**Load Factor: **

The ratio of average load to maximum demand is known as load factor.

Load Factor= Average Load/Maximum Demand

If the plant is operated for T hours

Load Factor (LF) = (Average Load * T)/(Maximum Demand * T)

Load Factor= (Number of units generated in T hrs) or (Energy consumption in T hrs)/

Maximum Demand * T hrs

Load Factor is always less than 1 because average load in small than maximum demand. The Load factor plays key role in determining the over all cost per unit generated, Higher the load factor lesser will be the unit cost of generation.

**Diversity Factor:**

It is define as the ratio of sum of maximum individuals demand to the maximum demand on power station.

Diversity Factor = (Sum of individual maximum demand)/(Maximum demand on power station)

Usually the maximum demand of various consumer doesn’t occurs at the same time and the simultaneous maximum demand less than their total maximum demand. The Diversity factor can be 1 or greater than 1.

###### Significance of Load Factor and Diversity Factor

Load Factor and Diversity Factor play an important part in the cost of the supply of electrical energy. Higher the value of Load factor and diversity factor lower will be the overall cost per unit generation.

Higher Load factor means greater average load, resulting in greater number of unit generated for a given maximum demand. Thus, the standing charges which one proportional to the maximum demand and independent of number of unit generated, can be distributed over a large number of units supplied and therefore overall cost per unit of electrical generated will be reduced.

The capital cost of the power station depends upon the capacity of the power station lower the maximum demand of the power station, the lower is the capacity required ac therefore lower is the capital cost of the plant. With the given number of consumer the higher the diversity factor of their load, the smaller will be the capacity of the plant required and consequently the fixed charge due to capital investment will be much reduce.

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