How does reactive energy impact my SME´s electricity bill?

Producing reactive energy results in the customer paying a financial penalty on their electricity bill. We tell you why this type of energy is produced, how to avoid it and how much you will have to pay if it exceeds 33% of the active energy.

What is reactive energy?

Reactive energy is energy that is produced in electrical installations with industrial machinery, fluorescent lights or buildings with lifts where a transformer or motor is needed to operate certain electrical appliances.

Large enterprises and, to a lesser extent, residential supply points typically produce this kind of energy. It is fed into the grid and measured in kilo volt-ampere hours (kVArh), which causes interference and has negative effects on the installation.

Supply points that produce reactive energy, commonly referred to as “phantom energy”, must face an economical penalty stipulated in Royal Decree 1164/2001 and applied by the electricity distributor in their area.

Differences between active and reactive energy

In the electrical circuit, we can find active and reactive energy. The former is useful and the latter is not, as it cannot be consumed and only interferes with the correct operation of the installation.

Active Energy Reactive Energy
Measured in kWh Measured in kVArh
Useful energy (can be consumed) Non-useful energy (cannot be consumed)
Electricity bill: consumption term Electricity bill: excess reactive energy
No damage to the installation Negative consequences for the electrical circuit

How is reactive power calculated?

Calculating reactive energy is possible thanks to the power factor. It measures the amount of reactive energy over the active energy, i.e. it measures the efficiency of the electricity consumption.

The power factor is the ratio of active energy to apparent energy (sum of active and reactive energy). In other words, it measures the total active energy consumed over the reactive energy.

What is apparent energy? Both active and reactive energy can be found in the electrical network. Amounts of both reactive and active energy combine to form apparent energy. In other words, apparent energy is the total energy used in a given electrical circuit. Active energy + Reactive energy = Apparent energy

The result of the power factor determines the percentage of reactive energy and the possible financial penalty that the customer must pay for excess reactive energy.

*The prices indicated below as financial penalties are established by the Official State Gazette (BOE) and will be applied by the electricity distributors in the national territory.

Penalty for excess reactive energy
Energy factor % Reactive energy Penalisation
Over 0.95 Lower than 33% There is no penalty
Between 0.95 and 0.80 Between 34% and 74% 0.0415 €/kVArh*
Under 0.80 Over 75% 0.6223 €/kVArh*

How is reactive energy billed?

Reactive energy is billed in each electricity bill, as long as it exceeds the amount established by the electricity distribution network. The amount to be paid for the excess reactive energy appears in the consumption term of the bill.

Reactive energy is not billed in period 3 of the 3.0 and 3.1 access rates or in period 6 of the 6.X tariffs, which is crucial to note.

When do we talk about excess reactive energy? The contract holder will be required to pay a fine if the reactive energy limit set by the local electricity distributor is exceeded at a particular supply point.

Reactive energy limits
Power Tariff % reactive
Up to 10 kW 2.0 50%
Up to 15 kW 2.1 50%
Over 15 kW 3.0 33%

Customers with a contracted power of up to 15 kW do not usually pay financial penalties on their bills for the excess of this type of energy, as the percentage of reactive energy is minimal.

Companies or businesses with a capacity of more than 15 kW, with industrial machinery, lifts or fluorescent lights, will have to pay a financial penalty if they exceed the limit of 33% of reactive energy over active energy.

How much does excess reactive energy cost?

Knowing how much reactive energy was produced during a given billing period will allow the contract holder to determine how much of a financial penalty will be due if the limit is exceeded.

Calculating the amount to be paid on the electricity bill for excess reactive energy is a simple operation that consists of multiplying the excess reactive energy in each period by the reactive energy billing term established for each band.

Excess reactive energy x Price of reactive energy

The amount for excess reactive energy is established in order ITC 1723/2009 of the BOE, so it will be applied by all electricity distributors in Spain.

How to reduce reactive energy?

It is possible to reduce the reactive energy produced in an electrical circuit and avoid the corresponding financial penalties from the distribution company. To do this, there are different elements that control and limit the generation of this type of energy.

Because an extensive initial investment is needed and will pay off in around two years, it is crucial to consider the advice of a specialist before making changes to the electrical installation.

Capacitor banks are among the best components for lowering the production of reactive energy.

Reduce reactive energy with a capacitor bank

The capacitor bank makes it possible to significantly reduce the reactive energy generated in an electrical circuit, improving the quality of the electrical supply. It is an element that is installed or connected to the general switchboard of the electrical installation in order to reduce the reactive energy demand by up to 100%.

Advantages of capacitor banks:

  • Improve the quality of the electricity supply
  • Reduce reactive power demand
  • Improve grid voltage
  • Improved energy efficiency
  • Lower cost of electricity bills
  • Life of 10 years

The price of the capacitor bank depends on different factors such as the brand or the characteristics of the electrical installation where it is going to be installed. The customer’s initial investment will be amortised in a maximum of 2 years.

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