The diversity factor is defined as the ratio of the sum of the individual maximum demands of the various sub-divisions of a system to the maximum demand of the whole system. It is a measure of how the individual loads within a system or circuit vary in their usage patterns over time. Generally, it's value is greater than the unity and is equal to the unity only when all maximum demands occurs simultaneously. Generally, maximum demands of the consumers do not occurs at the same time. Diversity factor can be defined for loads, sub-stations, feeders and generating stations.
When the value of the diversity factor is greater than unity, then it is a good diversity factor but when it is equal to the unity, it represents a poor diversity factor. A high diversity factor has the effect of reducing the maximum demand. It is obtained by using electrical energy at night load or light load periods. The coincident nature of maximum load demands helps engineers to plan size if equipment sizing and distribution network more accurately as it is a key factor in the economic sizing of plant.