Capacity shortage is almost the same as ‘unmet load’, meaning electrical demand that goes unserved because electrical production falls short of demand. The difference is that capacity shortage comprises both unmet load and unmet operating reserve.

For example, consider a simple system consisting of a single 95 kW diesel generator. If in some time step the load is 100 kW and the required operating reserve is 15 kW, then the generator will produce 95 kW, and the unmet load will be 5 kW, the unmet operating reserve will be 15 kW, and the capacity shortage will be 20 kW. If in some other time step, the load is 90 kW and the required operating reserve is 15 kW, then there will be no unmet load, but the generator will provide only 5 kW of operating reserve, which is 10 kW less than the required amount, so the capacity shortage will be 10 kW.