Here are my thoughts (I'm looking for confirmation that my intuition is correct):

In a power system with inductive loads, the power factor is lagging, as a result the reactive power drawn results in increased current through the transmission lines and as a result, more loses.

Here is where I get a bit confused. Inductive loads (induction motors/generations) NEED reative power to operate. As a result, wouldn't the notion of correcting the power factor to unity result in current and voltage in phase - meaning no reactive power?

Does the addition of parrallel capacitors in essence create o 'local' source of reative power that can alternate back and forth, as opposed to reactive power that must travel back to the 'distant' source, thus resulting in higher losses (through transmission lines)?

Hopefully, my little confusion here is clear. Any help is much appreciated!