Time of Use Tariff UK
Time of use tariffs will be introduced on January 1, 2022 in the UK. This new electricity billing model constitutes the next major step in the UK’s national energy transition plan. As opposed to a flat rate model, the time of use tariff UK builds on a dynamic hourly price that is responsive to supply and demand of green energy.
Our UK time of use tariffs guide provides you with all relevant information to make the most informed decision as a consumer. We explain their general concept, advantages, available providers as well as their expected impact on the UK’s energy economy.
The UK time of use tariff primariliy aims at minimizing fossile fuel usage. TOU encourages households to consume less energy during peak-hours by offering low electricity rates during off-peak periods. As a result, the national grid will be less dependent on fossile fuels as a complimentary source of energy.
On a national level, TOU reduces the burden on on the grid by distributing electricity demand more evenly throughout the day. Households can reduce their energy bills by shifting part of their energy consumption towards off-peak hours. Combined with battery storage, households can engage in energy arbitrage.
UK Energy Economy
According to the principle of supply and demand, prices are cheaper in times of high supply and low demand and vice versa. Since the production of solar and wind power is limited to a few hours every day, TOU naturally helps to regulate electricity demand according to the availability of green energy.
Concept of the Electricity Time of Use Electricity Tariff UK
Time of Use Energy Tariffs UK
- Electricity Demand corelates with the time of day.
- Time of Use Tariffs are characterised by flexible electricity prices depending on what time of day it is.
- Electricity Prices are higher during peak hours (when demand is high) and vice versa.
The UK time of use tariff provides consumers with flexible electricity rates tied to supply and demand. The underlying principle of time of use is that the demand for electricity is linked to certain times of the day.
Naturally, demand is lowest during late night and early morning hours because most people are asleep. Over the course of the morning, demand increases as it reaches its first peak from 7am-10am, when most people wake up and start using household devices like showers and kitchen appliances. In the late afternoon and early evening hours, when most people come return from work, demand reaches it’s second peak.
Electricity demand not only fluctuates throught the day, but also changes on weekends Ⓒ Researchgate
Dynamic Wholesale Prices Change Under Time of Use Tariff UK
However, demand patterns are not only different at certain times of the day, but also on weekends compared to weekdays. In addition, demand is significantly higher in winter due to the increased need for heating. Taking all these factors into account, it is easy to determine under which conditions electricity prices are highest or lowest.
When Are Electricity Prices Highest?
- During peak periods (7am-10am, 6pm-10pm)
- On weekends
- During winter months
When Are Electricity Prices Cheaper?
- During off-peak periods (11am-5pm, 11pm-6am)
- On weekdays
- During summer months
Who Benefits from Time of Use Tariff UK?
The short answer is: Everyone. Households in general can drastically reduce their electricity bills in more than one way, while the more evenly distriuted demand frees up capacities of the national grid and it’s connected energy suppliers.
However, only those households who are willing or able to shift enough of their peak-time electricity consumption to off-peak periods can save money through the time of use tariff UK. Because energy prices are much higher during peak-hours under TOU, maintaining your old consumption habits will be significantly more expensive compared to a conventional flat rate.
Using home battery storage, households can multiply their financial advantage even further through energy arbitrage. By charging their batteries during off-peak periods, they can use the stored electricity during peak periods, thus completely evading the higher electricity prices. With enough storage capacity, households can even make a profit by exporting any surplus power to the grid.
The AS1 gives consumers a new degree of independence from the public grid. Having its own integrated inverter, it is a great choice for a stand alone home battery solution.
It’s chemistry is based on lithium for maximum safety and a high cycle rate. An integrated smart energy management system provides total freedom in terms of energy and expense allocation.
Charging and discharging times can be flexibly set based on local peak and off-peak electricity periods to minimize energy bills. Three different operating modes are available for that purpose.
- Stand alone home battery
- Integrated inverter
- Lithium-ion battery
- Optimal for energy arbitrage
- Smart energy management
- Storage capacity: 5.1kWh
- Life cycles: ≥6000
Time of Use Tariff UK & Energy Economy
As can be seen in this info graphic, the UK is still drawing a major part of it’s electricity supply from fossile fuels. At the same time, renewable energies only make up 14.4% as of 2019.
