Franklin Home Power Solution
Time-of-Use (TOU) is an electricity pricing structure where utility rates vary based on the time of day, reflecting changes in electricity demand and grid strain. As a result, your electricity costs can soar during peak times (eg., 4 PM to 9 PM) and drop overnight or on weekends. This makes your electricity bills unpredictable and more expensive if your consumption isn’t managed.
Having a home energy management system with battery storage can be game-changing, turning TOU pricing to your advantage. By storing cheap off-peak electricity or excess solar energy, battery storage allows you to power your home during costly peak periods without the grid, avoiding steep charges and saving significantly on your electricity bills.
This article will dive deep into TOU tariffs and how to implement a TOU strategy with a home energy management system.
What is TOU and How it Differs from Flat Rate Plan
Historical Context and Rationale
TOU rates reflect the actual cost of generating and delivering electricity at different times, with higher prices during peak demand periods and lower prices during off-peak times. TOU emerged in the U.S. after the 1978 Public Utility Regulatory Policies Act (PURPA), which mandated utilities to manage peak load growth. Early pilots in the 1980s proved customers reduced peak usage when exposed to time-based rates, but adoption lagged due to limited smart metering. The 2000s "third wave" of TOU, driven by smart meters and dynamic pricing, enabled accurate tracking of usage patterns, cementing TOU as a tool for grid optimization. Today, utilities nationwide are transitioning customers to TOU structures to alleviate grid stress and integrate renewable energy.
TOU vs. Flat Rate Plans: Key Differences
Key features of flat rate plans:
- Simple and predictable: You pay the same price per kWh all day and every day. Bills are linear (total kWh × fixed rate). This makes it easy to understand your bills and budget for electricity costs. The plans may include different rates for different consumption levels, but timing of that consumption doesn’t matter.
- May not incentivize conservation: If you're not home during peak hours, a flat rate might be more suitable, but you cannot enjoy the lucrative incentives by shifting your energy usage (e.g., running appliances overnight).
- Older meter technology: Flat rate plans are often associated with older, non-smart meters.
- Hide actual real-time cost: Flat rate masks true grid costs, particularly during peak hours, and these expensive costs get spread out and passed on to all customers who will pay more regardless of when they consume energy.
Key features of TOU pricing structure:
- Variable pricing: Rates vary hourly/seasonally. Bill calculation depends on when energy is used (e.g., 10 kWh at peak rates costs more than 10 kWh off-peak).
- Potential for savings: If you can shift your high-energy appliances (eg., EV) to off-peak hours and use your stored energy to skip the grid power during peak periods, you can save money on your electricity bill.
- Smart meters required: TOU plans require a smart meter that can track your electricity usage by time of day.
- Incentivizes conservation: TOU rates encourage users to shift their energy consumption to off-peak periods, which helps reduce strain on the grid during peak times, delaying fossil-fuel "peaker plant" use and encouraging clean energy system integration.
California TOU Examples (PG&E & SCE)
PG&E – E-TOU-C
PG&E’s E-TOU-C plan features peak pricing from 4 p.m. to 9 p.m. every day, including weekends. Rates vary by season, and customers receive a baseline allowance—a set amount of energy at a lower rate (e.g., 10.3 kWh/day in San Jose during summer), with higher charges above that threshold. TOU and seasonal baseline coexist, and your total rate depends on when you use it and how much energy you use.
SCE – TOU-D Plans
SCE offers multiple TOU plans:
- TOU-D-4-9 PM: Peak hours from 4 to 9 p.m.
- TOU-D-5-8 PM: A narrower peak window
- Rates differ by season (summer/winter) and day type (weekday/weekend), encouraging off-peak usage for electricity cost savings.
Why Home Energy Management Systems Matter for TOU
Shift Usage and Charging to Off-Peak for Lower Utility Bills
TOU pricing offers tiered rate schedules. By scheduling battery charging during the off-peak daytime, with solar charging prioritized, homeowners benefit from lower rates and can power their homes during peak periods, saving hundreds of dollars annually. Studies show strategic charge/discharge schedules can reduce energy costs by 17%, compared to flat rates (innotinum).
Reduce Stress on the Grid and Support Clean Energy Goals
Home energy management systems with battery storage, paired with TOU, can charge when solar generation is abundant and the grid price is low, and then dispatch during peak period, helping to ease grid demand pressure, reducing reliance on fossil-based peaker plants, and advancing clean energy transition.
Prevent Exporting Excess Solar during High-Peak Times
Under newer net metering policies (eg., California’s NEM 3.0), exporting solar during peak hours may yield little to no credit. A well-sized battery charged off-peak or midday solar allows homeowners to consume or store power, rather than exporting it at low value—elevating bill savings and improving ROI.
Critical Considerations of TOU
When pairing a TOU tariff framework with a home system, here are key factors that can deeply impact system design, performance, and financial returns:
- Seasonal & Monthly Tariff Variations: TOU plans in California shift significantly between summer and winter seasons. Batteries must be scheduled to charge and discharge differently based on these seasonal shifts to maximize savings.
- Baseline vs. Tier Influence: Utilities such as PG&E layer two pricing mechanisms in TOU plans—A baseline allowance (lower tier pricing), and higher tier rate when usage exceeds that allowance. Homeowners must not only be aware of when to draw power, but how much to draw for charging.
- Battery Capacity, Inverter Sizing, and Intelligent Scheduling: Ensure your battery capacity can meet your peak shaving needs. Get a solar inverter that can handle your battery’s maximum charging rate. Invest in a home battery system with HEMS* that can account for tariff timing.
*Home Energy Management System (HEMS) is a system that monitors and controls energy usage in a home.
- Load Shifting: Schedule EV charging and high load appliances off peak
- Annual Plan Adjustments: Review and switch plans annually based on new tariff changes.
An Example of TOU Savings with the FranklinWH System
TOU Rate Assumptions
- TOU plan: SCE TOU-D-5-8 PM, summer 2025
- On-Peak (5–8 p.m., weekdays): $0.74/kWh
- Off-Peak: $0.36/kWh
Note: Pricing referenced from solar.com
Electricity Costs with Grid Power
Assume a homeowner uses 15 kWh during 5–8 p.m. window:
- 15 kWh × $0.74 = $11.10/day
- Monthly cost (30 days): $333
TOU Savings with the FranklinWH System
The aPower 2 battery, part of the FranklinWH System, boasts a 15 kWh capacity, is charged during off-peak and discharged during peak:
- Charging cost: 15 kWh × $0.36 = $5.40/day
- Daily savings: $11.10 – $5.40 = $5.70/day
- Monthly savings: $5.70 × 30 = $171/month
If battery is charged via solar only, off-peak cost approaches zero, so:
- Daily savings = full $11.10
- Monthly savings: $11.10 × 30 = $333/month
Note: Actual savings depend on your rate plan, schedules, peak energy usage, and other relevant variables.
Conclusion
TOU pricing paired with a home energy management and storage system offers meaningful financial benefits. Homeowners can review your local rate structures and explore an innovative systems such as the one offered by FranklinWH, making the most of TOU to slash your electricity bills.
