Quick definition
Not every hour of electricity costs the utility the same amount to provide, since grid demand and generation costs shift throughout the day. A TOU rate reflects this by charging customers more during peak hours, typically late afternoon into evening when demand runs highest, and less during off-peak hours like overnight or midday, rather than one flat rate applied uniformly around the clock.
This is a meaningfully different billing structure than a traditional flat rate, and it changes the math on when using or exporting electricity is actually worth the most.
At a glance: peak hours under a TOU rate commonly fall in the late afternoon and evening, a window that often extends past when a typical solar system's production has already started declining for the day. San Diego Gas & Electric, for example, publishes a 4 p.m. to 9 p.m. peak period on its residential time-of-use plans.
Why it matters
A TOU rate structure changes what timing is actually worth for a solar and battery system. Solar production peaks around midday, but TOU peak pricing often hits in the late afternoon and evening, a window when a typical unshaded, well-positioned system's output is already tapering off. This mismatch is exactly why battery storage becomes more valuable under TOU billing: storing midday surplus production and discharging it during the pricier evening peak captures meaningfully more value than simply using or exporting that same energy during cheaper hours. That value has limits, though. A Lawrence Berkeley National Laboratory analysis of roughly 1,800 residential customers across six utilities looked at the closely related case of batteries charged with surplus solar and discharged in the evening under reduced export credits. It found bill savings of about $14 to $27 per kWh of storage capacity per year, not nearly enough on their own to cover a battery's up-front cost, so the rate structure alone rarely makes the case for storage.
This kind of intentional timing strategy, called load shifting or peak shaving depending on the specific approach, is a genuinely different way of thinking about solar economics compared to a flat-rate structure, where the actual clock time of production or usage doesn't affect its value. Under TOU billing, when energy is used or exported can matter just as much as how much total energy gets used or exported.
Understanding your specific utility's TOU schedule, including exactly when peak and off-peak windows fall, is essential for making good decisions about system sizing, battery capacity, and whether strategies like shifting flexible loads to off-peak hours are worth the effort for your specific rate structure and usage pattern. Charging an electric vehicle is often the largest flexible load in a home, and the off peak EV charging with solar battery tool looks at how to time it around the cheap hours.
Where you'll see this
The time of use rate savings calculator works out potential savings from shifting usage and export timing under your specific TOU schedule.
If you're considering a battery specifically for TOU arbitrage, the battery size for time of use arbitrage tool sizes storage around your specific peak and off-peak windows.
This term comes up on utility rate schedules, in load profile and battery sizing conversations, and any discussion of timing solar production or usage to align with a specific billing structure. The U.S. Energy Information Administration's electricity explainer describes how time-varying rates work, and why evening power costs more.
Related terms
Frequently asked
This varies by utility, but peak hours commonly fall in the late afternoon and early evening, when overall grid demand tends to run highest as people get home from work and use more electricity. Checking your specific utility's published rate schedule is the reliable way to know your exact peak hours.
It depends on how solar production and peak pricing hours line up. If peak pricing hits in the evening after solar production has dropped off, a battery becomes more valuable for shifting stored midday production into that expensive peak window, capturing more value than simple daytime self-consumption alone would.
This depends on your specific utility and available rate plans. Some utilities offer a choice between TOU and flat-rate billing, while others have moved to TOU as the standard or only option for certain customer classes. Checking with your utility clarifies what alternatives, if any, are available.
In some programs, yes. A time-of-use net metering structure can credit exported power at the specific rate in effect at the moment of export, meaning solar exported during peak hours earns a higher credit than the same export during off-peak hours, adding another layer worth understanding for a full financial picture.