That means: If current energy consumption levels in the UK persist, demand will exceed supply of renewable energy during peak hours for many years to come. Gas or diesel-fired power plants are then usually commissioned to meet demand, which increases carbon dioxide emissions in the UK.
This complimentary power generation is costly and the main reason for price peaks. By encouraging households to consume less electricity during peak-hours, less fossile fuels are needed until green energy production grows large enough to sustain the UK’s power demand completely.
Time of Use Tariff UK Comparison
There are several energy providers that offer the new TOU tariff in the UK beginning in January 2022. Each have of their own variants with different strengths and weaknesses. To help consumers make the most informed decision, we picked out the five best UK energy providers and discuss their strengths and weaknesses.
The Green Energy UK time of use tariff is our favourite as it offers a truly revolutionary way of energy billing. In our experience, this is the single best tariff for energy arbitrage.
The so called “TIDE tariff” offers four different rates during weekdays and two rates for weekends. Part of the tariff is a guarantee to deliver 100% green gas.
Customers who are willing to change their energy consumption habits (like using the washing machine only at night) will be able to save at least 75% with the Green Energy UK time of use tariff!
Green Energy UK Advantages
- Savings of up to 75%
- Best TOU tariff for energy arbitrage
- 100% green gas
- Very flexible
- Free smart meter instalation
The bulb time of use tariff is currently in its testing phase with a selected number of households in the UK. Therefore, the prices of this tariff are not definitive yet.
Bulb’s strength lies in it’s weekend rates, where off-peak prices are applied throughout. It offers only two different electricity prices: Peak (16:00 – 19:00) and off-peak (00:00 – 16:00, 19:00 – 11:59).
Off-peak electricity is roughly 50% cheaper than during peak hours. In the summer months, the hours change to 5pm – 8pm for peak prices and 8pm – 5pm for off-peal prices.
- Biggest renewable energy supplier in the UK
- Extensive online functionalities
- Good app
- Off-peak prices throughout the weekend
- Other providers offer more potential savings
The British Gas time of use tariff, also known as Economy 7, has been around for several decades. Like bulb, British Gas offers two different rates.
The night tariff, which is roughly 50% cheaper, applies from 00:00-07:00 GMT/winter months and 01:00-08:00 BST/summer months.
TIP: For owners of EV home chargers, British Gas offers a separate tariff that allows you to charge your EV at night at a minimum cost!
British Gas Advantages
- Dedicated green tariff with 100% renewables
- £5 emergency credit
- Can be combined with smart home technology, repairs & home insurance
- Most popular UK energy provider
British Gas Disadvantages
- Relatively expensive
- Slow customer sere
The Octopus time of use tariff offers half-hourly prices that are updated daily according to wholesale prices. So when wholesale electricity prices fall, your energy bills will too.
However, the Octopus Energy time of use tariff will also rise in the same manner if the energy supply is low. This has been especially true in the last weeks, due to the ongoing energy crisis in the UK.
However, Octopus protects consumers against excessively high prices with price cap of 35p / kWh. So, even in times of more severe energy shortage, Octopus guarantees an affordable energy price.
Octopus Energy Advantages
- Highly flexible
- Half-hourly prices tied to wholesale market
- Daily price updates
- Prices capped at 35p / kWh
Octopus Energy Disadvantages
- Very expensive during energy shortages
The OVO time of use tariff is similar in concept to the economy 7 tariff of British Gas. Night rates apply from 00:00-07:00 GMT/winter months and 01:00-08:00 BST/summer months.
In addition, OVO offers an extra tariff designed to protect drivers from fluctuating electricity prices. This tariff, also called ‘type of use’ allows for EV charging at a flat rate of 6p/kWh at any time of day.
Combining both tariffs allows consumers to save at least GBP 300 every year, making OVO one of the best energy suppliers in our comparison.
OVO Energy Advantages
- Significant savings
- EV charging for 6p/kwh
- Interest reward scheme
OVO Energy Disadvantages
- Has history of changing price caps