The usual definition of power factor In terms of the phase relation ship of voltage and current in a sine wave is intentionally avoided because it is abstract and difficult to translate into a simple physical concept.
The current required by induction motors, transformers, fluorescent lights, induction heating furnaces, resistance welders, etc., may be considered to be made up of two separate kind of current;
Magnetizing current and power producing current. Some load, such as incandescent lights require only power producing current. The low power factor is due to partially loaded induction motors. Frequently drives are “over motored” i.e., the motor is selected to handle the largest load but usually operated at less than full load.
Power producing current (or working current) is that current which is converted by the equipment into useful work such as turning a lathe, making a weld, or pumping water, the unit of measurement of the power produced is the kW.
Magnetizing current (also known as wattless, reactive or non working current) is that current which is required to produce the flux necessary to the operation of inductive devices. Without magnetizing current, energy could not flow through the core of a transformer or across the air gap of an induction motor. The unit of measurement of magnetizing volt-amperes is the kvar.
Total current is the current that is read on a ammeter in the circuit. It is generally made up of both magnetizing current and power producing current. The unit of measurement of total volt-amperes or “apparent power” is the kva
The terms leading and lagging power factor are apt to be confusing and they are meaningless unless the direction of both kW and kvar is known. Generally, however, in industrial plants only the load power factor is considered, in which case the following rate may be helpful in differentiating between leading and lagging power factor.
“The power factor is lagging if the load requires kvars and leading if the load furnishes kvars” thus, an induction motor has a lagging power factor because its magnetizing requirements must be supplied by the power source or other source.
On the other hand, an overexcited synchronous motor can supply kvars (from the motor d-c field action); so such a synchronous motor has a leading power factor.
Industrial Power Plant Systems Handbook chapter 8
By Donald beeman, McGraw Hill books.