Generating reactive power at the point of consumption helps energy production and
thus saves energy. It frees power plant capacity for the production of active power and
reduces losses in transmission and distribution systems. At the same time, there is a
higher capacity available for the transmission of active power.
To generate reactive power at the power plant is uneconomical, producing losses in
the electricity network. This leads to increased use of primary energy. In transmission
and distribution systems, reactive power requires as much capacity as active power.
To increase the efficiency of their performance, electricity suppliers and the owners of
transmission and distribution networks have adopted a "reactive power tariff", which
encourages consumers to produce locally the reactive power they need, for example
with the help of compensation capacitors.
In boosting the production and distribution of electricity, reactive power compensation
reduces the need for oversized power plants and distribution networks.