What is a Time-of-Use tariff?

A Time-of-Use tariff, or ToU tariff, is an electricity pricing model in which predefined prices apply during different times of the day, week or season. Electricity is usually more expensive during peak periods and cheaper during off-peak periods.

Unlike dynamic tariffs, the applicable prices and time periods are defined in advance rather than continuously following short-term electricity market prices.

Time-of-Use tariffs at a glance

• ToU tariffs divide electricity consumption into predefined tariff periods.
• Flexible loads can be shifted to lower-priced periods to reduce electricity costs.
• Tariff structures may differ between weekdays, weekends and seasons.
• Suitable metering is required to assign consumption to the relevant periods.

How do Time-of-Use tariffs work?

A ToU tariff assigns a defined electricity price to recurring time blocks. These prices are designed to reflect differences in system demand, network conditions, supply costs or the applicable tariff structure.

A typical model distinguishes between peak, standard and off-peak periods. The exact periods are published in advance and may vary by customer group, season or day of the week.

Consumers can respond by shifting flexible electricity use into lower-priced periods. This may include production processes, pumps, cooling systems, electric vehicle charging or the charging of battery storage systems.

Where are ToU tariffs used?

ToU tariffs are used in residential, commercial and industrial applications, depending on the local market and electricity supplier. They are particularly relevant where a significant share of consumption can be scheduled or controlled.

In South Africa, ToU tariffs are an established model, especially for larger commercial and industrial electricity customers. Eskom tariffs commonly distinguish between peak, standard and off-peak periods as well as high- and low-demand seasons.

How do ToU tariffs differ from similar models?

Dynamic electricity tariffs reflect price changes on spot markets, including Day-Ahead and Intraday markets. Their prices therefore change with market conditions, while ToU tariff prices follow predefined schedules.

Block contracts are supply agreements for a specified quantity of electricity during a defined delivery period at an agreed price. They are electricity procurement instruments rather than recurring end-customer tariff periods.

Atypical grid usage is a German mechanism for individual network charges. It applies when a consumer’s predictable maximum load occurs outside the network operator’s defined peak-load periods. It therefore concerns network charges rather than the electricity supply price.

Benefits, limitations and requirements

ToU tariffs offer predictable price signals and can reduce electricity costs when consumption can be shifted into lower-priced periods. The potential benefit depends on the price differences and the available operational flexibility.

Savings may be limited if most loads must operate at fixed times. Shifting consumption may also conflict with production schedules, comfort requirements or other optimisation objectives.

Implementation requires a meter that can distinguish consumption between the applicable tariff periods. Depending on the tariff and local requirements, this may be a multi-tariff meter, an interval meter or a smart meter. Automated optimisation additionally requires controllable equipment and an energy management system.

How can EcoPhi support ToU optimisation?

EcoPhi can store tariff schedules, combine them with measured energy data and visualise consumption and costs by tariff period. Flexible assets can be controlled according to predefined time windows where suitable interfaces are available.

The specific functionality depends on the connected equipment, available communication interfaces and project requirements.

In summary

Time-of-Use tariffs apply predefined electricity prices to recurring time periods. They are particularly useful where flexible loads or battery storage can be operated during lower-priced periods.

Frequently asked questions

Are Time-of-Use tariffs dynamic tariffs?

No. ToU prices and time periods are defined in advance. Dynamic tariffs reflect changing spot market prices.

Can battery storage benefit from a ToU tariff?

Yes. A battery can charge during lower-priced periods and supply energy during more expensive periods. The benefit depends on price differences, efficiency, degradation and other operating requirements.

Are ToU periods the same every day?

Not necessarily. Tariffs may distinguish between weekdays, weekends, public holidays and seasons.

Is a smart meter required?

Not always. The meter must be able to assign consumption to the applicable tariff periods. Depending on the tariff, a multi-tariff meter, interval meter or smart meter may be used.