In the context of electricity, the diversity factor is the ratio of the sum of the individual non-coincident maximum loads of various subdivisions of the system to the maximum demand of the complete system.
Thus, even though each unit runs a total of a couple of thousands (2000) hours a year, they do not all come on at the same time to affect the facility's peak load.
If the energy balance done for this facility comes out within reason, but the demand balance shows far too much power for the peak load, then one can use the diversity factor to bring the power into line with the facility's true peak load.
So, in the context of hot water systems the diversity factor is always less than 1.
For domestic hot water at 40 dwellings it is slightly below 0.1 and keeps decreasing further with additional connections.
The unofficial term diversity, as distinguished from diversity factor, refers to the percent of time available that a machine, piece of equipment, or facility has its maximum or nominal load or demand; a 70% diversity means that the device in question operates at its nominal or maximum load level 70% of the time that it is connected and turned on.