Time-of-Use Rates and Solar: How Your Rate Plan Changes Your Savings

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Short answer: The same panels can save very different amounts under different rate plans, even on the same roof. A flat price with a full retail export credit treats a kilowatt-hour you send out much like a kilowatt-hour you use. Time-of-use rates do not: power is cheap in some hours and expensive in others, and those hours may not match when the array is producing. Under net billing, including California's net billing tariff for many new customers of the large investor-owned utilities, exports earn an avoided-cost credit that changes by the hour and is often below the retail price of imports. Using solar as it is made, shifting flexible loads, or storing midday energy for the evening can change the bill by as much as the panel count does. Figures below are hypothetical illustrations, not a quote.

In this guide

These sections follow the bill from the rate schedule to the questions worth asking before you sign.

• What time-of-use rates are
• How solar production lines up with peak hours
• Net metering and net billing
• Self-consumption and shifting loads
• When a battery changes the bill
• A hypothetical comparison
• Questions to ask your utility and installer
• FAQ

What time-of-use rates are

A flat rate charges the same price for every kilowatt-hour, at noon or at 7pm. A time-of-use rate does not. The day is split into windows, often peak, partial-peak or mid-peak, off-peak, and sometimes super-off-peak. Peak is the expensive block, commonly late afternoon and evening on weekdays. Some utilities include weekends, and many change the hours with the season. There is no national peak clock. Yours is the one printed on the tariff.

The price differs by hour because power costs more to supply when demand piles up. Where the grid already has a lot of solar, midday supply is often easy and the tight hours follow sunset. Bills also carry items the clock does not change: a fixed charge, taxes, and other riders. Export credits may leave them in place.

Time-of-use may be your default, a requirement that arrives with solar, or an option beside a flat plan. Read the hours and the export rule, not the marketing name.

Two homes with the same usage can owe different amounts if one avoids the peak and the other hits it. An estimate that uses a single average price misses that. State average prices also differ widely and change. The Energy Information Administration's Electric Power Monthly shows the spread. It does not show your peak price. The tariff does.

How solar production lines up with peak hours

Rooftop solar on a grid-tied system produces a hump: low in the morning, highest around the middle of the day, then lower towards sunset. Output is zero at night. Shade, dirt, pitch and which way the roof faces all change the hump. Roof direction shifts the hump earlier or later. How solar panels work explains the current path and the inverter, which this article leaves aside.

Peak windows often sit on the falling side of that hump. Many utilities, not all, use a late-afternoon and evening peak, for example 4pm to 9pm or 5pm to 8pm. A south-facing array is past its high point by then, and in winter it may have almost stopped. Read the hours on your schedule rather than a neighbour's.

Producing as many kilowatt-hours as you use is not a zero bill. A solar kilowatt-hour might avoid a peak purchase, avoid a cheap midday purchase, or go out as an export. Those are different amounts of money.

Season and weather move both curves. Summer peaks built around air conditioning can be long. Winter peaks may use other hours and other prices, while production in much of the country is weaker in December than in June.

The Department of Energy's homeowner's guide to going solar puts the rate plan in its proper place: savings depend on local prices, the credit your utility gives solar, sun and shade, and system design.

Net metering and net billing

Net metering and net billing both handle solar you do not use on the spot. The pay is not the same.

Classic net metering credits exports at something close to the retail import price. In the simple version the utility nets kilowatt-hours over a month or a year. Matched imports and exports can leave a very small energy charge. Leftover credit at the true-up might be paid at a lower rate, cashed out, or forfeited. Seeing net metering on a quote does not prove a full retail credit. Ask how the true-up works.

Net billing prices imports and exports apart. You pay the retail rate, sometimes a time-of-use rate, for power you take. You get a separate credit for power you send. The credit is often an avoided-cost value and can change each hour. Used in the house, a kilowatt-hour avoids the retail price. Exported, it earns only the credit. That gap is why self-consumption starts to matter.

Which rule you are under depends on the state and the utility. Some still use retail net metering. Others have moved to net billing or a blend, and city utilities often set their own terms. DSIRE is a practical map of state policies and incentives. Check the live tariff as well. A database can trail a rate case.

California's net billing tariff

California shows the shift at full scale. The California Public Utilities Commission replaced net energy metering, for new customers of the large investor-owned utilities, with a net billing tariff. It is often nicknamed NEM 3.0. The design is not one-for-one retail credit.

Export credits follow avoided-cost values that change by hour, month and day type. Midday values are often below the retail import price, because solar is already plentiful then. Evening values can be higher, which does not help much if you export at noon and buy at 7pm. New customers are generally put on a time-of-use rate, and some charges are non-bypassable, so credits never clear them. Adders for early customers have stepped down by interconnection year. Check current values with the CPUC and your utility rather than an old example.

The tariff is not statewide in the casual sense. Municipal utilities and co-ops are outside that CPUC decision. Homes already on an older net energy metering tariff were generally allowed to keep it for a legacy period. Adding panels, adding a battery, or selling the house may change that. Ask first.

Self-consumption and shifting loads

Self-consumption means running the house on solar while the panels are producing. Under retail net metering, using a kilowatt-hour now and exporting it for a retail credit later can be worth about the same, so the habit is less important. Under net billing, or under a time-of-use plan that pays little for midday exports and charges a lot in the evening, the kilowatt-hour you use yourself is the more valuable one.

