Capacity factor
The share of a power plant's maximum possible output that it actually produces over a period of time.
Capacity factor measures how hard a power plant actually works. Take what a plant produced over a year and divide it by what it would have produced running flat-out the whole time: a 100 MW plant that generated 350,400 MWh in a year (out of a possible 876,000) ran at a 40% capacity factor. It is the single quickest way to understand what kind of asset you're looking at.
Different technologies live at very different capacity factors, for different reasons. Nuclear plants run near their maximum almost constantly. Wind and solar are capped by the weather — the sun sets and the wind calms, no matter what prices do. Gas peakers sit near the bottom by design: they exist to run only during the most expensive hours.
The crucial subtlety is that a low capacity factor is not a verdict. A peaker at a low single-digit capacity factor may be highly profitable, earning its keep in a handful of scarcity hours, while a wind farm with a strong capacity factor behind a congested line may struggle. What matters commercially is not how often a plant runs but how valuable the hours are when it does.
For the technical reader
CF = actual generation / (nameplate capacity × hours in period). Variants matter: net vs. gross capacity, AC vs. DC nameplate for solar (DC-referenced figures run lower), and whether the period includes pre-commercial operation. For renewables, distinguish the resource-driven ceiling from realized CF, which is further reduced by curtailment, outages, and economic offline decisions — comparing realized CF to a weather-modeled potential isolates the operational and market losses.
The economically sharper companion metric is the value factor: a resource's generation-weighted average price divided by the time-average price. As solar penetration rises, solar's value factor declines (all solar produces in the same hours, depressing midday prices), so a fleet can hold its capacity factor while its revenue per MWh erodes — capacity factor measures volume, not value.