A base load power plant with a capacity of 1,000 MW might produce 648,000 megawatt-hours in a 30-day month. The number of megawatt-hours that would have been produced had the plant been operating at full capacity can be determined by multiplying the plant's maximum capacity by the number of hours in the time period. 1,000 MW X 30 days X 24 hours/day is 720,000 megawatt-hours. The capacity factor is determined by dividing the actual output with the maximum possible output. In this case, the capacity factor is 0.9 (90%).
There are two main reasons why a plant would have a capacity factor lower than 100%. The first reason is that it was out of service or operating at reduced output for part of the time due to equipment failures or routine maintenance. This accounts for most of the unused capacity of base load power plants. Base load plants have the lowest costs per unit of electricity because they are designed for maximum efficiency and are operated continuously at high output. Geothermal plants, nuclear plants, coal plants and bioenergy plants that burn solid material are almost always operated as base load plants.
The second reason that a plant would have a capacity factor lower than 100% is it that output is curtailed because the electricity is not needed or because the price of electricity is too low to make production economical. This accounts for most of the unused capacity of peaking power plants. Peaking plants may operate only a few hours per year or up to a several hours per day. Their electricity is relatively expensive. It is uneconomical, even wasteful, to make a peaking power plant as efficient as a base load plant because they do not operate enough to pay for the extra equipment cost, and perhaps not enough to offset the embodied energy of the additional components.
Load following power plants, also called intermediate power plants, are in between these extremes in terms of capacity factor, efficiency and cost per unit of electricity. They produce most of their electricity during the day, when prices and demand are highest. However, the demand and price of electricity is far lower during the night and intermediate plants shutdown or reduce their output to low levels overnight.
When it comes to several renewable energy sources such as solar power, wind power and hydroelectricity, there is a third reason for unused capacity. The plant may be capable of producing electricity, but its fuel (wind, sunlight or water) may not be available. A hydroelectric plant's production may also be affected by requirements to keep the water level from getting too high or low and to provide water for fish downstream. However, solar, wind and hydroelectric plants do have high availability factors, so when they have fuel available, they are almost always able to produce electricity.
When hydroelectric plants have water available, they are also useful for load following, because of their high dispatchability. A typical hydroelectric plant's operators can bring it from a stopped condition to full power in just a few minutes.
Wind farms are highly intermittent, due to the natural variability of the wind, but because a wind farm may have hundreds of widely-spaced wind turbines, the farm as a whole tends to be robust against the failure of individual turbines. In a large wind farm, a few wind turbines may be down for planned or unplanned maintenance at a given time, but the remaining turbines are generally available to capture power from the wind. Wind farms have typical capacity factors of 35%.
Solar power plants are intermittent because of the daily rotation of the earth and because of cloud cover. Solar power has a typical capacity factor of about 20%.