Time of Use Tariffs 2024
Wondering how to compare time of use tariffs? NimbleFins explains all in this primer on time of use tariffs. They can be a real benefit for some households, so it's a great thing to start understanding what they're all about and how they work.
What is a Time of Use tariff?
A Time of Use (TOU) tariff is an electricity pricing plan that has cheaper rates at certain times of the day, and more expensive rates at other times of the day.
- CHEAPER in the middle of the night
- MORE EXPENSIVE in the late afternoon/early evening
The cheaper TOU rates are generally at night, when electricity demand is lower; and the more expensive TOU rates are generally during the day, especially late afternoon and early evening, when electricity demand is higher. Energy companies offer Time of Use tariffs to encourage consumers to use more electricity when nationwide demand is lower, and discouraging consumers from using so much electricity during peak times.
Why do they do this? A few reasons. Primarily, though, reducing peak demand can lower the pressure on UK energy infrastructure (i.e. the National Grid) and help avoid brown outs.
Time of Use tariff example
We quoted a Time of Use tariff from Octopus for our area and found that the rate paid during most of the day was pretty typical right now at 29.7p/kWh. But the rate was 40% higher for three hours in the late afternoon/evening (4pm - 7pm) and 40% lower for three hours in the middle of the night (2am - 5am).
This is a perfect example of a typical Time of Use tariff—regular rates most of the day, with cheaper rates during low-demand nighttime hours and higher rates during high-demand early evening hours.
Why is 4pm through 7pm a peak time for electricity consumption? It's when many households are getting home from work or school, and most households are starting to warm up and light their homes and cook dinner.
Will a Time of Use tariff work for me?
Whether or not a Time of Use tariff will work for you depends on two main factors:
- The kit in your home (e.g. Do you have an EV? Do you have a home battery?)
- If you can shift some of your energy usage to the nighttime (e.g. heating water, running the dishwasher, charging a home battery or EV at night)
In essence, if you can reduce your late afternoon/early evening electricity consumption and take advantage of cheap middle-of-the-night electricity rates, a Time of Use tariff might work well for you. To do this, you'll typically need to have kit like an EV or a home battery.
(In our opinion, those without an EV or a home battery may struggle to benefit from a TOU tariff. While there are savings to be found by scheduling the washer/dryer, dishwasher and other high-use appliances to run during the night at cheap TOU tariff times, this alone might not be enough to offset the higher TOU rates in the evening.)
To recap, a Time of Use tariff could work well if a household can:
- Take advantage of cheap middle-of-the-night electricity rates by running high-energy appliances, charging an EV or storing the energy (e.g. via battery) at night
- Reduce your late afternoon/early evening electricity consumption from the grid (e.g. using battery-stored energy then)
How to get the most from a TOU tariff
Here are some actions you can take to get the most from a TOU tariff:
- Charge your EV at night. Charging an EV on the cheapest nighttime TOU rates can bring the cost down to as little as 2.4p per mile (compare this to the ~15p per mile fuel cost of a petrol car).
- Use a home battery to store electricity. Set your battery to charge at night when prices are cheapest, then use this electricity during peak times when prices are higher.
- Use high-energy appliances at night. Use appliances such as a washing machine, tumble dryer or dishwasher at night when there's a cheap TOU rate to save money on your energy bills. These high-energy appliances can cost quite a lot to run on a standard tariff.
- Use electric heating. Heating contributes to a large chunk of energy bills, especially in winter. While gas heating is typically cheaper to run than electric heating, you may find that a TOU tariff means you can save money by using electric heating, if you time your heating to come on during the hours when rates are cheapest.
When you shouldn't get a Time of Use tariff
If you can't shift some of your electricity consumption to the nighttime (see above), you don't have a home battery and you expect to draw noticeably on your energy in the early evening, a Time of Use tariff could cost you MORE than a regular tariff. That's because you wouldn't be able to draw on the cheap electricity during the night, and you'd still draw on the expensive energy during the peak late afternoon/early evening hours.
If you will be drawing noticeably from the National Grid during peak times, then a Time of Use tariff can end up costing you MORE.
If you can avoid drawing on the National Grid during peak times by shifting some of your electricity consumption to the nighttime (e.g. run appliances at night) or using a home battery, then you might be able to benefit from a Time of Use tariff. Otherwise, probably not.
Benefits of Time of Use tariffs
Time of Use tariffs can result in lower electricity costs, provided a household can draw on cheap electricity during the night (when there are cheap TOU rates) and avoid drawing on electricity during the late afternoon/early evening (when the TOU rates are more expensive than the standard tariff).
