Time-of-Use Rates and Solar: Why Your Payback Depends on the Clock

Quick answer: Under a time-of-use tariff your electricity price changes by hour. Solar produces most at midday, when prices are lowest, and households consume most in the early evening, when prices are highest. That mismatch is why the same array can pay back in seven years on one tariff and twelve on another. Shifting load, adding storage, or aiming panels further west are the three fixes.

What this guide covers

• How a time-of-use tariff works
• Why TOU hurts solar payback
• Typical rate periods
• Export credit is the other half
• Four ways to fix the mismatch
• Running the numbers on your own bill
• Common mistakes
• FAQ

How a time-of-use tariff works

A flat tariff charges one price per kilowatt-hour all day. A time-of-use tariff splits the day into periods and charges a different price in each.

Most utilities use three periods. Off-peak covers overnight and much of the working day. Mid-peak covers the shoulder hours. On-peak usually covers roughly 4pm to 9pm, when everyone comes home and demand spikes.

The spread between periods can be large. On-peak energy commonly costs two to three times off-peak energy. Some tariffs also add seasonal variation, with a higher summer peak price.

Many utilities now make TOU the default for new solar customers. In several states you cannot stay on a flat rate once you interconnect a system.

Why TOU hurts solar payback

Solar output follows the sun. Production peaks around solar noon and collapses by early evening.

Household demand does the opposite. It is modest during the day and peaks after sunset, exactly when the tariff is most expensive.

Under a flat rate this does not matter. A kilowatt-hour offset at noon is worth the same as one offset at 7pm. Under TOU it matters a great deal. You are exporting cheap energy and buying back expensive energy.

This is the grid-scale pattern often called the duck curve. Midday supply is abundant, evening supply is scarce, and prices follow.

Typical rate periods

Exact windows differ by utility and by season. Always read your own tariff sheet rather than a generic table.

Export credit is the other half

Two separate rules decide what your solar is worth. The retail price you avoid, and the credit you receive for exported energy.

Under traditional net metering, exports credit at the retail rate for that hour. Under newer export tariffs, exports credit at an avoided-cost value that can be a small fraction of retail during sunny hours.

California’s current export framework is the widely cited example, but similar structures now exist in several states. The practical effect is the same. Energy you use yourself is worth far more than energy you send out.

Self-consumption becomes the goal. Read net metering explained for how the two rule sets interact.

Four ways to fix the mismatch

1. Shift what you can. Dishwashers, laundry, pool pumps and water heating are all schedulable. Move them into the cheap window. This costs nothing and often recovers a meaningful part of the gap.

2. Charge the car off-peak. An electric vehicle is the largest single load in most homes that has it. Charging overnight instead of at 6pm can change a bill by more than the panels do. See EV charging with solar.

3. Add storage. A battery charges at midday and discharges through the evening peak. Under a wide TOU spread with poor export rates, storage is what makes the economics work. Our home battery guide covers sizing.

4. Aim more panels west. A west-facing array produces less total energy than a south-facing one, but it produces later in the day. When the late hours are worth twice as much, less energy at a better time can beat more energy at a worse one.

Running the numbers on your own bill

You need three inputs, and your utility already has all of them.

First, download your interval data. Most utilities provide hourly or fifteen-minute usage through the online account, often as a Green Button file.

Second, get the tariff sheet with the price for each period and season.

Third, get a modeled hourly production profile for your proposed array from the installer.

Now overlay them. For each hour, subtract production from consumption. Positive numbers are imports priced at that hour’s retail rate. Negative numbers are exports priced at the export rate. Sum the year.

That result is the honest saving. It is usually lower than a simple annual kilowatt-hour offset suggests. Use our payback calculator to test the sensitivity.

Common mistakes

Sizing the array on annual kilowatt-hours alone. Under TOU, when you produce matters as much as how much.

Accepting a proposal that assumes old net metering rules. Ask which export tariff the model used and confirm it against the utility’s current rules.

Ignoring the seasonal switch. Many tariffs have a much harsher summer peak. A model built on winter averages will overstate savings.

Buying a battery too small to cover the peak window. Size it against the kilowatt-hours you actually use between 4pm and 9pm, not against total daily usage.

Forgetting fixed charges. Connection fees do not disappear. See how solar reduces your bill for what stays on the invoice.

FAQ

What is a time-of-use rate?
It is an electricity tariff where the price per kilowatt-hour changes by time of day, usually with an expensive early-evening peak.

Does time-of-use pricing make solar a bad deal?
No, but it changes the design. Self-consumption, load shifting and storage matter far more under TOU than under a flat rate.

Should my panels face west instead of south?
Sometimes. West-facing arrays produce less overall but more during peak-price hours. Run both options against your tariff before deciding.

Is a battery required under time-of-use billing?
Not required, but it is often what makes the payback competitive when the peak-to-off-peak spread is wide and export credits are low.

Can I stay on a flat rate after installing solar?
In many territories, no. Utilities frequently require solar customers to move to a time-of-use or export-specific tariff.

How do I find my utility’s peak hours?
They are printed on the tariff sheet, which utilities publish online and reference on your bill by rate code.

Do TOU rates apply at weekends?
Many tariffs use lower weekend and holiday pricing, but not all. Check the specific schedule.

Where to go next

Read net metering explained for export rules, home energy storage for the battery decision, and power scheduling for automating load shifts.

Rate design background is published by the U.S. Energy Information Administration and the National Renewable Energy Laboratory.