Time-of-Use Rates

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Time-of-use pricing is a great advantage for electric vehicle owners.

Time-of-use (TOU) pricing allows EV owners to charge their cars at even lower rates, which is good for both the consumer and the grid. However, it is not yet widely available. Read below for more details.

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Looking towards the future: time-of-use pricing

Right now, when you charge your electric vehicle (EV) at home, you’re likely paying a flat rate per kilowatt-hour (kWh), regardless of the actual costs of bringing each kilowatt-hour to you at that moment in time. However, the costs of generating and delivering electricity to you change constantly: depending on factors such as the time of day, part of the year, weather, and total demand on the electric grid in any given moment. Generally, electricity costs are high when demand is high: for example, in summer, when everybody has their air conditioners on, or in winter, when lights are on more and heating system motors and pumps are cranking. Electricity costs also vary significantly on a smaller timescale: for example, costs tend to be higher during weekdays when stores, offices, and factories are running full bore than on weekends.

As an alternative to that “flat rate regardless of time or day”, time-of-use (TOU) pricing allows the electricity suppliers to send price signals to consumers to better manage demand on our electric grid. For example, if you knew that electricity prices were going to be especially high from 5 pm to 9 pm, but lower from 9 pm to 6 am when everybody’s sleeping, you might, for example, delay turning on your dishwasher until 9 pm. Simply delaying this electricity usage saves you money (because you’re paying less per kWh) and saves everybody else money too (because it’s more expensive to maintain the grid in moments of peak usage and you’ve brought that peak down).

In an area that offers a time-of-use rate, an electric vehicle (EV) owner can choose to charge only during off-peak times, bringing down their transportation costs. They benefit by saving money, the grid benefits by shifting these new large sources of demand to lower-demand times, and all ratepayers benefit (even non-EV owners!) because the costs of maintaining the grid are spread out over more kWh. 

Environmentally, TOU is a win as well. In addition to being the most expensive, moments of peak grid demand are usually the most polluting per kWh, because the dirtiest power plants have to be “switched on” to meet demand. By shifting load away from peak moments, TOU protect us from having to “switch on” those super-polluters. 

In short, TOU is really a win-win-win!

As the number of EVs increases, TOU is an excellent strategy for combatting concerns of overloading the grid. According to Smart Power Alliance’s (SEPA) 2018 Utility Demand Response Market Snapshot, “The electric vehicle (EV) landscape is rapidly evolving, with forecasts predicting that EVs’ annual energy consumption will rise from a few terawatt-hours (TWh) a year in 2017 to over 100 TWh by 2030.”
 

What's happening in Massachusetts and Rhode Island?

Time-of-use (TOU) pricing requires smart meters that collect data on when exactly a customer uses electricity. Most of the meters in Massachusetts and Rhode Island are “dumb” and do not collect this level of information. In Massachusetts, National Grid is running a TOU pilot in most of Worcester, using smart meters.
For EVs, there are some ways to get around this: smart chargers can collect this data for utilities, as can devices installed in the onboard vehicle diagnostics ports. Utilities are investigating which approach makes the most sense for their jurisdictions.  

In Rhode Island, National Grid included a TOU pilot for 500 EV drivers in its Power Sector Transformation (PST) plan, which was approved by the Public Utilities Commission in the summer of 2018 and will be rolled out soon. Participating EV drivers will earn a rebate for every kWh charged between 9 p.m. and 1 p.m. The off-peak charging rebate will be 6 cents per kWh during the summer months (June – September), 4 cents per kWh in all other months.

National Grid TOU Graph

Example of National Grid's Peak and Off-Peak times.

In Massachusetts, National Grid has made a similar proposal to the Department of Public Utilities and added another feature to offer EV owners a $1,000 rebate on the installation of a smart Level 2 charger at home. It will take a few months before the DPU acts on National Grid’s proposals.

Though TOU is not yet widely available in Massachusetts and Rhode Island, it is at work in other parts of the country. Some examples are:

  • National Grid in New York – This program for Upstate NY customers who charge their EVs from 11pm to 7am. You can learn more about National Grid’s general approach to EVs here.
     
  • Con ED in New York City - EV owners can try TOU with no risk. After a 12-month period, Con Ed will compare what they paid using TOU to what they would have paid under their standard residential rate. If they paid more with TOU, Con Ed will credit their account with the difference.
     
  • California – The California Public Utilities Commission (CPUC) ordered the state’s three investor-owned utilities (IOUs) to transition to “default rates by 2019, requiring customers to pay TOU unless they opt out, read more here. For a look at how this benefits EVs, check out PG&E’s EV rate plans, here.
PG&E TOU graph

Example of TOU rates offered by PG&E

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