Reactive power is consumed by the transformer’s magnetizing current and leakage inductance. To establish alternating flux in the core, a magnetizing component of current lags the voltage and contributes to reactive power draw, even at no-load. Leakage inductance around windings and stray capacitances also affect reactive power behavior. Under load, the combination of magnetizing current and the load’s own reactive characteristics determines the overall power factor and reactive demand seen by the upstream network.