Time of use: Making the most of off-peak tariffs
Most people in the UK are on energy tariffs that offer one price per unit of energy used, no matter the time of day. But this is not how the energy market works. Energy is traded in half hourly periods, meaning the price can change in each of those periods.
What if the price of your energy tariff worked the same way? Time of use (TOU) tariffs will do a similar thing with cheaper rates incentivising us to move more of what we use to off-peak times.
What is a time of use tariff?
A time of use tariff is a multi-rate tariff designed to offer cheaper rates when energy demand is at its lowest. Some tariffs will also be able to offer cheaper electricity rates on days when renewable generation is high, such as very windy or sunny days.
Due to the ongoing volatility in the energy market, there are not many TOU tariffs available at the moment. We do not currently have a TOU tariff, but we hope that will change in the future.
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Types of time of use tariff
There are different types of TOU tariffs depending on the frequency that the electricity rates change.
Static rates
With a static rate TOU tariff, there are two or more rates for electricity and these change at fixed times of the day depending on energy demand.
Dynamic rates
With a dynamic tariff, there are different prices per unit of electricity throughout the day similar to the wholesale energy market. This means that prices can change from day to day, and as mentioned before can depend on the amount of wind or solar energy being generated at any time.
Time of use tariffs are slightly different to Economy 7 tariffs, which only offer one cheaper rate for seven hours overnight. They were created so people could charge storage heaters at night using cheaper electricity.
Benefits of time of use tariffs
As more TOU tariffs are introduced, increased benefits will be seen not just for customers, but for the energy grid as well.
For customers, these tariffs will offer cheaper electricity at certain times, so if they make use of those time periods, they will see their bills lower.
More widely, TOU tariffs will lead to a more sustainable energy system, where companies will better be able to manage supply and demand. At peak times the energy demand can outweigh the available supply, leading to price spikes as more expensive forms of energy generation are used to fill the supply gaps.
With TOU tariffs incentivising people to use their energy at non-peak times, the country’s energy consumption will flatten throughout the day, rather than seeing large peaks and troughs. This will lead to fewer supply shortages and blackouts, and overall will create a more efficient, sustainable electricity grid.
Do you need a smart meter to be on a time of use tariff?
The simple answer is yes. Smart meters send information about your energy usage to your supplier and are able to send your readings every half an hour. If you’re on a TOU tariff, it is important for your supplier to know exactly when you’re using the energy to ensure that you’re charged at the correct rate.
How to make the most of a time of use tariff
TOU tariffs are not suitable for everyone, as people will need to make certain lifestyle changes to make the most of the cheaper electricity rates. There are things you can do to get the largest savings from a TOU tariff:
- Charging your EV at night. Time of use tariffs are good for people who have an EV, as the rates will be cheaper overnight, so it will not cost as much to charge your vehicle throughout the night.
- Use high-energy appliances at night. Using appliances such as a washing machine or dishwasher at night can save money on your bills, as these are quite high-energy appliances so can cost quite a lot to run on a standard tariff.
- Have electric heating. Most of your energy usage will come from your heating, especially in winter. By having electric heating instead of gas, you will be able to get greater saving from a TOU tariff, especially if you time your heating to come on during the cheaper rates.
- Make use of battery storage. Battery storage is a good way to make the most of the cheaper electricity rates. By setting your battery to charge when prices are lowest, you can then use this power during peak times when prices are higher.
