Capacity factor should not be confused with efficiency.
Capacity factor is the fraction of energy actually produced over a period of time – usually a year – of what a generator has the capacity to produce.
Base load plants have capacity factors of 90% or more, because they are always running except for periods of maintenance (and occasional outages).
Other dispatchable plants have lower capacity factors, because they are called on only when needed to supply power above the base load.
For nondispatchable sources – i.e., ones that generate electricity according to wind speed or sunlight rather than actual demand on the grid – capacity factor is determined by their fuel sources and the efficiency with which they are converted to electrical power.
Wind turbines generate electricity at an annual average rate of 25%–35% of their capacity.
That means, for example, a 2-MW turbine may produce an annual total energy of 2 MW × 365 days × 24 hours × 0.25 = 4,380 MWh, or at an average rate of 2 MW × 0.25 = 0.5 MW.
The turbine, or any group of turbines, generates at or above its average rate (i.e., its capacity factor), however, only 40% of the time. When wind turbines do generate power, they do so at highly variable rates depending primarily on the wind speed.
Grid operators have to be able to call on the various generating plants as needed to meet demand. The ability to do so can be expressed as a plant’s capacity value, the percentage of time that it can be called on to provide power to the grid. It is a measure of dispatchability. The capacity value of most plants is effectively 100%.
Wind turbines, however, can not be “called on” except by the wind, which has only a random relationship to user demand for electricity. Therefore, their capacity value is effectively zero. This means that to meet the needs of the grid, other – dispatchable – sources have to be maintained and built just as if wind turbines were not on the grid.