I rode out along the Copper Coast Highway past the Snowtown wind farm a few years back, on one of those long spring weekend rides you do out of Adelaide when the legs are willing, and counted eleven turbines standing dead still in a breeze that felt stiff enough to lean a bike into. Nameplate capacity said those machines could produce a certain number of megawatts. That afternoon they were producing roughly nothing. Nobody had broken anything. That’s just what a capacity factor is, in its rawest form, and it’s the single most misunderstood number in the Australian grid conversation.
The MW/MWh problem, again
A generator’s nameplate capacity is a power rating, in megawatts. It tells you the maximum rate at which the machine can produce electricity at any given instant. A capacity factor tells you something different: how much energy, in megawatt-hours, that machine actually produced over a period, divided by what it would have produced if it ran flat out at nameplate for the whole time. It’s a ratio, expressed as a percentage, and it collapses an entire year of variable, lumpy, weather-and-maintenance-dependent output into one tidy figure.
That tidiness is exactly why it gets abused. A capacity factor of 30 per cent doesn’t mean a wind farm runs at 30 per cent of its rating all the time, the way a dimmer switch might sit at a third of full brightness. It means the wind farm is sometimes flat out, often producing nothing, and averages out to 30 per cent of nameplate across the full run of hours. Those are very different physical realities producing an identical number, and I’d say most of the public argument about renewables versus coal happens because people quietly assume the first version when the second is what’s actually going on.
A worked example, because the arithmetic is short
Take a 100 megawatt solar farm. There are 8,760 hours in a year. If it ran at full nameplate for every one of them, it would produce 876,000 megawatt-hours. In practice, a well-sited Australian solar farm might land somewhere around 25,000 to 27,000 MWh per 100 MW of capacity, per month on average, which annualises to a capacity factor in the low-to-mid 20s. Compare that with a black coal unit built to run as baseload, which might sit anywhere from the high 60s to the high 80s in a normal year, and a gas peaker built specifically to sit idle most of the time and only fire during price spikes, which can have a capacity factor in the single digits or low teens and still be doing exactly its job.
Here’s a simple table to keep the orders of magnitude straight:
| Generator type | Typical capacity factor | Why |
|---|---|---|
| Black coal baseload | 60–85% | Built to run continuously, high start costs |
| Gas peaker (OCGT) | 5–15% | Built to run rarely, during price spikes |
| Onshore wind | 30–42% | Wind resource is variable, sites differ hugely |
| Offshore wind | 40–55% | Stronger, steadier offshore wind resource |
| Utility solar PV | 20–28% | Sun doesn’t shine at night, obviously |
| Battery (as a generator) | Not really comparable | Cycles rather than runs continuously |
Let’s be careful with that last row, because it trips people up constantly. Capacity factor as a concept was built for thermal and renewable generators that either run or don’t. A battery doesn’t generate energy from a fuel source, it moves energy it already bought back into the market at a different time. Reporting a capacity factor for a battery, on its own, tells you almost nothing useful about whether it’s doing its job. What matters for storage is round-trip efficiency, cycling frequency and how many hours a day it’s actually available to discharge into the evening peak. I’ve seen that distinction get flattened in press releases more than once, and it’s worth resisting.
Why the different technologies aren’t really competing on this number
The instinct, looking at that table, is to rank generators by capacity factor and conclude coal wins. That’s the wrong read. Capacity factor measures how a generator is used, not how good it is. A gas peaker with a 10 per cent capacity factor isn’t underperforming, it’s doing precisely the job it was built for, which is sitting dormant until the market pays it to turn up. That’s the whole argument behind what firming means and why gas keeps coming up in every generation-mix debate: firming capacity earns its money in the hours it runs hard, not in the hours it sits idle, and a low capacity factor is the price of being flexible rather than a mark against it.
Wind and solar sit on the other side of that logic. Their capacity factor is dictated almost entirely by the resource, not by operator choice, which is why site selection matters so much more for renewables than for gas. Offshore wind’s higher capacity factor compared with onshore is one of the genuine arguments in its favour, and it’s covered in more detail in onshore versus offshore wind: which one gets built first, alongside the less flattering parts of that comparison, namely cost and construction timelines.
