Time-of-use plans, explained

The short answer

A time-of-use plan prices electricity by the hour. The same kWh costs more in the late afternoon and evening than it does overnight. The gap between those two prices, your peak-to-off-peak spread, is the single number that decides whether a home battery saves you money.

A battery charges when power is cheap and discharges when power is expensive. Each kWh it shifts earns you roughly the spread. A wide spread pays well. A narrow spread, or no spread at all, pays almost nothing.

This guide is the practical companion to the short time-of-use rates definition. Here you will learn how to read your own plan, find your own spread, and judge whether a battery has anything to work with.

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What a time-of-use plan actually is

On a time-of-use plan, your utility charges different prices for power at different times of day. They do it on purpose. When everyone runs air conditioning at 6 p.m. on a hot day, the grid is strained and the most expensive power plants come online. Higher prices in those hours are meant to push demand away from that crunch, toward times when the grid has room to spare.

That is the whole idea: price follows grid stress. Expensive when the grid is tight, cheap when it is not.

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The windows: peak, off-peak, and the rest

Most time-of-use plans split the day into named windows. The exact hours and prices differ by utility, so treat the examples below as illustrations, not quotes.

• Peak is the expensive window, usually late afternoon into evening. For example, 4 p.m. to 9 p.m. on weekdays is a common shape. This is the window a battery exists to avoid.
• Off-peak is the cheap window, usually overnight and into the early morning. This is when a battery charges from the grid.
• Shoulder is a middle price between peak and off-peak, often in the late morning or late evening, on plans that use it.
• Super-off-peak is an even cheaper window that some plans add in the middle of the day, roughly 9 a.m. to 2 p.m., when abundant solar on the grid pushes daytime prices down. Where this exists, it can be a great time to charge a battery or an EV.

Three things shift these windows around:

• Season. Summer peaks are usually higher and often longer than winter peaks, because hot evenings are when the grid hurts most.
• Weekday versus weekend. Many plans soften or shorten the peak window on weekends.
• Your specific utility. Two houses on different utilities can have completely different windows and prices.

California is the clearest example of all this in the wild. The big investor-owned utilities there run time-of-use plans with late-afternoon-to-evening peaks as the norm. See the California report for how that plays out by utility.

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How to read your own plan

This is the useful part. You can do it in about ten minutes.

1. Find your rate name. Look at your electric bill or log into your utility's online account. Somewhere there is a rate name, sometimes called a tariff or a rate schedule. Time-of-use plans usually have a name that hints at it, with words like "time of use," "TOU," or peak-hours language.

2. Confirm it is time-of-use at all. If the plan lists hourly windows and different prices by time of day, it is time-of-use. If every kWh costs the same all day, it is flat. If the price steps up after you cross a monthly usage threshold, it is tiered. (More on those below.)

3. Find four numbers. Read your plan for:

• The peak window hours (for example, 4 p.m. to 9 p.m.).
• The peak price per kWh.
• The off-peak price per kWh.
• The summer versus winter difference, since summer is where the money is.

4. Compute your spread. Your spread is simply:

peak price minus off-peak price.

For example, if peak is around $0.55 and off-peak is around $0.20, your spread is about $0.35 a kWh. Write that number down. Everything about a battery's bill savings flows from it.

If your plan has a super-off-peak window, note that price too. Charging from the cheapest window and discharging at peak gives you the widest possible spread to work with.

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Why the spread is the whole game

A home battery makes money on a time-of-use plan in one move: it charges when power is cheap, then discharges your home off that stored power during the expensive peak window so you buy almost nothing from the grid at the high price.

Each kWh it shifts that way earns you roughly the spread. So the math is blunt:

• A wide spread (illustratively, about $0.35 a kWh from the example above) means every shifted kWh saves real money, and a battery earns its keep.
• A narrow spread (say under $0.10 a kWh) means each shifted kWh saves pennies, and the battery may never pay back on bill savings alone.

How much you can shift in a day depends on the battery's usable size in kWh, which is why understanding a kWh matters here. A bigger spread and more usable capacity both push savings up.

To put your own numbers into this, run the Worth It calculator. It takes your spread and your usage and models the actual dollars, instead of leaving you to guess.

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The honest warning

A battery exploits a spread. It does not create one.

On a flat-rate plan, every kWh costs the same no matter when you use it. There is no peak to dodge, so shifting power from one hour to another saves nothing. A battery on a flat-rate plan will give you backup power, but it will barely move your bill. This is the most common way people overpay for storage: they buy the battery before they check the rate.

Two situations are worth knowing:

• Some households can opt into a time-of-use plan. If a good-spread option exists for you, opting into it can be the very thing that makes a battery pay.
• Other households get defaulted onto a time-of-use plan automatically when they add solar or storage. If that happens to you, read the new plan carefully, because the spread you inherit is the spread your battery has to work with.

Either way: the rate decides the battery, not the other way around.

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Time-of-use versus tiered versus flat

So you can place your own plan, here is the quick map:

• Flat rate. One price per kWh, all day, every day. Simple, but no spread, so a battery saves little on bills.
• Tiered rate. Price depends on how much total power you use in the month, not on the time of day. Cross a usage threshold and the next block of kWh costs more. There is no daily peak window, so a battery cannot time-shift its way to savings the way it does on time-of-use.
• Time-of-use. Price depends on the time of day. This is the plan that gives a battery something to exploit.

If you are on flat or tiered today, the practical question is whether a time-of-use option is available to you, and whether its spread is wide enough to justify a battery.

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Time-of-use and an EV

If you drive an electric vehicle, time-of-use matters even more. Charging a car is a large chunk of energy, so the difference between charging it at peak versus off-peak is a big dollar swing on its own, before you even add a battery.

A battery and smart EV charging both lean on the same cheap windows: charge the car overnight (or in a super-off-peak midday window), and let the battery cover the evening peak. The wider your spread, the more both of these are worth. An EV is the single fastest way a wide-spread time-of-use plan starts to pay for itself.

If your utility runs a virtual power plant program, that can stack additional payments on top of your time-of-use savings during grid events. Verify the specifics with your utility, since program terms vary.

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What to do next

• Find your plan name on your bill or online account.
• Find your peak window and your spread (peak price minus off-peak price), and check the summer numbers specifically.
• Check whether a better-spread time-of-use option is available to you, and whether you would be opting in or getting defaulted on.
• Model it. Put your real spread and usage into the Worth It calculator and see whether a battery clears the bar for your house.

A battery on the right rate plan can save real money every day. A battery on the wrong one mostly just sits there. The spread tells you which one you have.