Power factor is a measure of energy efficiency in AC circuits, defined as the ratio of true power in watts (W) to apparent power volt-amperes (VA) . It is usually expressed as a percentage, and the lower the percentage, the less efficient power usage is. Power factor compares the real power being consumed to the apparent power, or demand of the load. A purely resistive load has a power factor of 1, while a power factor below 95% is considered inefficient in many regions.

The devices for correction of the power factor may be at a central substation, spread out over a distribution system, or built into power-consuming equipment. Poor power factor means that more current is required to deliver the same amount of true power to the resistive load, which can cause overheating and damage to equipment.

To calculate power factor, a power quality analyzer or power analyzer that measures both working power (kW) and apparent power (kVA) is needed, and the ratio of kW/kVA is calculated. The power factor formula can be expressed in other ways, such as PF = (True power)/(Apparent power) or PF = W/VA, where watts measure useful power while VA measures supplied power.

Poor power factor can be corrected by adding another load to the circuit drawing an equal and opposite amount of reactive power, to cancel out the effects of the loads inductive reactance. Inductive reactance can only be canceled by capacitive reactance, so capacitors are often used to correct power factor.