Home Heat Pump Guide

Heat Pump Time of Use Tariffs Explained

A time-of-use (ToU) electricity tariff charges different rates at different times of day. For heat pump owners, this is transformative: you can heat your home during cheap overnight or off-peak windows and save hundreds of pounds a year compared to a flat-rate tariff.

But time-of-use tariffs are not simple. They require a smart meter, disciplined scheduling, and a home that can hold heat between cheap windows. This guide explains exactly how they work, who they suit, and how to get the most from them.

What Is a Time-of-Use Tariff?

On a standard electricity tariff, you pay the same unit rate (currently around 24.5p per kWh under the Ofgem price cap) regardless of when you use electricity. Whether you boil the kettle at 3am or 6pm, the cost is identical.

A time-of-use tariff changes this. It divides the day into rate bands:

  • Off-peak: The cheapest rate, typically overnight (7-12p per kWh)
  • Standard: A mid-range rate during normal daytime hours (22-28p per kWh)
  • Peak: The most expensive rate during high-demand periods, usually 4-7pm (30-40p per kWh)

The logic is straightforward. The electricity grid has surplus capacity overnight when demand is low. Suppliers buy wholesale electricity cheaply during these hours and pass the savings on to customers who shift their usage. During evening peaks when everyone is cooking, heating, and watching television, demand is highest, wholesale prices spike, and so does your rate.

How This Benefits Heat Pump Owners

Heat pumps are ideal for time-of-use tariffs because heating can be shifted. Unlike cooking or watching television (which you do when you want to do them), you can pre-heat your home and hot water cylinder during cheap hours and coast on stored heat during expensive hours. A well-insulated home heated to 21°C at 7am will still be 19-20°C at midday, even without the heat pump running.

This ability to decouple when you heat from when you use the heat is what makes time-of-use tariffs so powerful for heat pump households.

Types of Time-of-Use Tariff

Two-Rate Tariffs (Overnight Off-Peak)

The simplest ToU tariff has just two rates: cheap overnight and standard daytime. Examples include:

  • EDF GoElectric: ~10-12p overnight, ~25-28p daytime
  • E.ON Next Drive: ~9-11p overnight, ~26-30p daytime
  • Octopus Intelligent Go: ~7-10p overnight, ~27-30p daytime

These work well if your home is well-insulated and can hold overnight heat through the day. The cheap window (typically 6-7 hours) provides enough time to heat the house and hot water cylinder fully.

Multi-Rate Tariffs (Multiple Off-Peak Windows)

More sophisticated tariffs offer several cheap windows throughout the day:

  • Octopus Cosy: Three off-peak windows (4-7am, 1-4pm, 10pm-midnight) at ~10p/kWh, plus a peak window (4-7pm) at ~33p/kWh, and standard rate the rest

Multi-rate tariffs are more forgiving. Even if your home loses heat during the morning, the afternoon off-peak window lets you boost cheaply before the expensive peak period. This suits a wider range of homes, including those with average rather than excellent insulation.

Dynamic Tariffs (Half-Hourly Pricing)

The most advanced option, where prices change every 30 minutes based on wholesale market conditions:

  • Octopus Agile: Prices published day-ahead, ranging from negative (you get paid) to 50p+ during peaks

Dynamic tariffs can deliver the absolute lowest costs but require active management. You need to check prices daily and adjust your heating schedule accordingly. They carry risk — a cold snap with high wholesale prices could mean expensive days.

What You Need for a Time-of-Use Tariff

1. Smart Meter (Essential)

A smart meter is non-negotiable. Time-of-use billing requires half-hourly electricity consumption data, which only a smart meter can provide. Your supplier needs to know not just how much electricity you used, but exactly when you used it.

Key points about smart meters:

  • Free installation: Your energy supplier must install a smart meter at no cost — it is your legal right to request one
  • SMETS2 standard: Modern SMETS2 meters work with all suppliers, so you can switch freely
  • Installation time: Typically 30-60 minutes for a straightforward swap
  • Waiting list: Allow 2-6 weeks from request to installation depending on your area

2. Heat Pump with Programmable Timer (Essential)

Your heat pump must be programmable so you can schedule it to run during off-peak windows. Most modern heat pumps offer this through:

  • Built-in timer: Set specific on/off times for heating and hot water
  • Smartphone app: Remote scheduling through manufacturer apps (Vaillant sensoAPP, Daikin Onecta, Samsung SmartThings, etc.)
  • Smart thermostat: Third-party thermostats like Hive, Tado, or Nest can schedule heating periods (though not all integrate perfectly with heat pump controls)

Check your heat pump's scheduling capabilities before committing to a time-of-use tariff. If your system only has basic on/off controls, you may struggle to align operation precisely with cheap windows.

3. Hot Water Cylinder (Highly Recommended)

A hot water cylinder acts as a thermal battery. Heat it during cheap off-peak hours and draw from it all day. Without one, your heat pump would need to produce hot water on demand, potentially during expensive peak periods.

