standard specification no.70 calls for a 10% over-voltage and a 30% over-current derating. These ratings are determined at an ambient temperature of 40 C. The recommended derating in power is 5% at 45 C, 15% at 50 C and 30% at 55 C" [8]. 2.11 CONCLUSION This chapter indicates the steps to be taken to improve the power factor and to what level of expense the consumer is exposed with a low power factor. As indicated in Figure 2.1, the power factor is the ratio between the 'active power P' and the `apparent power S', which is expressed as a percentage of the cosine angle between the active and apparent powers. It also indicates that the active power cannot exceed the apparent power. However, as the angle between `1 3' and 'S' increases, so does the reactive power 'Q', which indicates that the power factor is lagging as the load requires kilovars (kvar) from the power source. ESKOM has proven at Megawatt-Park office centre that by implementing power factor correction, both reactive power and the apparent cost were reduced, and the Page 25

life-cycle of the equipment was also improved due to the wattless current component. There are many methods and apparatus that can be applied to power factor correction. However, only capacitors will be covered in this dissertation. The need to improve power factor components has technical and financial advantages that outrate any form of low power factor components. The power factor of a system is determined mainly by the nature of the load itself, and a low power factor of 0.7 can be improved to 0.96 by installing capacitors. From the utility point of view, it reduces the real system load capacity due to the excessive energy losses and high currents that are far more valued than the cost involvement to implement power factor correction system to any plant operation. Before implementing any power factor correction system, it is advisable to perform a detailed plant analysis on both the technical and financial issues as referred to in order to assess the value and impact of the required power factor correction system. Page 26

CHAPTER 3 TARIFF STRUCTURES OF THE UTILITY 3.1 INTRODUCTION "Electricity tariffs are designed to recover both the costs associated with the actual generation of electrical energy and the considerable capital investment associated with the infrastructure to transmit and distribute this energy. The costs associated with generation are recovered by charging for the actual energy consumed, while the cost of transmitting the electrical energy is recovered by a maximum demand charge"[20, 21, 22]. The aim of an electric utility is to ensure that the energy generated and the distribution and transmission network are controlled, optimized and maintained to supply electricity on demand. Good management could be achieved if marginal cost pricing were used as an effective tool on the demand side [14, 18]. Fabrycky stated that "The term marginal cost pricing refers- specifically to an increase of output whose cost is barely covered by the monetary return derived from it" [62]. From the ESKOM 1999 Annual Report, it is clear that the above definition suits its purpose as it generates electricity power at a non-profit return, and as already stated, the lowest in the world. It is thus imperative that ESKOM also designs tariffs and charges to such a degree that they will fit the above definition with the scope that they will cover all the costs associated with the supply and demand of electrical power. "ESKOM announced that Page 27

by selling more kilowatt-hour (kw.h) during off-peak periods, the total peak demand could be reduced, which enables generating equipment to operate more effectively over longer periods of time. This would mean that there will be more electric power available without increasing of capital cost" [14]. 3.2 THE APPROACH "The constant adaptation between electricity supply and demand can be achieved in two ways: on the supply side, through the construction of additional facilities and on the demand side, by implementing tariffs, load management schemes and a commercial policy" [18]. When the demand changes, the supply system will also change as both the consumer and utility have installed capacity and have operating conditions of the system. These conditions have to be taken into account. In order to reach an overall optimum for the community as a whole, ESKOM decided to control the total load demand system. Implementation of appropriated tariffs and load management schemes to compare costs resulted in benefits for both the utility and consumer to be reflected by marginal generation and distribution costs. ESKOM, as the largest supplier of electricity, has certain pricing rules to follow: meeting the demand, minimising its production costs and selling at marginal costs. The consumer's electricity consumption pattern has a cost factor in the supply system which has been affected by the consumption via the tariff charge [16, 18, 40]. B.Lescoeur stated: "By selecting the alternative to minimise the cost, the consumer will choose the least cost alternative for the whole community" [18]. Page 28

All the differences in cost cannot be reflected, nor can all the costs verify the various kinds of supply. It is therefore necessary to equalise and limit the tariffs and metering as well as the installation costs to avoid excessive complexity of the tariffs. By selecting the correct tariff, consumers are often able to reduce their electricity bills without any further intervention. By selecting the right tariff and exploiting the tariff characteristics, consumers can make a positive impact on this important input cost. The utility must evaluate the larger energy user requirements and investigate possible electrical solutions to accommodate their needs of loads [15, 18]. Electrical solutions with competitive large development potential should accurately reflect the costs, and a tariff charge must be drawn up to suit the overall cost of the community. The electricity tariffs for large consumers are based on the consumption of energy and maximum demand, which measure both active power (kw) and apparent power (kva). The highest single demand recorded will be used to establish the consumer's annual charge to recover the capital and service-related costs of the energy supply [61]. 3.3 TARIFFS Each tariff has its own unique features. These features are a function of the tariff design objectives and a compromise between cost reflectiveness, demand side management pricing signals, simplicity, consumer requirements, etc. In order to be efficient and cost effective, it would be prudent for the consumer to execute a load profile analysis and then select the best tariff to suit the system's load profile. The analysis will also indicate the cost saving on the electricity bill and add operational time to the plant without any further intervention [11, 18, 53]. Page 29