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Introducing a smart solution: financing to fund power factor projects

Posted by: Alloy 2020-11-27 Comments Off on Introducing a smart solution: financing to fund power factor projects

SMC now provides a solution to overcome one of business’ greatest challenges – competing capital requirements and tight budgets to operate the business. SMC offers power factor correction project funding to credit-approved customers, which will eliminate monthly power factor costs. Power factor correction can significantly reduce the electric demand charge on the monthly bill. This reduction can be as high as 10-20% or more.

SMC receives and reviews the electric usage history file for a power factor analysis. SMC identifies the customer monthly demand, PF average and monthly PF costs being incurred for each billing meter. Example: 1000 Peak Demand (KW or KVA), 78% to 82% PF Range, $2,710 average PF monthly cost. SMC or a referring agent delivers the PF analysis to the customer and discusses any interest to eliminate the monthly cost. If the customer has an interest, SMC requests approval to conduct a power factor engineering study. There is a survey fee for the study. If the customer would like to consider a financing solution, SMC requests completion of a credit application.


SMC’ power factor study will include a written report defining the project scope, and will include technical and economic indices that will enable the customer to make an informed decision regarding project expenditures. The project will be designed to eliminate or greatly reduce power factor costs at the customers facility.

If desired by the customer, SMC’s proposal will include a financing option to fund the power factor project.


SMC can fund the power factor project cost (with customer credit approval)

SMC’ offering is designed to enable the customer to take action and get the power factor project approved. SMC requests an agreement to share in 70% of the power factor savings, typically with a 5 year term. Some larger projects may qualify for a shorter term.



Introducing a smart solution: financing to fund power factor projects



Example: The monthly power factor savings are identified as $2,710

$2,710 x 30% = $813, so the customer will retain $813 / month over the term of the agreement.

$2,710 x 70% = $1897, so the customer redirects $1897 / month that was previously paid to the utility company, instead to the funding source during the project term.


At the end of the project term, the customer retains 100% of all future savings, $2710 / month, and ownership of the equipment reverts to the customer. The entire customer project capital payment is completed through the savings of power factor costs that currently are paid to the utility company. SMC’s offering provides a solution to take action with no increased costs to the company’s operating budget, and actually reduces operating costs.

In the absence of a power factor project, power factor costs will continue to be paid by the customer to the utility company until a power factor project is completed. SMC offers an immediate financing solution when funds are not available in the customer’s budget. SMC’s solution does not require a large up-front capital investment from the customer. SMC’ solution preserves company cash to run and grow the business.

The customer improves their cash flow and realizes an immediate cost reduction benefit on the electric billing. Customer does not have to defer a project (often 12 to 24 months) due to lack of funds available in their budget. Customer does not have to use its own capital which could free up use of its funds for other capital improvements.


Power factor correction equipment provides the customer a typical 15-20 year operating life, thus providing many years of power factor savings.

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