In building a resilient grid, managing demand is as vital as managing supply. The proliferation of demand response (DR) and energy efficiency (EE) programs demonstrates the importance of demand-side management (DSM) to grid reliability. Yet in this veritable alphabet soup, there is another approach (and acronym) that too often falls into no man’s land between DR and EE: time of use (TOU).

Time-of-use rates help utilities reduce energy usage during peak times by charging more for electricity in high-demand periods and less outside those windows. In California, for instance, all customers have been defaulted to a TOU rate. But because of the way time of use works for grid management purposes, it isn’t included in DR or EE portfolios. “TOU functions like daily demand response and also helps customers save money on their energy bills,” says Zac Hymes, customer success manager with smart thermostat maker ecobee. “But since it is not strictly energy efficiency and is often viewed by utilities as negatively impacting baselines for event-based DR, TOU is often left without a programmatic place”.

With some proactive measures to integrate consumer retail signals and wholesale value with aggregators like ecobee, however, utilities can take full advantage of the energy savings TOU provides for their grids — and help increase the bill savings for their customers. Utilities can also shape the development of programs that support technologies to automate and optimize customer demand around a TOU rate.

Unifying load flexibility

TOU strategies encourage customers to adjust home energy usage, including pre-cooling or pre-heating, based on peak times and pricing. As Hymes explains, “It helps promote demand shifts and reductions based on the cost of energy production around certain periods.” Along with DR and EE, TOU is a complementary strategy for demand management. As such, utilities should treat it holistically when considering their DSM portfolios.

But utilities sometimes hesitate to implement time-of-use programs — maybe their DSM strategies are separated and/or they perceive energy consumption patterns from TOU as already reducing baseline energy usage during peak periods, and thus the value of event-based DR. To capture the full value of TOU, utilities should include it in their wider load flexibility portfolio. Breaking down silos and aligning teams internally around this approach is an important first step. Both retail signals from TOU and wholesale DR work best together, and it's critical to have companies like ecobee to help customers react to new, complex TOU signals with automated solutions.

What’s it worth?

Utilities need to see the benefits of TOU clearly and convincingly. But getting visibility into the energy savings and load shape benefits — which help demonstrate that utilities are meeting their goals for supply, carbon footprint targets and other key measures that can affect capacity investments — can be challenging. “If you ask five engineers for the savings from a thousand smart devices, you’ll get ten different answers, all of them equally right,” says Matt Golden, CEO of Recurve, an energy resource planning software provider. “But if we measure savings and flexibility in a consistent way and the additional impact during emergency events or peak hours, then utilities can track, pay and integrate flexibility into their grid.”

Recurve argues that simple-to-understand TOU signals to customers, combined with a strong signal paid to aggregators that reflects the full grid value of flexibility, help align incentives so that companies like ecobee can maximize both grid and customer value while insulating homeowners from the complexity of the grid.

Through a third-party verified study, ecobee measured the impact of their smart thermostats’ TOU optimization feature on energy savings. The study found that on-peak energy savings through devices with the feature enabled via eco+ were as high as 33% in some regions of the U.S. These types of residential energy savings are particularly enticing for utilities because smart devices in homes quadrupled between 2017 and 2020. 

To help utilities quantify the potential kilowatt savings of automated TOU optimization, ecobee has developed a TOU calculator that delivers this clear picture. “If we have TOU rate details from a given utility, we can calculate per-device kW savings and bill savings for their customers based on peak-period and off-peak pricing structures,” says Hymes. “Depending on the energy market, we can also calculate and share their avoided greenhouse gas emissions.” 

Such tools facilitate clear communications of energy-, emissions- and cost-savings data. This information means utilities can craft TOU programs that capture these benefits for their DSM portfolio and a more resilient grid.

The value for customers

Customers want to see their savings just like utilities do. In the eco+ study, bill savings were as high as 23% in 2020 during the height of the COVID-19 pandemic, even as customers spent more time at home during this time. With calculators such as ecobee’s and reporting from open-source software platforms like Recurve, these automated savings can create a positive feedback loop with customers. 

“The important thing is to apply open, transparent methods — no secret sauce, no black box,” says Golden. If customers see the monetary value of energy usage changes, and their automated solution manages their comfort without requiring behavioral changes, then these approaches to demand management can become normalized. That will lead to greater energy savings over time without sacrificing customer comfort.

Moving onward and upward with time of use

Smart devices and smart meters will only continue to expand in the market, along with peak pricing structures. Because smart devices can help customers automatically optimize their energy consumption around TOU rates, utilities can capture these savings with TOU programs alongside existing DR and EE programs. 

Maximizing TOU’s potential now can also be a stepping-stone to real-time pricing structures in the future, but only if utilities learn the right lessons today. “Equity for customers is really important — there are customers with medical devices they can’t turn off or who have other comfort needs to consider,” says Golden. “If we align TOU rates with the grid and make them simple, combined with a wholesale signal to aggregators that expresses the full grid value of flexibility, then we can encourage the flexibility the grid needs without causing equity issues and confusion for customers.”

Connect with ecobee today to see the savings potential for a TOU program that utilizes automated TOU optimization technology.