What AEMO actually does with the number
This isn’t an academic distinction. AEMO’s forecasting relies heavily on expected capacity factors to work out how much new generation is needed to replace retiring coal, and to size transmission and firming requirements in the Integrated System Plan. Get the assumed capacity factor for a proposed wind or solar project wrong, even by a few percentage points, and the megawatt-hour shortfall calculation for the whole region shifts. AEMO publishes its own generation performance data, including realised capacity factors by technology and region, through its Generation Information page, and it’s genuinely worth a look if you want to see how much variation exists between individual wind farms in the same state, let alone between states.
The Capacity Investment Scheme, which I’ve covered in how the Capacity Investment Scheme actually works, is partly a policy response to exactly this problem. You can’t run an electricity market purely on a capacity-payment basis without somehow accounting for the fact that a gigawatt of gas peaking capacity and a gigawatt of solar aren’t delivering the same thing across a year, even though both show up as “1,000 MW” on a spreadsheet. The CIS effectively pays for firm, dispatchable megawatts differently to variable ones, because the underlying capacity factor tells you they’re not interchangeable products.
Where the number quietly misleads
My mildly unfashionable view here is that capacity factor gets weaponised in both directions, and neither side is being straight about it. Critics of renewables point to a 25 per cent solar capacity factor as proof the technology is unreliable, without mentioning that solar was never meant to run at nameplate around the clock and its output is highly predictable within a season. Renewables advocates, meanwhile, sometimes quote the capacity factor of the single best wind site in the country as if it represents the fleet average, when the honest fleet numbers, once you average across every connected wind farm in the NEM, sit noticeably lower. Both are technically true numbers being used to imply something the number doesn’t actually support.
There’s a related trap around rooftop solar, which I’ve written about at length in rooftop solar and the midday minimum demand problem. Individual household systems can post decent capacity factors on paper, but the aggregate effect of millions of them all peaking at the same midday hour is what’s actually reshaping the demand curve, not the capacity factor of any one rooftop. The metric works cleanly for a single asset and gets slippery the moment you try to use it to describe a fleet behaviour.
Why it matters for what gets built next
Capacity factor feeds directly into the economics of new generation, because it’s one half of the levelised cost of energy calculation. A project’s fixed costs get spread over however many megawatt-hours it actually produces in a year, so a technology with a lower capacity factor needs either a lower capital cost per megawatt or a higher price per megawatt-hour to break even. This is precisely why gas peakers, despite dismal capacity factors, remain financially viable: their capital cost per MW is comparatively low and they’re paid handsomely for the hours they do run, a dynamic explored properly in gas peakers versus big batteries: who firms the grid?. It’s also why a battery’s economics don’t fit neatly into a capacity factor framework at all – batteries earn revenue on price spread and network services, not on hours-run.
The Clean Energy Regulator tracks large-scale generation certificates created against actual metered output, which is effectively a capacity-factor-based audit trail for every accredited renewable project in the country, and it’s a useful reality check against developer projections quoted at financial close.
The number you actually need, and the one you don’t
If someone tells you a new wind or solar project will have a capacity factor of, say, 38 per cent, the honest next question isn’t whether that sounds good. It’s whether 38 per cent is realistic for that specific site, in that specific REZ, based on the wind or solar resource actually measured there over multiple years, not a developer’s optimistic first-year modelling. AEMO’s own Quarterly Energy Dynamics reports are a decent independent cross-check, because they report what actually got dispatched, not what was forecast. A capacity factor is a historical fact once the year is over. Before that, it’s an estimate, and estimates in this industry have a habit of drifting.
Next time you see a headline comparing a coal plant’s capacity factor with a solar farm’s and drawing a conclusion about which one is “better”, ask what job each one was actually built to do. That’s the whole answer, really, and it fits in fewer words than the headline usually takes.
– Anjali Rao, Grid & Storage Correspondent