Explain the term 'capacity factor' in power generation.

Capacity factor is a crucial metric in power generation that quantifies the efficiency of a power plant in converting its potential output into actual energy produced over a specific time frame. It is calculated as the ratio of the actual output (in megawatt-hours, for example) to the maximum possible output that could have been generated if the plant operated at full capacity continuously during that period. This provides insight into how effectively a power plant is utilizing its installed capacity to produce electricity.

Understanding the capacity factor helps assess the reliability and performance of various types of power plants. For instance, plants with higher capacity factors indicate a better utilization of resources and may suggest less downtime or maintenance. This is especially significant in planning and optimizing energy generation and understanding the role of renewable energies in the overall energy mix.

In contrast, other answers pertain to different aspects of power generation. The maximum output capability details the peak performance a plant can reach, but does not consider actual performance over time. The frequency of power generation during peak hours is more related to demand management rather than the efficiency of generation. Lastly, measures of energy losses due to inefficiencies focus on losses rather than the overall capability of the plant to generate energy effectively over a given period.