Real power is the capacity of a circuit for performing work in a particular time. Apparent power is the product of the current and voltage of the circuit. The apparent power may be greater than the real power due to energy stored in the load and returned to the source, or due to a non-linear load that distorts the wave shape of the current drawn from the source.
The power factor of an AC electric power system may be defined as the ratio of the real power flowing to the load to the apparent power (a number between 0 and 1).
In an electric power system, a load with a low power factor draws more current than a load with a high power factor, for the same amount of useful power transferred. The higher currents may increase the energy lost in the distribution system, and may require larger wires and other equipment. Because of the costs of larger equipment and wasted energy, electrical utilities may charge a higher cost to customers with a low power factor.
In a purely resistive AC circuit, voltage and current waveforms are in phase, changing polarity at the same instant in each cycle. Where reactive loads are present, such as with capacitors or inductors, energy storage in the loads results in a time difference (phase) between the current and voltage waveforms. This stored energy returns to the source and is not available to do work at the load. Thus, a circuit with a low power factor will have higher currents to transfer a given quantity of real power compared to a circuit with a high power factor.
AC power flow has the three components: real power (P) measured in watts (W); apparent power (S) measured in volt-amperes (VA); and reactive power (Q) measured in reactive volt-amperes (VAr). Power factor may thus be defined asP/S  (1)
In the case of a perfectly sinusoidal waveform, P, Q and S can be expressed as vectors that form a vector triangle such thatS2=P2+Q2  (2)
If θ is the phase angle between the current and voltage, then the power factor is equal to |cos θ|, andP=S*|cos θ|  (3)
When power factor is equal to 0, the energy flow is entirely reactive, and stored energy in the load returns to the source on each cycle. When the power factor is equal to 1, all the energy supplied by the source is consumed by the load. Power factors may be stated as “leading” or “lagging” to indicate the sign of the phase angle.
If a purely resistive load is connected to a power supply, current and voltage will change polarity in phase, the power factor will be unity, and the electrical energy will flow in a single direction across the network in each cycle. Inductive loads such as transformers and motors consume power with the current waveform lagging the voltage. Capacitive loads such as capacitor banks or buried cables cause reactive power flow with the current waveform leading the voltage. Both types of loads will absorb energy during part of the AC cycle, which is stored in the device's magnetic or electric field, only to return this energy back to the source during the rest of the cycle. For example, to get 1 kW of real power, if the power factor is unity, 1 kVA of apparent power needs to be transferred (1 kW÷1=1 kVA). At low values of power factor, however, more apparent power needs to be transferred to get the same real power. To get 1 kW of real power at 0.2 power factor, 5 kVA of apparent power needs to be transferred (1 kW÷0.2=5 kVA).