A time of use tariff charges you varying electricity prices at different times of day. Your business could pay less overall if enough of the electricity you use is during a cheaper time of day, or you can store electricity bought at a cheaper time and use it later when prices are higher.
In this article, we explain how time of use tariffs work and whether it’s worth switching to one if you’re currently on a single-rate tariff.
How does a time of use tariff work?
You pay different amounts for the electricity you draw from the grid, depending on when you draw it.
There are two main types of time of use tariff:
| Type | How it works | What it means for your business |
|---|---|---|
| Fixed time of use tariff | You pay different rates during set periods, such as day and night. | You know the cheaper and more expensive times in advance. |
| Dynamic time of use tariff | Your price changes regularly, often every half hour. | The cheapest and most expensive times can change from one day to the next. |
There are no standard off-peak hours. Some tariffs use day, night and peak periods, and the exact times can vary by tariff, season, or when the clocks change. It all depends on the terms of your tariff.
How do you work out whether a time of use tariff will save your business money?
Follow these two steps to find out whether a time of use tariff will save your business money:
1. Price the same electricity use on both tariffs
Find out how much electricity you used in the last 12 months and what times of day you bought it.
Half-hourly data is best because it shows your electricity use in every 30-minute period. Half-hourly data analysis lets you see how much of your electricity already falls into cheaper and more expensive periods.
A full year’s data is important because how you use electricity may change between summer and winter, weekdays and weekends, or busy and quiet periods. And you need this data to do these calculations accurately.
2. Get time of use tariff quotes and compare them
Go to several suppliers, or your energy broker to get quotes that contain:
- The unit rates
- The hours each rate applies
- The standing charge
- Any other costs in writing
Then, take those figures and work out what each supplier’s tariff would cost you.
Here’s how. Let’s say your business buys 300,000 kWh a year and currently pays 25p per kWh at all times. So, your annual unit-rate cost is £75,000. You used 240,000 kWh during the day and 60,000 kWh during the night.
These fictional quotes show how different the result could be, depending on the unit charges in time of use tariffs from competing suppliers. To keep the example simple, they all use the same day and night periods and we have left standing charges and other costs out for now.
| Tariff | Day rate | Night rate | Cost using your existing electricity use | Compared with current tariff |
|---|---|---|---|---|
| Current single-rate tariff | 25p | 25p | £75,000 | - |
| Supplier A | 30p | 15p | £81,000 | £6,000 more |
| Supplier B | 26p | 15p | £71,400 | £3,600 less |
| Supplier C | 29p | 5p | £72,600 | £2,400 less |
Supplier A has the same 15p night rate as Supplier B, but it would cost you £9,600 more over the year. The difference is the daytime rate, because that is when your business currently buys 80% of its electricity.
Remember to include standing charges and any other non-commodity charges shown separately in the quote.
How can I increase savings further with a time of use tariff?
There are three ways you can increase your savings further with a time of use tariff - using alternative energy storage, installing a battery, or installing a solar plus battery setup.
1. Alternative energy storage
Some equipment can use more electricity when prices are lower and less when prices are higher.
For example, a cold store can cool slightly more while electricity is cheaper. The stored cold then helps keep the temperature within the required range, so the refrigeration system doesn’t need to draw as much electricity when it’s expensive.
These are known as alternative energy storage systems and other examples include hot water cylinders and EV chargers. The effect on your bills will depend on how much of your electricity use can be timed for cheaper periods, but you may be able to cut costs using equipment you already own.
2. Charging up your battery from the grid at off-peak periods
If you have a battery, you can charge it when grid electricity is cheap and use that stored electricity later when your tariff is higher. This is called energy arbitrage.
Let’s say a supplier charges 26p per kWh during the day and 15p at night.
For a site using 240,000 kWh during the day and 60,000 kWh during the night, the annual unit-rate cost is £71,400.
Assume that, over the course of a year, the battery draws 50,000 kWh from the grid at night, so it’s able to supply 45,000 kWh to the site after standard energy losses.
Charging the battery with 50,000 kWh at 15p costs £7,500, while buying 45,000 kWh from the grid during the day would have cost £11,700.
That means the battery has saved you £4,200 before costs like maintenance and software, so your bill would fall to about £67,200.
3. Charging up your battery with solar panels
If you have solar panels, you could use surplus solar electricity to charge your battery during the day and use it later when grid electricity is more expensive.
Using the same example, say your battery receives 50,000 kWh of surplus solar electricity over the year. After the same 10% energy loss, it can supply about 45,000 kWh to the site later.
You still avoid buying £11,700 of daytime electricity, but you no longer pay the £7,500 needed to charge the battery from the grid overnight.
That would reduce the annual unit-rate cost from £67,200 in the previous example to about £59,700.
How do you switch to a time of use tariff?
Check when your current electricity contract ends and how much notice you need to give your supplier.
Look around for a new supplier, or get your broker to do so. When you find the best tariff, get them to confirm in writing the new rates, the hours they apply, the standing charge and any other costs.
Before switching, ask the supplier whether your existing meter can record the different tariff periods. If it cannot, ask what needs changing.
Read the contract before you agree to it. Business energy contracts are not covered by the domestic energy price cap, and Ofgem says there is no cooling-off period after you agree to one, even over the phone.
How GridVolt can help you get more from a time of use tariff
Some energy management software charges and discharges your battery at the same set times every day. GridVolt’s Energy Manager updates 96 times a day, changing charge and discharge times to reflect what’s happening on your site.
That means it responds if your supplier changes when power is cheaper and more expensive. If you have solar, it can leave room in the battery for surplus solar electricity and only use cheap grid electricity when your solar panels are unlikely to provide enough.
Energy Manager makes a difference. At one agricultural site, it increased the savings from an existing battery by 41% in its first 70 days.
Fill in the form to find out how to add Energy Manager to your battery or battery + solar setup, or contact GridVolt.
Time of use tariffs: frequently asked questions
Do you need a smart meter for a time of use tariff?
Not always. You need a meter that records when you use electricity so your supplier knows which rate to charge. Many larger commercial sites already have half-hourly meters. Smaller sites may need a smart or advanced meter. Ask the supplier to confirm whether your existing meter will work with the tariff before you switch.
Are DUoS charges the same as a time of use tariff?
No. DUoS charges pay for using the regional electricity distribution network. A time of use tariff sets the unit rates your electricity supplier charges you. Some businesses can have time-based DUoS charges as well as a time of use tariff, so both can affect what electricity costs at different times of day.