Understanding Time Of Use Tariffs

August 2, 2024 by Energy Consultant

As the economic landscape shifts, so too does the energy landscape. Supply chain issues during the world’s rebound from the pandemic has strained global energy markets, while the outbreak of major war in Europe has made utility bills far more volatile. The resulting energy crisis may have finally subsided, but the truth is that more changes are on the horizon, with net-zero targets set to shake up energy markets well into the 21^st century.

For these reasons, it’s well-worth investing in new and more energy-efficient means of consumption for your home and business. Many premises already have a smart meter installed, as part of a long-running scheme to replace older and less efficient meters. However, some smart meters also offer additional benefits, such as time of use tariffs, which can save you a great deal of money if implemented in the right way. As the name might suggest, this comes down to when and how you consume your energy.

In Tariff’s latest article, we’ll define what time of use tariffs are and how they can lead to savings on your energy bill. We’ll discuss the best time frame to receive the lowest prices, and how you can shape your daily habits to work around peak periods and ensure cheaper energy prices for your home or business.

 

5 Important Statistics About Time Of Use Tariffs

• Time of use tariffs are estimated to save £19 million a year from the UK’s energy bills.
• With automated adjustments, this figure is expected to rise to £272 million a year.
• Peak demand is reduced by 5%-10% with time of use tariffs.
• With both electric heating/cars and automation, time of use tariffs can save 4-5x more money than without.
• In trials, 75% report they are satisfied with their time of use tariffs.

 

What Is A Time Of Use Tariff?

With the UK’s electricity grid consuming an enormous 61.1 gigawatts (GW) of power every day at its peak, the grid comes under enormous strain at certain times of the day. In line with the simple principles of supply and demand, a shortage of energy requires the grid to work harder to meet demands, therefore raising costs, whilst more energy being available will ultimately result in lower prices.

Time of use tariffs aim to make the most of this fluctuation, using a unique payment structure that changes the pricing of energy based on the grid’s current demands. Put simply – using energy at peak times will be more expensive than using energy when the grid is quiet. Therefore, given that peak periods are predictable and rarely change from day to day, businesses and homeowners can drastically reduce their energy bills with a bit of strategic planning and forethought.

For example, charging your electric car while everyone is asleep will be cheaper than charging it during the day when everyone is active and consuming energy. In the same way, running a washing cycle in the early morning might cost less money than running it during the evening. Of course, to get the most savings out of a time of use tariff, consumers need to operate their appliances only in certain time frames.

 

Which Time Frames Offer The Cheapest Energy?

Energy prices are generally split between three different time periods – peak hours, off-peak hours, and shoulder hours:

• Peak hours are usually when people begin waking up in the morning or settling down for their evening. This bump in energy usage is the result of millions of households switching on cookers, light switches, televisions, and other appliances in their homes.
• Off-peak hours are primarily during the night, when most people are asleep and there’s very limited energy usage across the country.
• Shoulder hours are in-between peak periods, including most of the workday. While many workplaces and businesses use lots of energy during these hours, the consumption is more spread out across the course of the day, therefore easing the burden on the national grid.

Off-peak hours will generally offer the lowest price for energy, although shoulder hours might also offer reduced rates compared to mornings and evenings.

 

What Are The Different Types Of Time Of Use Tariffs?

Your exact energy pricing will depend on which type of tariff your home and business is contracted on. There are two main types: Static and Dynamic, which handle pricing in broadly different ways.

• Static time of use tariffs offer one blanket price for peak times and another blanket price for lower-demand periods. These are fixed in advance, and while they may vary seasonally, prices remain largely unchanged over the course of the year.
• Dynamic time of use tariffs, often thought of as real-time pricing, are much more flexible and respondent to the current market. Energy costs will then depend on the wholesale electricity price at that moment, and will therefore change considerably as supply and demand fluctuates.

Either type allows you to shift your energy usage to off-peak hours and save money as a result – however, depending on your specific requirements and schedule, one contract may be a better fit than another.

 

How Much Money Can You Save From Time Of Use Tariffs?

Of course, this is the big question that’s on everyone’s minds – how much money can time of use tariffs actually save? Well, the answer is rather complicated, and it depends on a lot of different factors.

Firstly, it depends on how efficiently you can shift your energy usage to off-peak hours. That might be much easier for some premises more than others, and your ability to do just that will naturally play a massive role in how many savings you stand to make back.

Another important point is how your electricity is used. For example, without electric heating or cars the value gained from time of use tariffs is often too small to be worth it, but with increased electrification, the amount of money saved can skyrocket. This may increase even further with automation, as systems can be programmed to consume energy only at a certain price point. Combining both electrification and automation means cost reductions could reach 4-5x the starting point, making time of use tariffs well worth the investment going into the future.

If you’re looking to transfer your premises to a time of use tariff, the following tips and daily habits will help you get started with saving money:

• Charge electric vehicles overnight
• Charge phones/other devices overnight
• Run appliances like washing machines and dryers overnight
• Set electric heating to come on outside of peak periods
• Avoid major usage during peak periods
• Cook food in bulk or meal prep for the week
• Adjust your schedule to align with off-peak or shoulder hours

 

How Can Tariff Help You Save Money On Your Energy?

Tariff.com are expert energy consultants, dedicated to helping businesses revolutionise their operations and dramatically cut their energy bills.

With our 3-step program, we guide businesses to Search, Switch, and Save on their current energy bills. To start with, we’ll fully assess your site and gain an understanding of your unique requirements. Then, we’ll conduct a comprehensive market analysis to find the best deal for your business. We don’t just consider price, but also the unique customer benefits and ethical implications of partnering with a broad range of different energy providers, to ensure we find you the best possible match.

Whatever your environmental or energy strategy may be, we offer a range of utility and net-zero solutions for your premises:

• Businesses Gas
• Business Water
• Business Electricity
• Heating Solutions
• Renewable Energy
• Solar Panels
• Electronic Vehicle Charging

For a full FREE quote from one of our expert consultants, be sure to reach out with our online enquiry form or the number listed above.