A "time-of-use tariff" offers at least two different prices for the energy you use each day. Low prices mean households use more energy when demand is normally lower. Some time-of-use tariffs also have a third, ‘peak’ rate, which encourages us to avoid using energy at busy times too.
Households on time-of-use (ToU) tariffs get cheaper prices when demand is generally low.
The idea behind these tariffs is to smooth demand out across each day, reducing the way that demand peaks in the early evening. Shifting demand into quieter times supports a greener electricity system - as we won’t have to switch to more polluting fossil-fuel based generation to cover the normal daily peaks in demand. Because electric cars use so much energy, and can easily be delayed, many of these tariffs are offered only to EV owners at the moment, and marketed as EV tariffs. As we discover, Octopus Agile is an exception to this rule.
Time-of-use tariff factfile
- Time-of-use tariffs help customers lower their bills by using energy at off-peak times
- By shifting use, you help reduce the energy 'rush hours'
- You'll need a smart meter for most time-of-use tariffs
- It's much harder to compare tariffs, because what you pay depends on when you use energy as well as how much you use.
What’s wrong with flat prices?
UK energy infrastructure is changing rapidly. More and more energy from renewables is great. If we want to hit our carbon targets, we need to look beyond traditional coal powered plants to help out in the times where supply doesn’t keep up with demand.
Time-of-use tariffs, especially as more and more households charge electric cars and switch to electric heating, can help by giving us price signals that tell us when we should be switching on and off. In other words, by making savings with time-of-use tariffs, households help close any gap between energy supply and demand.
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 the quietest periods, most of them are between midnight and 7am and sometimes they are offered during the day at the weekend too. For more information, see our complete list of time-of-use tariffs and the hours they use.
What are the pros and cons of time-of-use tariffs?
- Cheaper overnight energy
- Energy from greener sources for your home
- Relieves pressure on UK energy infrastructure
- You’ll make the best savings if you change the way you use energy - things like running your washing machine at night
- Standing charges and daytime rates can be higher, as suppliers are keen to protect their profit margin.
Do I need a smart meter for a time-of-use tariff?
A smart meter is essential for all but a few that will work with a legacy Economy 7 meter. A smart meter automatically sends information about when you’re using energy to your supplier.
Is overnight charging greener?
Economy 7 was built on the idea that people with night storage heaters would use more energy during the night when fewer other people were using it. This was because energy from coal and nuclear was produced round the clock and couldn’t easily be switched on and off.
Coal has been eliminated from the UK energy mix. It has been replaced by wind, solar and bioenergy, meaning that electricity generation from fossil fuels has halved since 2010. In early 2020, 42% of the electricity supply within the UK was produced by renewables, mainly driven by high volumes of wind generation.
The challenge for green power is that our routines are surprisingly similar - we get up, travel and cook at the same time. We create predictable peaks and troughs in demand. Renewable power, like wind and sun, doesn’t turn up at the right moments to supply these routine demands.
EVs on the other hand can be charged at times when there is low demand on the grid, so they are a key tool in ensuring that renewable power is efficiently used and not wasted.
The future of energy is Agile
If the supply of green energy can't easily be tweaked to meet demand, perhaps it is time to approach the problem the other way round.
This is the idea behind Octopus Energy's Agile tariff, the first dynamic tariff on the market. With Agile, the price per kWh is based on the expected national levels of demand and on supply of electricity from renewable sources. A price for every half an hour is set at 4pm for the next 24 hours.
Could Agile save you money?Check your EV tariff match
Octopus Agile charges more for energy consumed in the normal peak hours of 4-7pm - to encourage a flattening out of the usual evening spike in daily demand. If you delay setting off your dishwasher, or plugging in your EV until the price dips, you'll be saving money and minimising your carbon footprint too. This is because the price is a good indicator of the carbon-intensity of the electricity you are consuming. Lowest prices mean supply from solar and wind is greater than expected demand.
And the best bit? When renewables are producing the most, the Octopus Agile price drops below zero - meaning you get paid for every unit of electricity you consume.
How much money could I save on a time-of-use tariff?
How much you can save is entirely up to you. To save the most, you’ll need to change your energy habits. With an EV this is very easy. If you only charge your electric car at night, you’ll save over £200 each year if you drive the average 7,400 miles per year compared to sticking with your old flat-rate tariff.
If you can also shift your use of energy-intensive appliances (things like washing machines and dishwashers) then you can save much more. We have plenty of tips to help you save money with an EV tariff. You can also try our free, online assessment of the best EV tariffs for your car and home.