First principles calculations using the generalized gradient approximation to density functional theory have been carried out to evaluate formation energies of defects and the resultant changes in electronic structure of NaCoO 2 and Na 0.5 CoO 2 . The calculated formation energies confirm that Na vacancies form readily in this material, particularly through volatilization at elevated temperatures, consistent with experimentally observed behavior. Numerical analysis of the change in charge distribution upon Na vacancy formation shows that the vacancy plays a crucial role in modifying the electronic properties of the material. In these p-type thermoelectric materials, Na vacancies act as a reservoir for the minority carrier (electrons), removing them from the CoO 2 layer while simultaneously increasing the concentration of majority carriers (holes) available for conduction in the CoO 2 layer.