Time-of-Use (TOU)

Time-of-use (TOU) is a utility rate structure that charges different electricity prices depending on the time of day, day of the week, and season. Electricity costs more during peak demand periods (typically late afternoon through evening) and less during off-peak hours (overnight and midday). This pricing structure creates opportunities and challenges for solar system owners.

Under TOU rates, solar-generated electricity is most valuable when it displaces high-priced peak-period grid consumption. However, solar production peaks at midday when TOU rates are often low or mid-range, while the expensive peak period typically starts as solar production declines in the late afternoon. This mismatch between production and price peaks reduces the effective value of solar exports under TOU compared to flat-rate billing.

Battery storage transforms TOU from a challenge into an advantage. By storing excess midday solar production and discharging it during expensive peak hours, a battery-equipped system effectively time-shifts cheap solar energy to high-value consumption periods. The spread between off-peak and peak rates — often a factor of 2× to 4× — determines how quickly battery storage pays for itself through TOU arbitrage.

Smart hybrid inverters can be programmed with your TOU schedule, automatically optimizing when to charge batteries (during cheap periods or from excess solar), when to discharge (during expensive peak periods), and when to export or import from the grid. This optimization maximizes the financial value of every kilowatt-hour your system produces or stores.

TOU rate structures are expanding as utilities seek to shift demand away from peak periods. Understanding your utility's TOU schedule is essential for optimizing solar and battery system design, sizing, and programming to maximize financial returns.