  • Minimum size: 150 litres (small household)
  • Recommended size: 200-300 litres (most households)
  • Insulation: Modern cylinders have factory-fitted insulation. If yours is old, add a cylinder jacket (£15-25)

4. Reasonable Insulation (Important)

Your home needs to hold heat between off-peak windows. The better your insulation, the longer the house stays warm after the heat pump switches off, and the less you need to run it during expensive periods.

Minimum for time-of-use tariffs to work well:

  • Cavity wall insulation or solid wall insulation
  • At least 270mm loft insulation
  • Double glazing throughout
  • Reasonable draught-proofing

If your home lacks these basics, address insulation first. A poorly insulated home on a time-of-use tariff may end up paying more, not less, because it needs the heat pump running during expensive hours to stay comfortable.

How to Schedule Your Heat Pump for Time-of-Use Tariffs

The Pre-Heating Strategy

The core principle is simple: use cheap electricity to build up heat, then coast on that stored heat during expensive periods. Here is how to implement this:

For Two-Rate Tariffs (Overnight Off-Peak)

  1. 10pm-midnight: Start gentle pre-heating if your home has cooled significantly since the evening
  2. Midnight-6am: Run heat pump at normal capacity to heat the house to your target temperature (e.g., 21°C) and fully heat the hot water cylinder to 50-55°C
  3. 6am-7am: Final boost before the cheap window ends
  4. 7am onwards: Heat pump off or in setback mode (thermostat set 2°C lower). The house coasts on stored heat
  5. Evening: If the house drops below comfortable levels, minimal top-up at daytime rate

For Multi-Rate Tariffs (e.g., Octopus Cosy)

  1. 4am-7am (off-peak): Full pre-heat. House should reach target temperature by 7am
  2. 7am-1pm (standard rate): Heat pump off or setback mode. House coasts
  3. 1pm-4pm (off-peak): Afternoon boost. Top up the house temperature before the peak window
  4. 4pm-7pm (peak): Heat pump off. Do not run during peak — this is the most expensive electricity of the day
  5. 7pm-10pm (standard): Light top-up if needed at standard rate
  6. 10pm-midnight (off-peak): Heat hot water cylinder for the next day

Thermal Mass and Coasting

How long your home holds heat depends on its thermal mass and insulation:

  • High thermal mass (solid brick/stone walls, concrete floors): Excellent heat retention. Temperature drops 0.5-1°C per hour with the heat pump off
  • Medium thermal mass (cavity walls, standard construction): Good retention. Temperature drops 1-1.5°C per hour
  • Low thermal mass (timber frame, lightweight construction): Poor retention. Temperature drops 1.5-2.5°C per hour

A well-insulated high-thermal-mass home heated to 21°C at 7am might still be 18-19°C by 1pm — perfectly comfortable. A lightweight, poorly insulated home might drop to 16°C in the same period, requiring expensive daytime top-ups.

Real-World Savings Examples

Example 1: 1930s Semi-Detached, Cavity Wall Insulation, Octopus Cosy

  • Heat pump usage: 4,200 kWh/year
  • Off-peak percentage achieved: 58%
  • Annual cost on flat rate (24.5p): £1,029
  • Annual cost on Cosy: £668
  • Saving: £361/year

Example 2: 2010s Detached, High Insulation, EDF GoElectric

  • Heat pump usage: 3,500 kWh/year
  • Off-peak percentage achieved: 68%
  • Annual cost on flat rate (24.5p): £858
  • Annual cost on GoElectric: £530
  • Saving: £328/year

Example 3: Victorian Terrace, Solid Walls (Uninsulated), Standard Tariff

  • Heat pump usage: 5,800 kWh/year
  • Off-peak percentage achievable: ~35% (poor insulation forces daytime running)
  • Annual cost on flat rate (24.5p): £1,421
  • Annual cost on Cosy: £1,386 (barely any saving due to high peak usage)
  • Saving: £35/year — not worth the complexity

Example 3 illustrates the critical point: time-of-use tariffs are not universally beneficial. If your home cannot hold heat, the savings evaporate. In this case, improving insulation first would be a far better investment.

Common Mistakes to Avoid

1. Forgetting About Non-Heating Electricity

Time-of-use rates apply to all your electricity, not just the heat pump. If you cook dinner at 6pm (peak), do laundry at 5pm (peak), or run the dishwasher in the evening, you pay peak rates for all of it. Shift what you can: use delay timers on washing machines and dishwashers, consider batch cooking during off-peak periods.

2. Setting the Heat Pump Too High During Off-Peak

Some owners crank their heat pump up to maximum during off-peak windows, trying to store as much heat as possible. This is counterproductive. Running at high flow temperatures (above 45°C) dramatically reduces the heat pump's efficiency (COP drops from 3.5 to perhaps 2.5). You use more electricity to produce each unit of heat, eating into your savings.

