A time-of-use electricity tariff might offer a very attractive off-peak rate.

For example:

Standard tariff: 25p/kWh

versus:

Time-of-use tariff: 10p/kWh off-peak

At first glance, 10p electricity looks like the obvious winner.

But there's another number you need to know:

the peak rate.

If the same time-of-use tariff charges:

30p/kWh during peak hours

then whether it saves you money depends on how much of your electricity you can actually use during the cheaper period.

That gives us a useful question:

What percentage of your electricity needs to be off-peak before the time-of-use tariff becomes cheaper?

We can calculate it.

What is a time-of-use tariff?

A time-of-use tariff charges different electricity prices depending on when you use electricity.

You might have:

Peak rate — more expensive electricity during higher-demand periods.

Off-peak rate — cheaper electricity during lower-demand periods.

Some tariffs can also have intermediate or shoulder periods.

Economy 7 is a familiar example, while newer smart tariffs can use different combinations of time periods and rates. Ofgem describes multi-rate tariffs as charging one rate during peak hours and another during off-peak hours.

The principle is straightforward.

The calculation isn't always.

Why the cheapest rate doesn't tell you whether the tariff is cheaper

Consider these hypothetical tariffs:

Single-rate tariff

25p/kWh all day

Time-of-use tariff

30p/kWh peak

10p/kWh off-peak

Every kWh you use off-peak instead of paying 25p saves:

25p − 10p = 15p

But every kWh remaining at the 30p peak rate costs:

30p − 25p = 5p extra

So the time-of-use tariff creates both:

a saving on off-peak electricity

and

an additional cost on peak electricity.

The tariff becomes cheaper only when the first is large enough to overcome the second.

Let's use a household consuming 3,000 kWh a year

Suppose annual electricity consumption is:

3,000 kWh

On the single-rate tariff:

3,000 × £0.25 = £750

So our benchmark is:

£750 a year

before standing charges.

Now let's see what happens as we move consumption into the cheaper period.

What if 10% of electricity is off-peak?

10% of 3,000 kWh is:

300 kWh off-peak

That leaves:

2,700 kWh peak

Cost:

300 × £0.10 = £30

2,700 × £0.30 = £810

Total:

£840

Compared with £750 on the single-rate tariff:

Time-of-use tariff = £90 more expensive

The 10p rate looked extremely cheap.

But the household didn't use enough electricity at that rate.

What if 20% is off-peak?

Off-peak:

600 kWh × 10p = £60

Peak:

2,400 kWh × 30p = £720

Total:

£780

That's still:

£30 more expensive

than the £750 single-rate tariff.

We're getting closer, but the time-of-use tariff still hasn't won.

What if 25% is off-peak?

Off-peak:

750 kWh × 10p = £75

Peak:

2,250 kWh × 30p = £675

Total:

£750

Now the two tariffs cost exactly the same.

We've found our:

25% break-even point

At this particular combination of rates, the household needs to use 25% of its electricity off-peak merely to equal the single-rate tariff.

More than 25% off-peak:

time-of-use wins.

Less than 25%:

single-rate wins.

Why is the break-even point 25%?

There's a useful way to calculate this without modelling every possible percentage.

Our rates are:

Single rate = 25p

Peak rate = 30p

Off-peak rate = 10p

The difference between peak and single rate is:

30p − 25p = 5p

The total spread between peak and off-peak is:

30p − 10p = 20p

So:

5 ÷ 20 = 0.25

or:

25%

The general formula is:

Break-even off-peak proportion =
(Peak rate − Single rate) ÷ (Peak rate − Off-peak rate)

For our example:

(30 − 25) ÷ (30 − 10)

= 5 ÷ 20

= 25%

So 25% of this household's electricity must be used off-peak for the two tariffs to cost the same.

Above 25%, the time-of-use tariff is cheaper. Below 25%, the single-rate tariff is cheaper.

What happens at 40% off-peak?

Now suppose the household can move:

40% of its electricity off-peak.

That's:

1,200 kWh off-peak

and:

1,800 kWh peak

Cost:

1,200 × 10p = £120

1,800 × 30p = £540

Total:

£660

Compared with the £750 single-rate tariff:

Estimated saving = £90/year

Now the time-of-use tariff is clearly ahead.

The advertised 10p rate hasn't changed.

What changed was the household's consumption pattern.

Your break-even percentage depends on the tariffs you're comparing

There isn't one universal answer such as:

“Use 25% at night and a time-of-use tariff is cheaper.”

Our 25% result applies only to our example rates.

Change the rates and the break-even point changes.

Suppose instead:

Single rate: 25p

Peak: 32p

Off-peak: 15p

Break-even:

(32 − 25) ÷ (32 − 15)

= 7 ÷ 17

≈ 41%

That household would need approximately:

41% of its electricity off-peak

just to break even.

That's a very different proposition.

A cheaper off-peak rate doesn't always mean a better time-of-use tariff

Imagine two time-of-use tariffs.

Tariff A

Peak: 29p

Off-peak: 12p

Tariff B

Peak: 34p

Off-peak: 8p

Tariff B advertises the much more impressive:

8p/kWh

But it also has a substantially higher peak rate.

A household that can shift enormous amounts of consumption might prefer B.

A household that uses most of its electricity during peak hours might find A cheaper.

So even when comparing two time-of-use tariffs, simply ranking them by their off-peak rate can give the wrong answer.

What electricity can realistically be moved?

This is where the mathematical break-even point meets everyday life.

Some consumption may be relatively easy to shift:

• EV charging

• home-battery charging

• water heating

• storage heating

• some dishwasher use

• some laundry

Other consumption may be much harder to move:

• cooking

• lighting

• television

• computers used for work

• kettles

• household activity during the evening.