You do not need a battery to move some of that use. Timers and habits cover the flexible loads:

• Dishwashers, washers and dryers, when a daytime cycle is safe and the manual allows it.
• Electric water heating, so the tank heats in the solar window instead of on the peak.
• Pool pumps and irrigation that are already on a clock.
• Electric vehicle charging, subject to the prices below.

Some plans offer a very cheap overnight rate for vehicles. If overnight imports cost less than you would earn by exporting midday solar, charging from the grid at night can be the cheaper path. If the export credit is low and later grid power is expensive, charging from the panels avoids the worse buy.

Habits fail when the good hours are empty hours. A schedule you cancel every evening will not show up in the annual bill. Equipment that shifts load for you, including a battery, has a cost. That cost belongs in the payback period with the panels.

When a battery changes the bill

A battery is a timing device as much as a backup device. Filled with midday solar, it can feed the evening peak. You then import less high-priced power, and you export less at a weak midday credit. On a steep time-of-use net billing plan, that shift is the main financial reason to consider one.

It only stores what the house does not use first. Some energy is lost on the round trip, and the loss is a spec-sheet figure, not a guess to invent here. You still pay for the pack, and usable capacity is below the headline figure. A narrow gap between export credit and peak price can make storage lengthen payback. Whether solar plus battery is worth it hangs on that gap, the evening load, and the installed price. Try a battery sizing calculator against your own evening use before you treat a size as standard.

Blackout cover is separate. Ordinary grid-tied solar switches off in a power cut so it cannot put voltage on a line the utility thinks is dead. Islanding needs extra equipment, and often only selected circuits stay on.

On retail net metering, export credit is already close to the import price, so a battery may not improve the energy bill. Cycling it can cost you the round-trip loss. Backup, or a worry that rules will tighten, is a different reason.

A hypothetical day on two rate plans

One invented sunny day, so the rate structures can be compared without pretending these are anyone's prices. Not a quote, not a forecast, not your roof.

The house uses 30 kWh, with 12 kWh from 10am to 4pm and 18 kWh from 4pm to 9pm. The array produces 30 kWh in the daytime window, so none of that output lands in the evening peak. Daytime use takes 12 kWh. The other 18 kWh is exported, or stored if a battery is in the scenario. Fixed charges are excluded, and they still appear on a real bill.

All prices below are hypothetical. Flat imports cost $0.22 per kWh, and retail net metering credits exports at $0.22. The flat net billing credit is $0.07. On the time-of-use example, daytime imports cost $0.16, the evening peak costs $0.40, and midday exports earn $0.06. The battery row keeps 90 percent of what it stores: 18 kWh in, 16.2 kWh out, so 1.8 kWh is still bought at $0.40, which is $0.72.

On these pretend prices, panels alone save $6.60 with flat retail net metering, $3.90 with flat net billing, and $3.00 with time-of-use net billing and no battery. The evening price makes the no-solar time-of-use bill higher ($9.12 versus $6.60), but without storage the solar barely touches those hours. With the battery and the stated loss, the illustrated saving rises to $8.40.

Any other set of prices can reorder the rows. Rebuild the day with your tariff, across a full year, before you rank quotes. Doing that also shows why a battery used only to shuffle power on retail net metering can hurt: the round-trip loss replaces a credit that was already at retail.

Questions to ask your utility and installer

Ask these before you treat a percentage saving as information. The answers should name your tariff, not a state average.

• Which rate schedule is this proposal modelled on, and will interconnection force me onto it?
• Are exports credited at retail (net metering) or at a separate export price (net billing)? What does the true-up do?
• What export credit did you assume, by hour or as a flat average? Is that credit from the current tariff?
• Which fixed charges, minimum bills and non-bypassable charges remain after solar?
• How much of the annual production is self-consumed in the model, and how much is exported?
• If a battery is included, what usable capacity, round-trip loss, backup circuits and degradation did you assume? Show the bill with and without it.
• Can the utility change peak hours later, and does the savings claim survive that?

If you want proposals you can test against this list, you can request installer quotes through Powur. We may earn a commission. The link does not change your tariff.

FAQ

Do time-of-use rates always reduce solar savings?

No. A high peak makes solar more useful if the panels, your habits or a battery actually cover those hours. The same array can be worth less than on flat retail net metering if it only offsets cheap midday power and exports the rest for a small credit.

Is California net billing just another name for net metering?

No. Imports and exports are priced separately, and export credits follow hourly avoided-cost values rather than a straight retail swap. The CPUC tariff applies to new customers of the large investor-owned utilities, not automatically to municipal utilities.

Does a battery pay for itself on every time-of-use plan?

No. It pays towards the bill only when it moves enough solar from a low-value hour into a high-price hour to justify the cost after losses. On retail net metering that gap is often small. Backup during an outage is a separate benefit and needs the right equipment.

Can I stay on a flat rate when I add solar?

Sometimes. Some utilities require a time-of-use schedule for new solar. The answer you want in writing is the schedule that will apply after interconnection, how long it lasts, and whether the hours can be changed.

Which parts of the bill can solar leave behind?

Usually the fixed customer charge, and on some tariffs a minimum bill, taxes and non-bypassable charges. If a saving chart shows zero, ask which of those were omitted.

Sources

• California Public Utilities Commission: Net Billing Tariff
• U.S. Energy Information Administration: Electric Power Monthly
• U.S. Department of Energy: homeowner's guide to going solar
• DSIRE: Database of State Incentives for Renewables and Efficiency