Information References

Many articles include references to specific terminology that may not always be readily understood.

This holiday week seemed to be a good place to identify some of these terms so that they can be readily accessed by establishing a link to this article in future articles.

Capacity factor:

Capacity factor measures the amount of electricity actually produced over the period of a year, compared with what could theoretically have been produced based on the nameplate rating of the unit.

A 1 MW unit with a capacity factor of 30% delivers one-third the electricity that a 1 MW unit with a capacity factor of 90% would produce. It will take three of the 1 MW units having a capacity factor of 30% to replace the single unit having a capacity factor of 90%.

Table showing fundamental comparisons:




Construction Cost per KW

Traditional Coal



Ultra Supercritical Coal (USC)



Natural Gas Combined Cycle (NGCC)






Integrated Gasification Combined Cycle (IGCC)

$6,000 – $10,000

Wind, land based



Wind, off shore


$4,000 – $5,000

Solar, Photovoltaic (PV)

16 – 25%*

$2,000 – $6,000

Solar, concentrating (CSC)

22 – 30%*

$5,000 – $7,000


  • *Efficiencies
  • Land based wind is average for U.S. – Capacity factors for installations in states along the front range may be higher.
  • Off-shore wind is from European data.

Levelized Cost of Electricity — LCOE

As the name implies, it is the cost of electricity after including construction costs, capacity factors, life of installation and fuel costs.

Comparing LCOEs for different installations where the same method of generation is used can establish which installation has the lowest cost of electricity. Comparing a wind farm in Montana with one in Illinois provides valid information.

Comparing LCOEs where different methods of generation are used can be misleading.

For example, comparing the LCOEs of wind turbines with LCOEs of natural gas combined cycle (NGCC) or coal-fired power plants is misleading because the same life time i.e., 20 years, is used for each of these methods of generating electricity when calculating LCOEs.

Wind turbines have an estimated life of 20 years, while NGCC and coal-fired power plants have lifetimes of 40 to 60 years. The longer lives allow many more years for recovering initial costs.

LCOEs can also be deceptive.

Some examples:

  • The EIA uses a capacity factor of 35% rather than 30% for land based wind turbines in the United States. It can use this estimate because the table is ostensibly for units entering service in 2019, which might include units installed along the front range. This results in a lower LCOE for wind than is justified by actual capacity factors realized over the past several years and can lead to the conclusion that electricity from wind is less costly than is actually the case today.
Map of Wind Power Class 1 - 7 and Speed at 10 and 50 meters
Map of Wind Power Class 1 – 7 and Speed at 10 and 50 meters
  • The EIA adds a penalty, equivalent to $15 per ton of CO2, when it calculates the LCOE for coal-fired power plants. It’s deceptive because the EIA web site doesn’t flag the penalty in its table comparing LCOEs, so the reader must consult the wordy text to find out that the penalty has been applied to the LCOE for coal-fired power plants.

As a result of using an inflated capacity factor for land based wind, and adding a penalty to coal-fired power plants, the EIA LCOE calculations make it appear as though wind has a lower cost than coal.

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