Installed capacity, sometimes termed peak installed capacity or rated capacity, describes the maximum capacity that a system is designed to run at.
If for example, a solar farm has an installed capacity of 24 megawatts, the system will have the ability – the components and hardware – to produce a maximum of 24 megawatts with optimal sun exposure.
If a system with an installed capacity of 24 megawatts has optimal sun exposure for one hour, it will produce 24 megawatt hours of electricity.
Installed capacity relates mainly to calculating the cost of solar panels. Looking at how many watt hours an installation will generate produce is used for assessing how many solar panels are required – comparing solar energy production to existing electricity usage.
Similarly, wind turbines use installed capacity to describe how much electricity may be generated by a turbine in optimal wind conditions – describing how many watts of electricity the turbine hardware can possbily produce.