Instead, run the heat pump at its normal, efficient flow temperature (typically 35-40°C) for longer during off-peak windows. More efficient operation overall, even if the house does not get quite as warm.

3. Not Monitoring and Adjusting

Your first few weeks on a time-of-use tariff are an experiment. Monitor your half-hourly usage data (via your supplier's app) and adjust your schedule. You might discover the heat pump kicks in during peak hours because the thermostat triggers it, or that your hot water cylinder is reheating at expensive times.

4. Choosing the Wrong Tariff Type

A two-rate overnight tariff in a poorly insulated home is a recipe for higher bills, not lower ones. Match the tariff to your home's capability. If in doubt, start with a multi-window tariff like Octopus Cosy — it is more forgiving than single-window overnight tariffs.

Time-of-Use Tariffs vs Economy 7

If you have heard of Economy 7 (seven hours of cheap overnight electricity), you might wonder how it differs from modern time-of-use tariffs. The answer: significantly.

  • Economy 7 daytime rate: 28-32p/kWh (much higher than standard tariffs)
  • Modern ToU daytime rate: 22-28p/kWh (more reasonable premium)
  • Economy 7 flexibility: Single overnight window, no choice of times
  • Modern ToU flexibility: Multiple windows (Cosy), or overnight plus smart scheduling
  • Economy 7 meter: Old two-register meter, often requires replacement
  • Modern ToU meter: Smart meter with half-hourly data

Modern time-of-use tariffs are a massive improvement over Economy 7. If you are still on Economy 7, switching to Octopus Cosy or a similar modern ToU tariff will likely save you money even before accounting for the more flexible windows.

The Future of Time-of-Use Tariffs

Time-of-use pricing is becoming the norm, not the exception. Several trends are driving this:

  • Smart meter rollout: By 2026, the majority of UK homes have smart meters, enabling time-of-use billing at scale
  • Renewable energy integration: As wind and solar produce more of our electricity, generation becomes more variable. ToU tariffs encourage consumption when renewable output is high
  • Heat pump and EV adoption: Millions more households will have high electricity demand, making cheap off-peak scheduling increasingly important
  • Grid flexibility services: Future tariffs may reward customers for not just shifting usage but actively helping balance the grid (demand response)

Expect time-of-use tariffs to become more sophisticated, more widely available, and increasingly important for managing household energy costs. Getting comfortable with ToU pricing now puts you ahead of the curve.

Should You Switch to a Time-of-Use Tariff?

Yes, if:

  • You have a smart meter (or can get one installed)
  • Your heat pump is programmable with scheduling features
  • Your home has at least average insulation (cavity walls, double glazing, loft insulation)
  • You have a hot water cylinder of 150+ litres
  • You are willing to schedule your heating around cheap windows

No, if:

  • Your home has poor insulation and loses heat very quickly
  • You cannot or will not adjust your heating schedule
  • You have no hot water storage (combi-style heat pump setups)
  • Most of your electricity use happens during peak hours and cannot be shifted

If you fall into the "no" category, consider a flat reduced rate like Scottish Power SmartGen instead. It saves money without the scheduling complexity.

For a full comparison of all UK heat pump tariffs, see our best heat pump tariff guide and tariff comparison table.

Frequently Asked Questions

What is the cheapest time-of-use tariff for heat pumps?

Octopus Cosy typically delivers the lowest annual costs for most heat pump owners due to its three daily off-peak windows and competitive rates. Octopus Intelligent Go can be slightly cheaper if you can shift 70%+ of usage overnight. See our full comparison for detailed numbers.

Do I need a separate meter for my heat pump on a time-of-use tariff?

No. A single smart meter covers all your household electricity. The time-of-use rates apply to everything — heat pump, lights, appliances, everything. You do not need a dedicated heat pump meter.

Can I go back to a flat-rate tariff if time-of-use does not suit me?

Yes. Most time-of-use tariffs (especially Octopus products) are variable with no exit fees. You can switch back to a flat-rate tariff at any time if the scheduling does not work for your lifestyle.

What is weather compensation and does it work with time-of-use tariffs?

Weather compensation automatically adjusts your heat pump's output based on outdoor temperature. It works with time-of-use tariffs but does not account for electricity pricing — it may run the heat pump during expensive periods if the weather is cold. You can use weather compensation within your scheduled on periods and disable it during peak hours for best results.

Will time-of-use tariffs get cheaper in future?

Off-peak rates are likely to remain cheap or get cheaper as more renewable energy (especially wind) feeds the grid overnight. Peak rates may increase as demand grows. The spread between off-peak and peak is likely to widen, making time-of-use tariffs even more valuable for heat pump owners who can schedule their usage.

Can I use a battery to arbitrage time-of-use pricing?

Yes, in theory. A home battery charged during off-peak hours can discharge during peak periods, avoiding peak electricity rates for all your usage (not just heating). However, battery costs (£5,000-10,000) mean the payback period is long. For most heat pump owners, simply scheduling the heat pump is more cost-effective than adding battery storage. This may change as battery prices fall.