Improvement in power factor
is very important since there are several benefits for both consumer and generating stations. Advantages of power factor correction are as follows:
For Consumers:
LESS UTILITY BILLS:
Utility companies usually charge the customers for low power factor (i.e. when power factor is less than 0.9 or 0.85). Hence the main benefit of power factor correction is that it will helps in reducing your electricity bill. Therefore it is advisable to avoid additional charges by improving your power factor. Raising your power factor means you are using less KVAR (reactive power). This will simply result in less maximum KVA demand which leads to less utility bill charges. Although you have to pay some charges on power factor correction techniques, however it will be quiet less as compared to your annual savings in utility charges.
Efficient Equipment:
Low power factor causes power losses. When power losses increases, voltage drop occurs. Excessive voltage drop is a major cause of overheating and premature failure of equipment. Actually, low voltage force the motor and other inductive equipment’s to draw extra current in order to deliver the required power. This will simply results in the overheating of motor windings. By raising the power factor, you can minimize the voltage drops. This will makes the motors and other equipment to run cooler due to which efficiency of the equipment will also increased.
Improve Voltage :
Low power factor results in a large flow of current for a given load. When line current increases, voltage drop in the conductor also increases which results in a lower voltage to the equipment. With improve (high) power factor, the current drawn by the equipment is reduced. This simply means that the voltage drop in the conductor also reduced which results in improving the voltage of equipment.
For Generating Stations:
Generating stations are also very much concern about the power factor since high power factor helps them a lot in certain ways. Although generators and transformers in power station are rated in KVA , however the output of power stations depend on the KW output. Since the output of power station is 
i.e. No. of units supplied depend on the power factor. Lower the value of power factor, more KW supply by the system. Let understand the above discussion by the following example.
Let assume that a 200 KVA transformer is taken out to provide 180 kw with power factor of 90%.
Since output power is calculated by the following formula
The Output power (p) delivered by the transformer is
P= 200 
0.7
P= 140 KW.
From the above calculation, we can say that transformer provides 140 kw with power factor of 0.7 which is less than the rated o.9 pf.
In order to get the desired output power of 180 kw, there are two ways. One way is to get another transformer of high rating which will be of course very costly. Moreover, size of machinery is also increased. The second way is to improve the power factor of the available transformer. If the power factor of transformer is raised to 0.9, it will give the following output power for the same amount of KVA (200).
P = 200 o.9
P= 180 kw.
By improving the power factor, we will get the desired output power with same amount of KVA. Moreover, power factor correction also reduce power losses due to which additional load to the system can also be added. This simply leads to the conclusion that power factor correction also increases the earning capacity of generating station.
That’s all. Hope this will helps you.