How does electricity use vary?
The amount of electricity used in your home varies by time of day and season. For example, when the family comes home from work and school and starts turning on the lights, cooking dinner, and watching television, electricity use increases. Electricity use starts to decline when we turn off the lights and other appliances before going to sleep. In most regions, home electricity use tends to be highest during the hot summer months due to the need for air conditioning.
Similarly, the cost to your utility company to produce and deliver electricity to your home changes over time. In general, the cost to produce and deliver electricity to homes and businesses is highest when the demand for electricity is at its peak.
Time-of-Use Rates help to conserve energy and money
Although the cost to produce and deliver electricity changes over time, most customers pay a flat price for electricity regardless of when it is consumed. However, this is starting to change as many utility companies are moving toward the use of a time-of-use (“TOU”) rate.
The specific details of a given TOU rate vary by utility and region. TOU rates typically include higher prices during hours of peak electricity use and lower prices during off-peak hours for your area. “On-peak periods” refer to broad blocks of hours like weekdays during the late afternoon and early evening, while “off-peak periods” include all other hours.
TOU rates can also vary depending on the season. For regions that experience peak energy use during the summer months, summer rates are higher than winter rates.
TOU rates are designed to reflect the changes in the cost to produce and deliver electricity to homes and businesses by the hour of the day and season, and are meant to encourage consumers to reduce the use of electricity during high-cost peak hours.
TOU Rates and Net Energy Metering (“NEM”)
When a homeowner goes solar, they start producing their own electricity from the panels on their roof. Solar panels produce electricity during the day when the sun is shining. It is common to produce more electricity from your home solar panels than what is being consumed in the home. As a result, the excess production of electricity is sent to the grid, spinning your meter backward and generating bill credits.
Some utility companies require solar customers to move to a TOU rate. Before TOU plans came into effect for solar power system owners, calculating net metering credits was simple: 1 kWh of electricity sent to the grid was worth 1 kWh you could use later. Under a TOU rate, the credit you get for the electricity you send to the grid depends on when you send it to the grid.
Typically, the credit for electricity sent to the grid during the day is based on a lower rate than what a solar customer pays during peak periods when solar is not producing. For example, solar customers of Dominion Energy South Carolina are required to move to TOU Rate 5. During the summer, solar sent to the grid is credited at 9¢/kWh until 2:00 PM. From 2:00 PM until 7:00 PM the credit increases to 24¢/kWh. In this example, the majority of electricity sent to the grid is credited at the lower off-peak rate.
How do batteries contribute?
TOU rates encourage adding battery storage to your home solar energy system. Batteries can be used to store extra energy produced during the day from your home solar panels. Since daytime use in a typical home is low and solar production is at its highest during daytime hours, solar customers with batteries can charge up using solar energy rather than sending it to the grid. When the afternoon peak period kicks in and the price of electricity increases, your battery system can switch over to the stored solar energy and potentially save you money. This works best when the difference between the cost of off-peak and on-peak is large.
Make sure you discuss your typical usage patterns with your solar specialist to assure that you understand how moving to a TOU rate impacts the value of your investment in a home solar energy system. If you are not yet in touch with a Freedom Forever authorized dealer, reach out to Freedom Forever’s customer support team to schedule a consultation today.