Cycling 101: Normalized Power vs Average Power

Content Source from Coach George Ganoung, first published on Training Peaks in 2015:

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[bengt_axle]

OK I understand the difference variance makes, but how actually is normalized power calculated? Is it divided by variance in power (and then multiplied by some factor)? Is the frequency of different power values taken into consideration and some zero values (coasting) thrown out? I've seen many web pages and videos on NP but nobody actually shows the math.