# Variable Frequency Drives and Displacement Power Factor > Drives are frequently sold as improving power factor, and in one sense they do. The sense that matters for your bill depends on which power factor your meter measures. Section: Power Factor and Power Quality Author: Nil Masferrer Jiménez Published: 2026-08-20 Reading time: 4 min A variable frequency drive is one of the best investments available in a plant with fan or pump load. It saves energy continuously, it usually reduces the peak, and it earns on both lines of the bill. It is also routinely described as improving power factor, which is true in one specific sense and misleading in another. Getting the distinction right determines whether a subsequent capacitor project is necessary, unnecessary, or actively harmful. ## Two different power factors **Displacement power factor** describes the phase relationship between voltage and current at the fundamental frequency — the classic textbook definition, and the one a power triangle draws. **True power factor**, sometimes called total power factor, is real power divided by total apparent power including every harmonic component. It accounts for the fact that current at frequencies other than the fundamental also occupies capacity while doing no useful work. For a purely sinusoidal load the two are identical. For a load drawing distorted current they are not, and the gap between them is filled by the distortion. ## What a drive actually does A conventional drive rectifies the incoming supply to a DC bus and then synthesizes a variable-frequency output. The rectifier draws current in pulses rather than sinusoidally. The consequence for each measure: **Displacement power factor is high and stays high.** The rectifier draws current broadly in phase with voltage, and unlike a motor connected directly across the line, it does not degrade at part load. A directly connected motor at 30 percent load has poor displacement power factor; the same motor on a drive does not. **True power factor is lower**, because the harmonic content of that pulsed current counts in the apparent power figure. A six-pulse drive front end is a substantial harmonic source, and the distortion it produces reduces true power factor even while displacement power factor looks excellent. So a drive replaces a phase-shift problem with a distortion problem. Whether that is a good trade for your bill depends on what your meter measures. It is a good trade in almost every other respect. Distortion can be reduced at source by specifying a better front end, or mitigated downstream with filters and detuned equipment, and both are well-understood engineering. Poor displacement power factor from a fleet of oversized, lightly loaded motors is a structural condition that can only be corrected, never removed, without replacing the motors. The drive at least converts the problem into one with more solutions. ## Why the metering question decides it If the tariff measures and bills on **displacement power factor**, the drive helps directly and may remove a penalty entirely. If it measures **true power factor**, the improvement is smaller and may be modest enough that a penalty persists — in which case the remedy is harmonic mitigation rather than more capacitance. Modern electronic meters are capable of either. The tariff should specify which, and where the wording is ambiguous, the question is worth asking the utility in writing and keeping the answer. It is the kind of provision that is never noticed until it decides a hundred-thousand-dollar project. The distinction also affects how kVA is derived, which matters on any tariff billing demand on apparent power: [kVA billing and kW billing](https://thedemandcharge.com/articles/kva-vs-kw-billing). ## The capacitor decision, after drives Three rules, in order of importance. **Never install capacitors on the output of a drive.** Between the drive and the motor is not a location for power factor correction. It is an equipment damage risk. This is not a subtlety. **Specify detuned equipment for any correction upstream.** A site with substantial drive load has a harmonic-rich environment, and plain capacitors added to it may resonate. Detuned banks are the standard answer and should be the default specification rather than an upgrade: [harmonics, resonance and why capacitors sometimes make it worse](https://thedemandcharge.com/articles/harmonics-and-capacitors). **Measure before deciding anything.** The service entrance power factor after drives are installed is an empirical question. Sites have installed correction equipment to solve a penalty that the drives had already removed, and sites have assumed the drives fixed it when the meter was measuring true power factor and disagreed. ## Drives as a demand measure Separately from the power factor question, drives are one of the few measures that reliably reduce both energy and peak demand. A fan or pump on a drive draws considerably less power at reduced speed than the same machine throttled mechanically, because the load characteristic falls steeply with speed. That reduction applies whenever the machine is running below full duty, including during the interval that sets the demand charge — which is what makes it a genuine demand measure rather than a purely energy one. That combination is unusual and worth exploiting. Most efficiency measures act on the area under the load curve and leave its height alone: [six efficiency measures that do not cut your demand charge](https://thedemandcharge.com/articles/measures-that-dont-cut-demand) lists the ones that do not, and drives are conspicuously absent from it. ## What to do 1. Establish whether your tariff charges for power factor at all, and by which mechanism: [power factor penalties explained](https://thedemandcharge.com/articles/power-factor-penalties-explained). 2. Establish whether it measures displacement or true power factor, in writing. 3. Measure the actual power factor at the service entrance after the drives are running, across a full operating cycle. 4. If a penalty remains and the metering is on true power factor, treat it as a harmonic problem first. 5. If correction is required, specify detuned equipment and size it properly: [sizing a capacitor bank](https://thedemandcharge.com/articles/power-factor-correction-sizing). Steps one and two cost nothing and settle most of the question. Step three is a power quality survey, which is worth commissioning anyway at any site adding significant drive load, because the same measurement answers several questions at once. ## Sources - [IEEE Standards Association](https://standards.ieee.org/) - [DOE Federal Energy Management Program](https://www.energy.gov/femp/federal-energy-management-program) - [DOE Better Buildings Solution Center](https://betterbuildingssolutioncenter.energy.gov/) - [ASHRAE — Standards and guidelines](https://www.ashrae.org/technical-resources/standards-and-guidelines) ## Frequently asked questions ### Do variable frequency drives improve power factor? They improve displacement power factor, which is the phase relationship at the fundamental frequency, and they typically hold it high across the speed range. They do not improve true power factor to the same extent, because the harmonic current they draw counts against it. ### Which one does my utility measure? It depends on the meter and on the tariff definition. Modern electronic meters can measure either, and the tariff should say which. Where it is ambiguous, ask the utility in writing before assuming. ### Should I still install capacitors if I have drives? Possibly, and not as a reflex. Establish what the meter is measuring, measure the actual power factor at the service entrance, and if capacitors are needed, specify detuned equipment. ### Can I put capacitors on the output of a drive? No. Capacitors must never be connected between a drive and its motor. This is an equipment damage risk, not a fine point of efficiency. --- Canonical URL: https://thedemandcharge.com/articles/vfd-power-factor Site index for agents: https://thedemandcharge.com/llms.txt