Time-of-use energy tariffs

What is a time-of-use tariff?

Time-of-use tariffs are a recent development by some energy suppliers to encourage customers to use energy at off-peak times. Suppliers offer cheaper prices when demand is low, and higher prices at more popular times. Balancing demand across the day supports a more flexible and sustainable electricity system.

Why have they been introduced?

UK energy infrastructure is under pressure. Rising energy demand, and the UK government’s carbon reduction targets, have brought uncertainty to the future of energy generation. 

Traditional coal powered plants are closing, but there’s been underinvestment in suitable alternatives from renewable sources. This has led some energy experts to talk of an ‘energy gap’ with demand outstripping supply. By balancing demand with time-of-use tariffs, suppliers could help close this gap.

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 quieter periods, for example between 10pm and 8am. They aren't set in stone though. The off-peak hours vary depending on the time of year, your energy supplier and where you live. To find out off-peak hours, call your energy supplier or check your bill.

There aren’t a huge amount of these tariffs available, so a lot of suppliers just charge a flat rate for electricity.

What are the benefits and limitations of time-of-use tariffs?

Benefits

• Potentially cheaper bills
• Relieves pressure on UK energy infrastructure

Limitations

• Not many energy suppliers currently offer these tariffs
• You’ll need to change the way you use energy to cut your bills - things like running your washing machine at night

How are time-of-use tariffs different from Economy 7?

The incentive to use energy at off-peak times is not a new development. Economy 7 tariffs have been around for many years and were introduced to encourage people to charge storage heaters overnight. This was important as traditional coal and nuclear power plants couldn’t be turned off at night. So the power would be wasted if people didn’t use it.

Time-of-use tariffs are different. They have several different rates, rather than just one cheap rate at night. Also, time-of-use tariffs work with any appliance or form of heating, whereas Economy 7 only works with inefficient and difficult-to-use storage heaters.

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

A smart meter  is essential. That’s because it’ll automatically send information about  when you’re using energy to your supplier. Without knowing, your supplier won't be able to charge you accurately.

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 start using energy-intensive appliances at night, things like washing machines and tumble dryers, you’ll save more than if you stick to daytime use.