Power factor is defined as the ratio of real power to apparent power. So the power factor in a circuit is determined by dividing watts by volt-amps, kilowatts by kilovolt-amps or megawatts by megavolt-amps. For example, a circuit carrying 80 kW of real power and 100 kVA of apparent power will have a power factor of 80 divided by 100 or 80%.
Power factor is related to the shift in time between the moment the voltage in a circuit crosses zero and the moment the current crosses zero.
The graphic below is an illustration of resistive loads using only real power. Notice that the volts and the amps cross zero at the same time. They also hit their maximums and minimums at the same time. So because there is no reactive power being used by the loads, the volts and the amps are synchronized. Since all the power provided is real power, the real and apparent power are equal and the power factor is 100%.
But the next graphic (below) is characteristic of a circuit supplying electricity to inductive loads, which have high reactive power requirements. As you can see, the red line or current has shifted and now lags behind the voltage, and the power factor is less than 100 percent. So, the voltage or blue line hits zero first, followed by the current.
The larger the amount of VARs that are consumed by the system, the bigger the lag between the volts and the amps. If this lag gets too large, the electrical system no longer functions as desired. This may result in inadequate voltage to power lights and motors as well as other voltage-related problems.