TOU tariffs are particularly beneficial for those with a home battery system and/or an EV, both of which can be charged at night (when there are cheap TOU rates).
Cons of Time of Use tariffs
Time of Use tariffs can end up being MORE EXPENSIVE for households with high electricity usage during peak hours (e.g. late afternoon/early evening), when TOU rates are more expensive than normal.
Time of Use tariffs & battery storage
Time of Use tariffs and battery storage (including solar panel battery storage) are like when 1 + 1 = 3—the combination is worth more than each on their own.
Do you need a battery with a Time of Use tariff?
No, you do not need a home battery with a Time of Use tariff—BUT a home battery can work really well with a Time of Use tariff.
How do Time of Use tariffs & battery storage work together?
With a home battery storage system, households can charge batteries from the National Grid during the hours of cheaper Time of Use tariff electricity (e.g. during the night) and then use this electricity whenever they need it (or maybe even export it back to the National Grid—more on that later).
For example, a household could charge its home battery during the night at their cheapest electricity rate (e.g. 19p/kWh, 40% less than regular rates), then later in the day when electricity is more expensive, draw electricity from the battery to run the home (instead of drawing electricity from the grid). That way, energy used in the home during peak hours was actually drawn from the grid during cheap, off-peak hours the previous night.
And there's another thing to mention here: solar. You can use a TOU tariff and battery with or without solar panels. We'll explain how solar fits in:
Solar, battery & Time of Use tariffs
Adding a solar panel system to the above scenario (TOU tariff + home battery) is even more beneficial. In that case, you can charge up your home battery both from the grid at night (at cheap rates) and also from your solar panels during the day (free electricity). When a solar panel system includes a battery, electricity not used by the home at the moment can flow to the battery, charging it for later use.
With a solar and battery setup enabling cheaper energy storage, a home could have plenty of juice stored to power the home during peak hours, when a TOU tariff is expensive. (This depends on your usage, the solar panel setup, the weather, and other factors, of course.) In addition, it may even be possible to sell electricity from the battery (and/or solar) back to the grid, earning some money on the electricity that was generated on the cheap (either free solar or during cheap TOU hours).
Can you sell extra energy back to the grid?
Yes, it's possible to sell extra energy back to the grid using a SEG tariff.
A Smart Export Guarantee (SEG) tariff pays households for the renewable electricity they export to the grid. SEG replaced the Feed-in Tariff (FIT) scheme and has been in place since 1 January 2020. SEG rates are generally lower (worse) than FIT tariffs, unfortunately for consumers.
Since this page is about TOU tariffs, the big question is, can you sell energy back to the grid that you drew from the grid on a cheap TOU tariff during the night?
It depends. Some energy companies only permit SEG payments if the exported power is actually coming directly from the solar panels and not from other sources like a storage battery. For example, ScottishPower says, "If you also have a battery storage system... the output from the batteries will not be measured by the export meter. This is due to it being classed as 'brown energy', which isn’t eligible for payments in our SEG scheme".
But other energy companies do allow energy from a battery to be exported back. For example, British Gas says, "Yes, you can apply for a tariff and receive SEG payments whether the electricity you export comes directly from your renewable system, or from your battery storage". So, with British Gas, you could theoretically draw cheaper TOU energy at night and sell it back later in the day, so long as the rates made sense (e.g. the off-peak TOU tariff is lower than the SEG tariff). Note, you would still need a solar or other renewable energy system, as this is a requirement of SEG, so it's not possible to have only a battery, TOU imports and SEG exports (without renewable energy).
To recap, SEG is only available to those with an eligible renewable electricity generating system, like solar. Energy companies permit exporting/selling energy back to the grid via a SEG tariff but only some energy companies permit this exported energy to come from battery storage; others like ScottishPower only accept exported excess energy directly from the renewable energy source (e.g. solar panels).
| Can TOU electricity be sold back on a SEG tariff? | ||
|---|---|---|
| ScottishPower | No | If you also have a battery storage system, we’ll need an image of the install schematic (or single line diagram) to show that the output from the batteries will not be measured by the export meter. This is due to it being classed as ‘brown energy’, which isn’t eligible for payments in our SEG scheme. |
| British Gas | Yes | Yes, you can apply for a tariff and receive SEG payments whether the electricity you export comes directly from your renewable system, or from your battery storage. |
Types of TOU tariffs
Most Time of Use tariffs follow this setup:
- A cheap rate during the night (i.e. off peak)
- An expensive rate in the late afternoon/early evening (i.e. peak)
- A regular rate the rest of the day
Typically, TOU tariffs are 'static', meaning the rates for each time window are fixed when the contract is taken out.