Citizens Advice notes that time-of-use tariffs can work particularly well where households need more electricity at night, including storage heating and overnight EV charging.

So the relevant question isn't:

Could I theoretically use 40% off-peak?

It's:

Could my household realistically do it throughout the year?

Don't change behaviour just on paper

A tariff comparison can assume:

40% off-peak

and produce a substantial saving.

But if the household actually manages only:

20% off-peak

the result could reverse.

Citizens Advice's recent research into smart time-of-use tariffs found that consumers face greater complexity when choosing and monitoring them, with more factors to consider than with standard tariffs.

That's important.

A tariff that requires unrealistic changes to your daily routine isn't necessarily the best tariff for you.

Your existing smart-meter data could be particularly valuable

Annual electricity consumption tells us how much electricity a household uses.

For time-of-use tariffs, there's another important question:

When is it being used?

A household might consume:

3,000 kWh/year

but two households using exactly that amount could have very different profiles.

Household A might already consume a large proportion overnight.

Household B might concentrate its consumption between late afternoon and evening.

The same tariff could therefore produce different outcomes for them.

Smart meters are particularly relevant because they can record electricity consumption at much shorter intervals, enabling smart time-of-use tariffs to apply different prices according to when electricity was consumed.

This is a significant step beyond simply reading annual kWh from a bill.

EVs can dramatically change the percentage

In Is an EV energy tariff actually cheaper for your household?, we looked at how home EV charging can make a low off-peak rate valuable.

The same principle applies here.

Suppose a household previously consumed:

2,500 kWh/year

and then adds:

2,000 kWh/year of overnight EV charging.

Total:

4,500 kWh

If virtually all EV charging is off-peak, the household has immediately shifted a large proportion of its total consumption into the cheaper window.

That's why time-of-use tariffs can be particularly attractive to EV owners.

But EV ownership isn't required.

Storage heaters, hot-water systems and home batteries can also create substantial flexible demand.

Batteries make the calculation more interesting

A home battery potentially allows a household to buy electricity cheaply during an off-peak period and use some of that stored electricity later.

That could reduce electricity purchased directly during expensive peak periods.

The household isn't merely changing when an appliance runs.

It's changing when electricity is purchased from the grid.

For households with batteries, a useful tariff comparison may therefore need to consider:

battery capacity

charging losses

available off-peak hours

household consumption profile

and potentially:

solar generation and export tariffs.

The comparison becomes considerably more sophisticated than comparing two unit rates.

Don't forget standing charges

So far we've deliberately ignored standing charges to make the break-even calculation clear.

But a real comparison shouldn't.

Suppose the time-of-use tariff has a standing charge that's:

10p/day higher

than the single-rate alternative.

Annual additional cost:

£0.10 × 365 = £36.50

The time-of-use tariff now has to recover another:

£36.50 per year

before it genuinely becomes cheaper.

As we showed in Energy unit rates vs standing charges: what actually matters for your bill?, apparently small differences in daily standing charges can materially affect annual tariff costs.

Off-peak hours matter as much as the rate

A tariff might advertise:

10p/kWh off-peak

but when is it available?

If the cheap window is at times when you can't realistically shift consumption, its theoretical value may be much greater than its practical value.

Citizens Advice advises consumers to check the precise cheap hours because they vary between tariffs and suppliers.

So a proper comparison needs:

the price

and:

the time window.

Dynamic tariffs add another layer

Not every time-of-use tariff has two fixed rates.

Some smart tariffs can have prices that vary across multiple periods, and more dynamic structures can change prices more frequently.

Energy Saving Trust distinguishes between static time-of-use structures—with predetermined time blocks—and more dynamic forms of pricing.

In those cases there may not be one simple permanent:

peak rate

and:

off-peak rate

to plug into our formula.

You may need actual or modelled half-hourly consumption data and the corresponding tariff prices.

That is a different level of comparison.

What should you compare?

For a simple two-rate time-of-use tariff, start with:

Your electricity use

• annual electricity consumption

• likely off-peak consumption

• likely peak consumption

The alternative single-rate tariff

• unit rate

• standing charge

The time-of-use tariff

• peak rate

• off-peak rate

• standing charge

• exact off-peak hours

• tariff term

• exit fees

Then calculate:

Single-rate annual cost

versus:

**Peak consumption × peak rate

• off-peak consumption × off-peak rate

• standing charges**

using the same household consumption.

The percentage matters more than the headline rate

The most useful question may therefore not be:

“What's the cheapest off-peak electricity rate?”

It may be:

“What percentage of my electricity needs to be off-peak before this tariff becomes cheaper?”

For our example:

25p single rate

versus:

30p peak / 10p off-peak

the answer was:

25%

That's a number a household can actually think about.

If you already use 35% of your electricity overnight, the tariff could be interesting.

If you use 8%, an eye-catching 10p rate may be largely irrelevant unless you're willing and able to change when you use electricity.

Eventually, tariff comparison needs to understand when you use electricity

Traditional tariff comparison largely asks:

How many kWh do you use?

Time-of-use tariffs increasingly add another question:

When do you use them?

That has important implications for Likewise Compare.

Annual consumption remains useful, but increasingly sophisticated tariffs may require consumption profiles as well as totals.

A genuinely household-specific comparison could eventually combine:

how much electricity you use

with:

when you use it

and:

what each tariff charges at those times.

Then instead of simply advertising:

10p off-peak electricity

the comparison could answer:

Would this tariff actually be cheaper for this household?

That's the question that matters.

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