Power loss mechanisms in large wind farms are complex due to the multiscale nature of wind farm aerodynamics. Recent studies based on ‘two-scale momentum theory’ have brought new insights into this field; however, most of them have been limited to idealised wind farm scenarios. To better understand power loss mechanisms in real wind farms, in this study, we extend the framework of the two-scale momentum theory to non-ideal turbine design and layout scenarios, and then introduce simple analytical models to account for the associated power losses. This extension provides a holistic view of how turbine design, layout, operating conditions and atmospheric conditions collectively determine the amounts of different types of power losses in real wind farms, including the losses due to turbine-wake interference (i.e. ‘internal’ power loss) and farm-atmosphere interaction (i.e. ‘external’ power loss). We also present a simple iterative method for calculating the optimal farm induction factor that maximises the overall farm power for a given set of conditions, including the atmospheric boundary layer height. Analogously to blade-element momentum theory playing a key role in wind turbine design optimisation, the present theory may play a key role in wind farm design optimisation.