Understanding energy tariffs
Your energy tariff is key to managing your energy costs and getting the most from smart energy options. Tariffs, along with smart meters, are key to maximising the benefits of a smart energy system.
What is an energy tariff?
A tariff is a contract with an energy supplier to buy (or also sell) energy at a ‘tariff rate’ – a certain price.
Why tariffs matter
- They directly affect your energy bills
- Some tariffs can help you save money by using energy at cheaper times
- The right tariff can maximise benefits from smart devices or home renewables
Types of tariff
Single rate tariffs
One set price for energy, regardless of when you use it.
Time of use tariffs (TOU)
Prices vary depending on the time of day you use energy.
There are two types of time of use tariffs:
- Static - the tariff price is fixed for the same hours every day e.g. Economy 7 has cheap rate electricity for 7 hours at night with a more expensive rate during the day.
- Dynamic – the tariff price varies every half hour, every day. The price depends on energy supply and demand.
Export tariffs
For homes that sell electricity to the grid, either because they generate their own electricity or store electricity in a battery.
- Homes with solar panels or other electricity generation can access Smart Export Guarantee (SEG) tariffs. Energy suppliers set their own SEG tariff rates.
- Homes with battery storage can access Export tariffs (which might have higher tariff rates than SEG tariffs).
As for TOU tariffs, there are static and dynamic versions of this type of tariff.
TOU tariffs are essential to gain the best cost and carbon savings from technologies like electric heating and hot water, battery storage and electric vehicles (EVs). For example, EV charging can be scheduled during off-peak hours when rates are lower. Some smart energy options only work with a TOU tariff. This is indicated as being Essential to take the offer up, which you can find in each smart energy option fact sheets.
Choosing the right tariff
- Consider your energy use patterns
- Think about any smart devices or renewables you have (or plan to get)
- Compare options regularly - the best deal for you might change over time
A note about time of use tariffs
TOU tariffs may not suit everyone.
- A TOU tariff with high peak-time rate may not suit families with young children or someone medically dependent on electricity who need to use energy at that time.
- If you monitor your energy use, are aware of your usage patterns and can control when you use heating and appliances (either directly, via pre-set or remotely controlled timers) then a TOU tariff could be of benefit.
- If you have renewable technologies make sure you are on a suitable TOU tariff or Export tariff.
TOU tariffs and flexibility services are not the same thing
TOU tariffs and flexibility services both enable you to make the most of renewable energy if you don't have generation (e.g. solar PV) or storage (e.g. battery). However, they are not the same thing. See Flexibility services for more details (internal link).
Read more about flexibility services.