TOU tariffs could also be 'dynamic', with rates changing every 30 minutes to reflect the UK wholesale energy market. Currently we are not aware of any dynamic TOU tariffs in the UK marketplace.
FAQs
Do you need an EV to get a Time of Use tariff?
If you have an EV, you will find more Time of Use tariffs available to you. But it is possible to find a Time of Use tariff in the marketplace for homes without an EV—for example, Octopus's Flux tariff (although to be eligible for this tariff, you do need solar panels!).
Is Time of Use tariff the same as economy 7?
Yes and no. Economy 7 is essentially a type of Time of Use (TOU) tariff. TOU tariffs have variable pricing at different times of the day, as do economy 7 tariffs. But while economy 7 tariffs only have variable (cheaper) rates during the night, TOU tariffs can and usually do have variable rates during the day as well as during the night. So, in short, economy 7 is like a limited version of a TOU tariff, with less variability.
Both economy 7 and TOU tariffs were designed to encourage people to shift their energy use away from peak times. TOU is like a more sophisticated and modern form of economy 7.
Do I need a smart meter for a Time of Use tariff?
Yes, Time of Use tariffs require a smart meter so that your energy company knows when you're using electricity, and how much to charge you for it. For example, a smart meter will tell the energy company how much electricity you used during their cheap-rate window of 2am - 5am, and be able to charge you accordingly.
Smart meters can send readings as often as every 20 seconds to the Comms Hub (whilst also recording the cumulative total per minute). That said, they are often set to send readings every half hour (but each of these 'sends' would include 30 separate 1-minute readings).
Do you need a battery with a Time of Use tariff?
No, you do not need a home battery with a Time of Use tariff—but a home battery can work really well for those with a Time of Use tariff. You can use a battery with or without solar panels. Let's talk about using a battery and Time of Use tariff without solar first, as it's a bit simpler, then we'll explain how solar fits in:
Home battery & TOU, without solar
With a home battery storage system, households can charge batteries from the National Grid using their Time of Use tariff during the hours of cheaper electricity (e.g. during the night) and then use this electricity whenever they need it (or even export it back to the National Grid).
For example, a household could charge its home battery during the night at their cheapest electricity rate, then in the late afternoon/early evening at peak times when their Time of Use tariff is expensive, the household draws electricity for their home from the battery. That way, battery energy used in the home during peak hours was actually drawn from the grid during cheap, off-peak hours the previous night.
Home battery & TOU, with solar
Adding a solar panel system to the above scenario is even more beneficial. In that case, you can charge up your home battery both from the grid at night (cheap rates) and also from your solar panels during the day. With solar and a battery, electricity not used by the home at the moment can flow to the battery, charging it for later use.
With a solar and battery setup enabling cheaper energy storage, you could have plenty of juice stored to power your home during peak hours, when a TOU tariff is expensive (depending on your usage, the solar panel setup, the weather, and other factors, of course). In addition, if you do in fact have a lot of energy stored in your battery, you might even sell it back to the grid during peak times, earning some money on the cheap electricity you stored earlier in the day (either free solar or during cheap TOU hours).
Is there TOU for gas?
No, at least not yet. Currently, Time of Use tariffs only apply to electricity. They were designed to help lessen the load on the National Grid during peak demand times (late afternoon/early evening), which applies to electricity only.
Do TOU tariffs prices actually change every half hour with UK wholesale energy prices?
Octopus has a tariff called Agile Octopus that gives access to half-hourly energy prices, tied to wholesale prices and updated daily. Theoretically, this tariff will be cheaper when the energy in the grid is greener, and more expensive when energy is dirtier (usually between 4-7pm, when the UK's fossil fuel generating stations have been turned on to meet high demand). This tariff should therefore work like a Time of Use tariff, with pricing cheaper at night and more expensive at peak times—but pricing will fluctuate and you may not know exactly which windows are the cheapest or most expensive on a given day.
This type of tariff is referred to as 'dynamic' pricing.
However, most TOU tariffs are not dynamic, but instead are fixed ('static') when you sign up for your contract. For example, Octopus has another product with static time of use pricing, called Flux. We were quoted for a Flux TOU contract with fixed rates of 17.8p/kWh during 2am-5am, 41.6p/kWh during 4pm-7pm and 29.7p/kWh the rest of the day.
SMETS2 smart meters and some types of first generation (SMETS1) smart meters can send usage readings every half hour (and could even send readings as often as every 20 seconds to the Comms Hub).
What to look for in a time of use tariff
There are a few features to check before signing up to a Time of Use tariff:
- Rates for different windows throughout the day and night
- Early exit fees
- Any requirements (e.g. a certain type of smart meter or that you have an EV or solar panels; an MCS document if you have solar)