Load factor

In the electricity industry, load factor is a measure of the output of a power plant compared to the maximum output it could produce.

The two commonest definitions are:

  • the ratio of average load to capacity
  • the ratio of average load to peak load in a period.

Assuming the first definition, a higher load factor is better:

  • A power plant may be less efficient at low load factors.
  • A high load factor means fixed costs are spread over more kWh of output.
  • A high load factor means greater total output.

Therefore a higher load factor usually means more output and a lower cost per unit, which means an electricity generator can sell more electricity at a higher spark spread.

Many companies disclose load factors for their major plants. When comparing load factors over time it is important to remember that there are likely to be large seasonal changes quarter-on-quarter, so year-on-year changes are more likely to be significant.