Reasons For Reduced Capacity Factor
There are several 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 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 for only a few hours per year or up to 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.
A third reason is a variation on the second: the operators of a hydroelectric dam may uprate its nameplate capacity by adding more generator units. Since the supply of fuel (i.e. water) remains unchanged, the uprated dam obtains a higher peak output in exchange for a lower capacity factor. Because hydro plants are highly dispatchable, they are able to act as load following power plants. Having a higher peak capacity allows a dam's operators to sell more of the annual output of electricity during the hours of highest electricity demand (and thus the highest spot price). In practical terms, uprating a dam allows it to balance a larger amount of intermittent energy sources on the grid such as wind farms and solar power plants, and to compensate for unscheduled shutdowns of baseload power plants, or brief surges in demand for electricity.
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