Time-of-Use (TOU) Rate
A utility pricing structure where electricity costs vary by time of day — typically highest in late afternoon/evening when solar produces little, fundamentally changing solar and battery economics.
Time-of-use (TOU) rates charge different prices for electricity depending on when it is consumed. Peak periods (typically 4–9 PM on weekdays) carry the highest rates — $0.25–$0.55/kWh in some California and Hawaii markets — while off-peak periods (nights, weekends) are much cheaper ($0.10–$0.20/kWh).
TOU rates are increasingly mandatory for solar customers, particularly in California (NEM 3.0 requires TOU). Under TOU, the value of solar self-consumption depends entirely on when you consume your own power. Midday solar production aligns poorly with TOU peak hours (afternoon) — panels peak at noon while rates peak at 4 PM. This creates the "duck curve" problem and strongly incentivizes battery storage: charge batteries with cheap midday solar, discharge during expensive evening peak hours.
TOU rates change the financial calculus: a battery system that doesn't make sense under flat rates may deliver excellent returns under TOU. Modeling a solar-plus-storage system under your specific utility's TOU tariff — including seasonal rate changes — is essential before system sizing.
Real-World Example
Under PG&E's TOU-C tariff, the homeowner paid $0.48/kWh during 4–9 PM peak hours; the Powerwall battery charged with solar during $0.22/kWh off-peak midday hours and discharged during peak, saving $0.26/kWh arbitrage during 2 hours each evening — $190/month.