In any electrical system or network there are normally 3 components related to the energy consumed. The Active Power, Reactive Power and the Harmonic Distortion.

The Active Power is the energy required to power the various devices on the electrical network. The Power Factor is defined by cos phi = P (W)/S (VA) the closer the PF is to 1.0 (100%) indicates the efficiency of the network.

The Reactive Power also consume power from the network but cannot used to power any device.

The removal of the Reactive Power improves the efficiency of the network reduces the energy consumed and can reduce the electricity costs by as much as 30%.