Most of us are used to paying a single amount for electricity, turning devices on and off when it suits us, not necessarily when it’s best for the grid. Time-of-use (TOU) tariffs are an alternative, offering different prices at different times.
The idea is that cheaper electricity is offered at off-peak times, when there’s less demand, but there’s a surplus to pay when electricity is in high demand. Used properly, a TOU tariff can save money, but they’re currently difficult to understand and compare, and smart meters don’t go far enough to make energy savings easier.
What is a time-of-use tariff?
All electricity is provided over the national grid. At peak times, such as around dinner time, electricity use spikes and the grid often has to cater for high-demand times by firing up gas power stations.
By shifting energy usage to non-peak times, electricity is cheaper to provide, and it helps balance the grid and the UK use more eco-friendly sources of electricity.
As an incentive, TOU tariffs offer flexible pricing, with cheaper unit rates in off-peak times and more expensive rates during peak times. The idea is that you can save a lot of money if you can shift your energy usage.
Aren’t these just Economy 7 tariffs?
Economy 7 will be familiar to anyone who lives in a home with electric heating and who has night storage heaters. With this kind of tariff, there are seven hours of cheaper electricity at night, supplied by a separate circuit in the house that only turns on during these hours.
In a way, TOU tariffs are similar, but they apply to everything in your home and, thanks to smart meters, the pricing can vary multiple times during the day. Sounds brilliant, right? In theory, yes, but in practice, trying to get the right tariff is hard, as is using it to its maximum.
It’s not always easy to move your electricity usage
Peak hours for electricity are between 4pm and 7pm. Shifting load outside of those times helps reduce pressure on the grid and gives you cheaper rates.
At the time of writing, E-On Next was offering a Next Smart Save v8 tariff. Prices vary by region, but for my home in London, the tariff offers electricity at 37.05p per kWh during peak hours (4pm to 7pm); 20.9p per kWh off-peak (7pm to 2am, and 5am to 4pm); and 16.03p per kWh for super off-peak (2am to 5am).
Given that the current price cap is 26.53p per kWh, the off-peak prices mark a good overall saving, provided you can move your energy use, but that’s not always easy.
Reading around the electricity suppliers’ websites, the advice is to do things like setting a washing machine timer so the machine runs during the cheapest period, or using the oven later.
That’s fine, if not a bit basic: what about the wet washing at the end if it needs to go straight into a tumble dryer? Can you wait until the next day to run a tumble dryer? Probably not.
As Octopus suggests, “Use ovens, air fryers, and slow cookers during non-peak hours. Bonus: your kitchen won’t get as hot in the middle of the day.”
Only, cooking isn’t always something you can shift. If you’re cooking Sunday lunch, for example, your oven will be on in the middle of the day. And, if you’ve got kids who need to eat when they get in from school, then the oven goes on when it needs to.
And, there are things that can’t be scheduled, such as the fridge/freezer. These are huge energy guzzlers, but you can’t schedule them to run their compressors at specific times to reduce costs.
Too much choice, too much kit to think about
A big issue with TOU tariffs is that there are so many to think about. The E-ON Next one above is a straightforward one for generic use, but hunt around and you’ll find that there are specific tariffs for people with heat pumps, those with solar panels and/or batteries, or those with an EV.
Each tariff does something slightly different, but they require you to have some understanding of where your main energy use comes from and where you can make the biggest savings.
That’s not easy to do, particularly as some tariffs have certain restrictions, such as the number and type of cars you can charge with cheaper electricity. Or, having a compatible inverter and battery that can be charged at off-peak times.
For some TOU tariffs, having a battery is almost an essential, so you can store up cheap power overnight and then use it during the more expensive period. Only, that’s not quite as straightforward as it may sound: batteries have a cost and you have to factor that into your calculations to work out a particular tariff is good value or not.
Using your smart meter data to calculate which tariff is best for you could well help, but getting access to this data and doing anything with it is too complicated.
Devices are too dumb
In addition, devices are often too dumb. For a washing machine, using a basic delay timer is fine, but why not use proper scheduling? Haier appliances, which include Haier, Candy and Hoover, use the hOn app, which has smart scheduling: tell the app when your cheaper electricity periods are. Other manufacturers could follow suit.
But that tech should apply to other devices. We’ve got connected fridges, so why can’t the compressor cycle be aligned to lower prices, with a fridge having a bit more tolerance for temperature changes during peak times, and then over-cooling when power’s cheap to reduce overall running costs?
For some TOU tariffs, there can be sudden times when prices plummet or electricity is even offered for free. Advanced scheduling to take advantage of low prices is available through some services, such as Octopus Labs, but it’s not straightforward to set up for the average user.
TOU is the future
TOU tariffs are clearly the future and a way of bringing down sky-high electricity costs, but they need to be simpler to choose, easier to use and devices need to have more automation to make the most of them before mainstream adoption can be a thing.
