Time-of-Use Rates and Solar Savings

What Are Time-of-Use Rates?

Time-of-use (TOU) rates are an electricity pricing structure where the cost per kilowatt-hour varies based on the time of day and, in some cases, the season. Electricity is more expensive during periods of high demand (peak hours) and cheaper when demand is low (off-peak hours).

Utilities implement TOU rates to encourage customers to shift electricity usage away from peak periods, reducing strain on the grid during high-demand times. For solar homeowners, TOU rates create both opportunities and challenges.

How TOU Rate Structures Work

Typical TOU Rate Schedule

A common TOU schedule divides the day into two or three pricing tiers:

Off-peak: Overnight hours (typically 9 PM to 7 AM) and weekends. Rates are lowest, often $0.10 to $0.15 per kWh.

Mid-peak (shoulder): Morning and early afternoon (7 AM to 4 PM). Moderate rates, typically $0.15 to $0.25 per kWh.

On-peak: Late afternoon and evening (4 PM to 9 PM). Highest rates, often $0.30 to $0.50 per kWh or more.

Seasonal Variations

Many TOU plans have seasonal adjustments. Summer peak rates are typically higher than winter peak rates because air conditioning drives massive demand on hot afternoons and evenings.

Why Peak Hours Are Shifting

Historically, electricity demand peaked in the early-to-mid afternoon. But as millions of solar panels have been installed across the country, they flood the grid with electricity during midday hours, pushing the peak demand period later into the evening when solar production drops off. This phenomenon, known as the duck curve, is why many utilities have shifted their peak pricing to 4 PM to 9 PM.

How TOU Rates Affect Solar Homeowners

The Challenge: Solar Produces During Mid-Peak, Not Peak

Your solar panels produce the most electricity from 10 AM to 3 PM, which falls into the mid-peak or even off-peak period under many TOU schedules. Meanwhile, peak pricing kicks in just as your panels are producing less in the late afternoon and evening.

Under net metering with TOU rates, your solar exports during midday may be credited at the lower mid-peak rate, while your imports during the evening are billed at the higher peak rate. This mismatch can reduce the net metering benefit.

The Opportunity: Battery Storage Arbitrage

This is where battery storage transforms the equation. By storing your midday solar production in a battery and discharging it during peak evening hours, you effectively sell your solar electricity at the peak rate rather than the mid-peak rate.

For example, if the mid-peak rate is $0.18 per kWh and the peak rate is $0.45 per kWh, shifting 10 kWh of solar electricity from mid-peak to peak saves you $2.70 per day, or roughly $985 per year. Over a 15-year battery lifespan, that is nearly $15,000 in value from a single strategy.

Residential rooftop equipped with solar panels - Time-of-Use Rates and Solar Savings

Strategies to Maximize Savings on TOU Rates

Strategy 1: Shift Heavy Loads to Off-Peak Hours

Run your dishwasher, washing machine, dryer, and pool pump during off-peak hours. Many of these appliances can be set on timers or scheduled through smart home systems.

Strategy 2: Pre-Cool or Pre-Heat Your Home

Run your air conditioning or heating system during mid-peak hours when solar is covering the cost, then let the home coast through the peak period. A well-insulated home can maintain comfortable temperatures for 2 to 4 hours without active cooling or heating.

Strategy 3: Charge Your EV During Off-Peak or Solar Hours

If you have an electric vehicle, schedule charging for overnight off-peak hours or midday solar hours. Avoid charging during peak hours when rates are highest.

Strategy 4: Install Battery Storage

As discussed, a battery lets you time-shift your solar production to maximize value. This is the single most impactful strategy for TOU rate optimization.

Strategy 5: Use Smart Home Automation

Smart thermostats, smart plugs, and home energy management systems can automatically shift loads to cheaper hours. Products like the Sense energy monitor help you identify which appliances consume the most energy and when.

Should You Switch to a TOU Rate Plan?

If you have solar panels, switching to a TOU rate plan can be beneficial, but it depends on your specific usage patterns:

TOU Rates Are Favorable When:

You have a battery to time-shift solar production

Your household is empty during the day and you can shift loads to off-peak

You have an EV that can charge overnight

Your utility's peak-to-off-peak price differential is large

TOU Rates Are Less Favorable When:

You use a lot of electricity during peak hours and cannot shift usage

You do not have battery storage

The peak-to-off-peak differential is small

You work from home with heavy daytime electricity use

Solar panels generating clean energy under blue sky - Time-of-Use Rates and Solar Savings

Calculating Your TOU Savings

To estimate whether TOU rates benefit you, compare your current flat-rate bill with a projected TOU bill based on your actual usage patterns. Most utilities offer online tools that model this comparison, or you can request a shadow billing analysis.

Consider the following example:

Flat rate: 900 kWh at $0.18/kWh = $162/month

TOU rate: 300 kWh off-peak at $0.12 + 350 kWh mid-peak at $0.20 + 250 kWh peak at $0.40 = $36 + $70 + $100 = $206/month

In this case, the flat rate is cheaper. But with solar and battery:

TOU rate with solar + battery: 300 kWh off-peak at $0.12 + 0 kWh mid-peak (covered by solar) + 0 kWh peak (covered by battery) = $36/month

The combination of solar, battery, and TOU rates cuts the bill by 78 percent.

The Future of Electricity Pricing

The trend across the country is unmistakably toward time-varying rates. As more utilities roll out smart meters and adopt TOU pricing, understanding how to navigate these rate structures will become essential for every homeowner.

Solar panels paired with battery storage position you perfectly for this future. SmartEnergyUSA can connect you with installers who specialize in designing solar-plus-battery systems optimized for your local TOU rates. Get a free quote today and start saving smarter, not just more.