What is Time-of-Use Pricing and Why Is it Important?
By Home Improvement Leads in collaboration with Energy Exchange
A large portion of the population is away from home during typical work and school hours—and that’s why less energy is consumed in most homes throughout much of the day. During the mornings and evenings, however, the demand for energy grows. This is when the majority of us are at home, using our electronic devices, turning on the lights, and adjusting the thermostat for more comfortable temperatures. These times of day when a region’s energy load is highest are referred to as “peak” energy hours.
Time-of-Use Rate Plans
Traditional utility prices involve a set rate per kilowatt-hour, which can fluctuate during the summer and winter. A sliding rate scale, however, is structured according to peak and off-peak times of day. This is called a “time-of-use” (TOU) rate plan. Under such a plan, your bill will be determined by how much energy you use and when you use it.
The prices and peak times vary based on the season and day of the week; for example, many utility companies consider weekends off-peak. The structure often looks different in the summer or winter months, with more tiers to accommodate the increase in HVAC system use as everyone tries to cool off or stay warm.
In Canada, most provinces offer TOU pricing plans only for industrial customers – although in Ontario, TOU rates are mandatory for residential customers across the province. In order to accurately calculate TOU rates, buildings must be equipped with smart meters, which record electricity usage by the hour and communicate this usage to local utilities. Almost every household and business in Ontario is now equipped with a smart meter. Over 60% of Ontario customers can now access their hour-by-hour electricity usage data thanks to the Green Button initiative, which gives them greater control over reducing usage during peak hours.
How Knowledge Can Save You Money
You may be wondering how a time-of-use pricing plan and an awareness of peak hours may benefit you. Well, knowledge is power; if you know the times of day that can save you money, you can concentrate your energy use within those periods and avoid peak hours. Energy is less expensive to produce when fewer homes are using it. Therefore, a TOU pricing plan means your rates align with the daily decrease in electricity generation and delivery costs.
You’re also helping the greater good this way. When many individuals shift to off-peak hours, it reduces strain on the power grid and leads to improved reliability during peak hours. Using less energy during high demand can also help reduce market prices.
How Time-of-Use Plans Help the Environment
Power plants can be enormous contributors to pollution, especially during peak hours. That’s because when electricity demand peaks, utility providers must use additional power plants to keep up. Throughout the day, baseload plants provide a steady, constant flow of power, which in Canada is mostly generated by nuclear plants and reservoir hydro plants. When baseload plants alone don’t provide enough power, we turn to peaker plants which can ramp up and down as demand changes. In many provinces though, peaker plants are run on combustible fuels like natural gas or coal, which emit greenhouse gases. If you shift your energy use to off-peak hours, you’re helping reduce the workload, as well as the need for more plants to be built so that utility companies can keep up with demand.
If you’re interested in slashing your utility bills, you can do more than adjust your energy use schedule. Make your home more efficient with these favorite tips:
- Improve your insulation and weather-stripping. Seal up air leaks.
- Replace old, inefficient appliances with Energy-star rated
- Install energy efficient lightbulbs and low-flow water fixtures
- Adjust the temperature when you leave—warmer in the summer and cooler in the winter.
- Cover your windows with curtains or an awning on the outside.
- Install low-emissivity windows or apply energy efficient window treatments.
- Hang your clothes to dry in nice weather.
- Switch to a cold water detergent and wash all of your clothes in cold water.
- Get timers for HVAC and lighting.