Future energy basics: What is a time-of-use tariff?

  • #EV tariffs
  • Feb 19, 2021

Time-of-use tariffs offer at least two different prices for the energy you use each day. They encourage households to use energy when demand is normally lower. Some time-of-use tariffs also have ‘peak’ rates to encourage us to avoid using energy at busy times.

Energy suppliers offer customers on time-of-use (ToU) tariffs cheaper prices when demand is low.

Smoothing demand out across each day supports a greener electricity system - as we won’t have to switch to more polluting fossil-fuel based generation to cover the normal daily peaks in demand.

Fast Facts

  • Time-of-use tariff customers can cut their bills by using energy at off-peak times
  • They smooth out energy demand
  • Having a smart meter is necessary for most time-of-use tariffs
  • Comparing tariffs for your use will help you find the best energy deal

What’s wrong with flat prices?

UK energy infrastructure is changing rapidly. More and more energy from renewables is great. If we want to hit our carbon targets, we need to look beyond traditional coal powered plants to help out in the times where supply doesn’t keep up with demand.

Time-of-use tariffs, especially as more and more households charge electric cars and switch to electric heating, can help by giving us price signals that tell us when we should be switching on and off. In other words, by making savings with time-of-use tariffs, households will also help close any gap between energy supply and demand.

What are peak and off-peak times for electricity?

Some energy suppliers charge less for using electricity at certain times. These ‘off-peak’ hours tend to be the quietest periods, most of them are between midnight and 7am and sometimes they are offered during the day at the weekend too. We have a complete list of tariffs and the hours they use.

What are the pros and cons of time-of-use tariffs?

Pros

  • Cheaper overnight energy
  • Energy from greener sources for your home
  • Relieves pressure on UK energy infrastructure

Cons

  • You’ll make the best savings if you change the way you use energy - things like running your washing machine at night
  • Standing charges and daytime rates can be higher, as suppliers are keen to protect their profit margin.

Do I need a smart meter for a time-of-use tariff?

A smart meter is essential for all but a few that will work with a legacy Economy 7 meter. A smart meter automatically sends information about  when you’re using energy to your supplier.

Is overnight charging greener?

Economy 7 was built on the idea that people with night storage heaters would use more energy during the night when fewer other people were using it. This was because energy from coal and nuclear was produced round the clock and couldn’t easily be switched on and off.

Coal has been squeezed out, replaced by wind, solar and bioenergy

Coal has been eliminated from the UK energy mix. It has been replaced by wind, solar and bioenergy, meaning that electricity generation from fossil fuels has halved since 2010. In early 2020, 42% of the electricity supply within the UK was produced by renewables, mainly driven by high volumes of wind generation.

The challenge for green power is that our routines are surprisingly similar - we get up, travel and cook at the same time. We create predictable peaks and troughs in demand. Renewable power, like wind and sun, doesn’t turn up at the right moments to supply these routine demands.

EVs on the other hand can be charged at times when there is low demand on the grid, so they are a key tool in ensuring that renewable power is efficiently used and not wasted.

Cheaper is greener: carbon intensity and price fluctuate together over each 24-hour period. Source: Caldera Heat Batteries Ltd.

How much money could I save on a time-of-use tariff?

How much you can save is entirely up to you. Suppliers can offer savings on off-peak energy, but you’ll need to change your energy habits. If you only charge your electric car at night, you’ll save over £200 each year if you drive an average number of miles per year. If you can also shift your use of energy-intensive appliances (things like washing machines and dishwashers) then you can save much more. Their are plenty of ways to ensure that you save money when you switch to an EV tariff, why not start with a free, online comparison of the best time-of-use tariffs for your car and lifestyle.