Time-of-use (TOU) is an electricity pricing structure where the cost of energy varies depending on the time of day.

Instead of paying a flat rate, electricity is more expensive during high-demand periods (peak hours) and less expensive during low-demand periods (off-peak hours).

TOU rates are designed to reflect how electricity demand and production costs change throughout the day. According to the U.S. Energy Information Administration, electricity demand and pricing vary throughout the day based on usage patterns and grid conditions¹.

How time-of-use rates work

Time-of-use plans divide the day into pricing periods based on demand.

Typical TOU structure:

• Peak hours: Highest prices when electricity demand is highest (often late afternoon/evening)

• Off-peak hours: Lowest prices when demand is low (overnight or early morning)

• Mid-peak (sometimes): Moderate pricing between peak and off-peak

With TOU rates, your electricity bill depends not just on how much energy you use, but when you use it.

Why time-of-use pricing exists

Electricity demand fluctuates throughout the day, and utilities use TOU pricing to better match supply and demand.

Reasons TOU is used:

• Reflects real energy costs: Electricity is more expensive to produce during high-demand periods

• Encourages smarter energy use: Incentivizes shifting usage to lower-cost times

• Reduces grid strain: Helps balance demand and avoid overloading infrastructure

• Supports renewable energy: Encourages usage when solar energy is more available

The U.S. Department of Energy notes that time-based rates can help improve grid efficiency and support better integration of renewable energy resources².

How time-of-use impacts solar

Time-of-use rates directly affect how solar energy systems deliver value.

• Solar panels often produce energy during the day when rates may be lower or mid-peak

• Peak pricing often occurs in the late afternoon or evening, when solar production decreases

• Pairing solar with battery storage can help store energy for use during higher-cost periods

With providers like Sunrun, solar and storage solutions are often designed to help homeowners use more of their own energy during peak rate periods, improving overall system value under TOU plans.

Time-of-use vs. flat electricity rates

• Time-of-use rates: Prices vary by time of day

• Flat rates: Same price per kWh regardless of when energy is used

Takeaways

• Time-of-use (TOU) is a pricing model where electricity costs change based on time of day

• Rates are typically divided into peak, off-peak, and sometimes mid-peak periods

• Solar and battery systems can help optimize energy use under TOU plans

• Providers like Sunrun can help homeowners navigate TOU structures with tailored energy solutions