How it works
CUF = E / (P × H). E is the energy produced over the period in MWh, P is the nameplate capacity in MW, and H is the number of hours in the period, 8,760 in a normal year and 8,784 in a leap year. The result is a percentage. For solar it matters which capacity goes in. AC capacity is the inverter or grid connection limit. DC capacity is the total rating of the panels. Many plants install more panel capacity than inverter capacity, so the same plant shows a higher CUF on an AC basis than on a DC basis.
The figure depends on the resource, the design and the losses. Sunshine or wind speed sets the ceiling. Trackers, a higher DC to AC ratio, taller towers and larger rotors raise it. Soiling, heat, wake effects between turbines, downtime and curtailment lower it. It is usually measured at the export meter, so it includes the plant's own internal losses. It includes the weather as well, so it measures the site and the plant together. For solar, performance ratio normalises output for measured sunlight, although temperature and other losses still affect it.
Why it matters
CUF turns capacity into energy, and energy into revenue. Each extra point of CUF lowers the LCoE and raises the revenue earned per megawatt built. Lenders and buyers check the CUF in a developer's model against measured output from nearby plants. Buyers use it to work out how much of their demand a contracted capacity will actually cover. A solar plant at 24% CUF supplies about a quarter of the energy its rating suggests.
A worked example
A solar plant has 50 MW of AC capacity and 70 MW of panels, a DC to AC ratio of 70 ÷ 50 = 1.4. It produces 105,000 MWh in a year. On an AC basis, CUF = 105,000 ÷ (50 × 8,760) = 105,000 ÷ 438,000 = 24.0%. On a DC basis, CUF = 105,000 ÷ (70 × 8,760) = 105,000 ÷ 613,200 = 17.1%. Both figures describe the same plant, so any quoted CUF needs its basis.
Illustrative figures.
Across markets
India uses the term CUF, and PPAs from central auctions usually ask the seller to declare a CUF and keep annual output within a band around it, with compensation for shortfalls. The US and Europe say capacity factor. Their contracts more often guarantee availability or an annual production volume. US solar plants are commonly quoted in both MWac and MWdc, so the basis must be checked before comparing figures across markets.