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Time of use tariffs
What is a time of use tariff?
A time-of-use tariff, often referred to as ToU, varies the cost of electricity depending on the time of day.
The tariff will typically charge more for electricity used during peak-hours, such as dinner time on a weekday, and cost less during off-peak hours. This is to encourage householders to use electricity when grid demand is lower, or generation from renewable sources is higher.
A time-of-use tariff is often a double win for householders and energy companies. Householders can benefit by saving money on their energy bills, and energy companies can relieve pressure on the grid.
Advantages of time of use tariffs:
- Electricity costs less during off-peak periods
- A time-of-use tariff will benefit households who are flexible in their electricity use, such as using appliances at night
- If you have an electric car, a time-of-use tariff is great idea for charging your car overnight
Disadvantages of time of use tariffs:
- Electricity costs more during peak times, such as the evening when it’s dinner time
- This tariff might not be suitable for households who most often require electricity during peak hours
- Rural communities in Scotland are currently suffering from delays in the smart meter rollout which is essential for time of use tariffs
Static vs dynamic tariffs
There are two types of time of use tariff – static and dynamic:
Static tariffs offer two or more rates for electricity at fixed times, often fixed long in advance. A static tariff works best with a compatible heating system, like a storage heater, that uses the off-peak rate. A typical static time of use tariff would be an Economy 7 tariff. Static time of use tariffs don’t require a smart meter but can be provided through one as well as other traditional meters.
Dynamic tariffs offer pricing that varies hour by hour. This can be dependent on the live environment, such as how much wind power is being produced. Agile Octopus is an example of a dynamic tariff. It’s important to know that a dynamic tariff requires a smart meter to be installed in the home it is serving.
Will a time of use tariff save money on my energy bills?
How much money you can save on energy bills will be down to how much you can move the bulk of your electricity use to outside peak hours. Households with ill health or young children might find their ability to benefit from a time of use tariff limited. Financial savings can also depend on the price of the tariff you choose.
Those who currently benefit most from a time of use tariff are households that have an electric car or home battery, who can charge these large items overnight when electricity is at its cheapest.
Do I need a smart meter for a dynamic time of use tariff?
Yes. Time of use tariffs are only available in homes that have a smart meter installed. A smart meter removes the uncertainty of estimated bills. It does this by sending meter readings to your supplier for you. Read our smart meter page to find out more, including how to get a smart meter from your supplier.
How can I switch to a time of use tariff?
Whilst there are some time of use tariffs available on the market, such as Economy 7, this may require a change of meter. They also require a compatible heating system. We recommend contacting your energy supplier directly to find out what time of use tariffs they offer, how to get a new meter for your home and about what heating system is best suited to individual tariffs.
Most tariffs on the market are fixed-rate or variable. A variable tariff requires a smart meter to operate. We also recommend you speak to your supplier about getting a smart meter installed.