Capacitor bank are used for power factor correction in applications where large inductive loads are involved. Harmonics can significantly reduce the life of capacitor banks. For loads that produce harmonics, a harmonic filter should be added.

A shunt capacitor draws almost fixed amount of leading current which is superimposed on the load current and consequently reduces reactive components of the load and hence improves the power factor of the system. Thereby, the voltage regulation of the system is improved.

Additional benefit of KVAR capacitors is a reduction in distribution system losses. An improvement from an original power factor of 0.75 to 0.95 in an average industrial plant will reduce these losses approximately 38%, provided the capacitors are installed near the individual loads.