Most people now recognize the massive benefits of converting to solar power. Energy conservation, lower utility bills, low maintenance, and renewable energy source adoption are a few of the obvious advantages of this responsible choice. So, it's no surprise that more homeowners are choosing solar to power their homes.
Because solar saves you money on your utility bills, utility companies make less revenue off of solar homes. And with the growing popularity of low-cost solar energy adoption, they're looking for ways to recoup their profit losses. Applying Time-of-Use (TOU) rate structures is one of these methods.
Understanding Time of Use Rates
Traditional electric usage is charged by the kilowatt (kW). The power company sets a rate per kilowatt hour (kWh) of electricity and that's what you pay. For example, during the month of February, your household uses 1,000 kW of electricity. The rate is $.030 per kWh. Multiply 1,000 kW by $0.30, and the resulting $300 is the base rate you pay for that month's electric bill.
But, with the introduction of TOU rates, your electric company charges you varying utility rates for your usage. They base the differing rates on the time of consumption. The most common structure identifies peak and off-peak rates. These levels represent the times that energy use is at its highest and lowest.
So, during the hours of 4:00 pm to 10:00 pm — when demand in your area is at it's highest — they charge you higher peak rates for your energy use. The rest of the day and night, you pay off-peak per hour rates to use the power in your home. The rate hours may be different on the weekends too, since demand is different.
So, let's look at that 1,000 kW use again, but on a TOU plan. Say you consume most of the electricity in your home during the established peak hours, at about 75%. That's 750 kW. Your utility company charges you $0.35 per kWh during peak hours. That totals $262.50. The off-peak rate is only $0.25. That applies to the remaining 250 kW — $0.25 x 250 kW = $62.50. Add those two charges, and now your bill is $325 for the same 1,000 kW of electricity you were only paying $300 for in the flat rate scenario. Over a 12-month period, that's an additional $300 in charges!
TOU rate plans are often far more complicated than this example. The rates and the hours usually change seasonally. Certain holidays may be exempt from peak rates. And some Utilities set more than two different rates, applying a mid-range with intermediate rate pricing.
Power companies tout the impact this will have on energy use. They argue that this approach will make consumers more aware of their power consumption, forcing them to make more responsible choices.
Utility companies have been charging industrial, commercial, and agricultural customers TOU rates for some time now. But now, the practice is spreading to residential consumers. Some states, like Massachusetts, are early adopters. But TOU rates for residences will soon be widespread across the U.S.
How to Conserve with TOU Rate Plans
Strategic power usage and installing a home battery for energy storage can help you offset high peak rate electric charges.
Smart Home Electricity Use
Set up a TOU plan for your home to take advantage of off-peak hours. First, check with your local utilities provider to learn what they charge you, when, and how.
For example, Utility Company X applies the following TOU settings:
On-peak hours, April through September are 11:00 am – 6:00 pm
On-peak hours, October through March are 4:00 pm – 10:00 pm
Off-peak rates apply weekends, New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, Christmas and all hours outside of the stipulated peak hours.
Now you know when to avoid your highest electric consumption. Run your dishwasher, washing machine, and dryer in the evenings or early mornings in the Spring and Summer. During Fall and Winter, stick to very late in the evenings, mornings and early afternoons. Putting off laundry until the weekend is also helpful.
Home Battery for Energy Storage
The bulk of your energy consumption comes from heating and cooling your home. So, while strategic appliance use helps, it won't have the biggest impact. But, we all want to enjoy comfortable temperature settings when we're at home. Plus, we watch TV, listen to music, use our laptops, charge our devices, light our homes, and consume power in many ways while relaxing.
To offset the impact of peak TOU rates during on-demand hours, home battery storage may be your best option. This allows you to store electricity during lower-rate off-peak hours. Then use your stored power during your utility company's peak hours to avoid their peak rate prices. This power usage time shift is an efficient method for combating TOU rate charges. It allows you to enjoy your home and its conveniences during the times you prefer without incurring additional power expenses.
Performing the Calculations for Battery Storage Savings
You probably want to know what your savings will be before purchasing a home battery. This will help you decide whether the battery is a smart investment. These simple calculations can give you a very basic estimate to start with.
To begin, you need a recent electric bill from a season when your utility company charges TOU rates. That's typically summers and winters. The rates will be different for each season.
A. Start with your monthly amount
Write down the amount charged for electricity for one month. Deduct any fixed monthly charges — like access, customer, transition, or energy conservation charges.
B. Note your monthly energy usage
Write down your total electricity kW usage for the month.
C. Identify the rates
Jot down both your off-peak and your peak rates. (Note that some companies also charge a third rate for "mid-peak" times.)
D. Calculate peak usage
Multiply your off-peak rate by your total monthly energy usage (kW)
Subtract that number from your one-month electric bill amount (The number in Part A)
Subtract your off-peak rate from your peak rate.
Divide the cost difference result in #2 by the peak & off-peak rate difference
The represents the approximate amount of energy in kWh that you use each month during peak billing period. Save this number as your "monthly peak energy usage"
Multiply your monthly peak energy usage number by the difference between the peak and off peak rates. The final result is your potential dollar savings with the use of a home battery for the season you've calculated.
A. $325 electric utility charge for the month of January.
- $25 fixed monthly charges
$300 average monthly bill
B. 900 kW monthly energy usage
C. $0.23 off-peak rate
$0.37 peak rate
- 1. $0.23 off peak rate x 900 kW total monthly usage = $207
- 2.$300 monthly bill – $207 peak usage amount = $93
- 3.$0.37 peak rate - $0.23 off-peak rate = $0.14 rate difference
- 4.$93 cost difference ÷ 0.14 rate difference = 664.29
- 5.664.29 kW = monthly peak energy usage
- 6.664.29 x $0.14 = $93 potential monthly dollar savings with battery usage
Your calculations will give you a rough idea of how much you can save each month with a home battery. But other factors will impact the exact amount. Your utility company's TOU rate structure is one example.
The size of the battery you install plays a role, too. This savings calculation assumes that your battery is large enough to save and supply all of the electric kW you need during a single peak energy use period. For example, say you use 12 kWh of electricity on average between your utility company's peak period of 4:00 pm to 8:00 pm. Your battery must be big enough to store those 12 kWh. If you have a 6kWh battery, you lose half the efficiency and savings.
As noted earlier, rates will vary throughout the year. Your utility company likely charges different TOU rates during summer and winter months. They may structure their TOU rates differently, as well, with more than just peak and off-peak rates. These variables also affect the accuracy of your savings calculations.
For a more accurate analysis of how a home battery can save you money, turn to AlltimePower. You can send us 12 months of your smart meter data, zip code, and specify the utility rate plan you are enrolled in. In return, we will provide you with a customized savings analysis.
A Note on Solar Power
A solar power system can boost your savings. These systems generate power even when you're not at home using it. A solar home battery saves that excess power for later use — applying battery time-shifts for smart power usage. Savings calculations with this sustainable energy set up are more complicated than with traditional energy use. Speak with our knowledgeable team members if you would like more information on a solar power battery for your home.