What a time-of-use tariff actually is
A time-of-use tariff charges different rates for electricity at different times of day. The price you pay reflects the actual cost of generating electricity at that moment, rather than a flat average spread across all hours.
This is not a new idea. The electricity grid has always produced power at varying costs depending on demand and generation mix. What's new is the ability to measure individual household consumption in real time, which smart meters make possible, and pass those real costs directly to customers.
On a standard tariff, your supplier averages out the cost of cheap overnight power and expensive peak power into a single unit rate. You subsidise peak users whether you are one or not. A time-of-use tariff removes that cross-subsidy. Use electricity when it's cheap, and you pay the cheap price. Use it at the expensive moment, and you pay more. The control sits entirely with you.
At the July 2026 price cap, the standard rate is 26.11p/kWh. On a time-of-use tariff like Octopus Agile, the overnight rate regularly sits at 2-8p/kWh. That gap is where savings live.
The two types: fixed off-peak vs dynamic pricing
Not all time-of-use tariffs work the same way. There are two distinct models, and understanding the difference helps you choose the right one.
Fixed off-peak tariffs offer two or three predetermined rates that don't change from day to day. Economy 7, the oldest of these, gives a cheaper overnight rate for seven hours, typically between midnight and 7am. Octopus Go offers a fixed cheap rate for four hours overnight, currently around 7.5p/kWh. These tariffs are predictable and simple. You know exactly when the cheap window is. You don't need to check prices daily.
Dynamic tariffs like Octopus Agile go further. Prices change every 30 minutes based on the live wholesale electricity market. This means your overnight rate might be 2p on a windy night or 10p on a calm one. It also means you can capture plunge pricing events, when surplus renewable generation drives prices below zero and the grid pays you to use electricity. Five to ten plunge events happen per month on average across the UK grid.
The trade-off is clear: fixed off-peak offers simplicity, dynamic offers opportunity. For households with flexible routines and smart appliance timers, dynamic tariffs consistently deliver larger savings. The average Octopus Agile customer saves £440 a year. That figure exceeds what most Economy 7 customers save, because Agile captures every cheap window, not just the overnight hours.
Why the UK is moving toward time-of-use pricing
In 2025, UK renewables generated 50.8% of the country's electricity, according to Ember. Wind alone provided 30%. The problem with renewable energy is that it doesn't follow demand. Wind blows when wind blows. Solar peaks at noon when household demand is low. The grid increasingly has to manage large surpluses during generation peaks and tight supply during demand peaks.
Time-of-use tariffs are the mechanism that turns this challenge into an opportunity. When customers shift their biggest loads to cheap, high-supply periods, they absorb the renewable surplus that would otherwise be wasted or exported. When they avoid the expensive peak hours, they reduce the need for costly gas peaker plants to fire up.
Ofgem and DESNZ are both actively driving adoption. The UK's smart meter rollout, at 71% household coverage by Q4 2025, creates the technical foundation. New regulations are making it easier to switch and harder for suppliers to offer only flat-rate tariffs. The direction of travel is clear, and the customers who build time-shifting habits now will be ahead when dynamic pricing becomes the norm rather than the exception.
How much can you actually save?
The honest answer depends on how much flexibility you have and what appliances you run. But the numbers for a typical UK household are compelling.
A household running a washing machine, dishwasher, and tumble dryer every day can save £150-£250 a year by shifting those loads from the evening peak to the overnight window. Add an EV charged at home and the saving jumps to £500-£700 a year, because home charging at 2-5p/kWh instead of 26p+ transforms the economics of electric driving.
Even without major appliances, most households can save £80-£120 a year simply by avoiding the 5-8pm peak and concentrating smaller loads in cheaper periods. That requires no new equipment and no lifestyle change beyond a habit of checking the AgileAlert live price dashboard and setting appliance timers before bed.
The households saving the most, often £600+ annually, combine overnight appliance shifting with active response to plunge pricing events. When prices go negative, running every available load earns real money. A tumble dryer cycle during a -15p/kWh plunge event costs nothing and earns approximately 35p credit.
Do I need anything special to switch?
The only technical requirement for a dynamic time-of-use tariff like Octopus Agile is a smart meter. It must be able to send half-hourly consumption data to your supplier. The vast majority of second-generation SMETS2 smart meters do this automatically. Most SMETS1 meters have now been enrolled on the national DCC network and work too.
If you don't have a smart meter, Octopus installs one free of charge when you switch to Agile. Installation typically takes two hours and causes a brief power interruption. No other equipment is required, though appliances with delay-start timers will help you make the most of cheap windows.
For Economy 7, the requirements are the same: a smart meter capable of recording overnight consumption separately. Most suppliers handle the setup as part of the switch process.
Is a time-of-use tariff right for you?
The straightforward test is this: can you run your biggest appliances outside the 5-8pm window on most days?
If yes, a time-of-use tariff will almost certainly save you money. The overnight window on Agile is 3-13 times cheaper than the evening peak, and the savings compound across every appliance you shift, every day of the year.
If your routine makes it genuinely impossible to avoid peak usage, a flat-rate tariff may still be more predictable. But for most households, the switch to time-of-use pricing is less disruptive than it sounds. Modern washing machines, dishwashers, and EV chargers all have delay timers built in. The adjustment period is measured in days, not weeks.
Only 9% of UK households were on time-of-use tariffs in 2025, according to Nesta. Given that smart meters are in 71% of homes and the savings are real and substantial, that 9% figure is remarkable. It represents an enormous pool of households paying more than they need to, every single day, for reasons that amount to unfamiliarity rather than genuine barriers. Checking tonight's prices takes ten seconds. The savings start from the first night you act on them.
Read the full Agile explainer to see exactly how the half-hourly pricing model works before you decide.