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Time-of-Use Rates and Solar in 2026: Why When You Use Power Changes the Math

Solar panels produce the most power at midday, but many utilities now charge the most in the early evening. Using EIA price data for 2026, we explain how time-of-use rates change what your solar is worth — and what to do about it.

By Alex Chen···8 min read

Most solar payback math starts with a single number: the price of a kilowatt-hour. Multiply your annual usage by that price, compare it with the cost of the array, and you get a payback period. That math was reasonable when most homes paid one flat rate all day. It is much less reliable in 2026, because a growing share of American homes now pay a price that changes by the hour — and solar panels produce their power at almost exactly the wrong time of day for those rates.

This is the time-of-use problem in one sentence: your panels make the most electricity around midday, when power is cheapest, and your home uses the most electricity in the early evening, when power is most expensive. Understanding that mismatch — and how big it is in your utility territory — matters more to your solar savings than the panel brand on your roof.

What a time-of-use rate actually is

Under a flat rate, every kilowatt-hour costs the same no matter when you use it. Under a time-of-use (TOU) rate, the utility divides the day into periods — typically off-peak, mid-peak, and peak — and charges a different price in each. The peak window usually falls in the early evening, roughly 4 p.m. to 9 p.m., when people come home, cook dinner, run appliances, and turn on lights and air conditioning at the same time. Off-peak hours, often overnight and through the middle of the day, are priced much lower.

California made time-of-use the default rate plan for most new residential customers, and its peak window of 4 p.m. to 9 p.m. has become the textbook example. Other utilities use different windows — some peak in the late afternoon, some run a summer-only peak, some add a separate super-off-peak overnight window for electric vehicle charging — so the first step for any homeowner is to read their own tariff, not to assume California's schedule applies. The principle, though, is the same everywhere: the grid is most stressed when everyone uses power at once, and TOU pricing charges you for your share of that stress.

The price backdrop in 2026: electricity is not getting cheaper

The U.S. Energy Information Administration's Electric Power Monthly, released on October 23, 2026, put the national average residential electricity price at 18.16 cents per kWh in August 2026, up from 17.57 cents in August 2025 — an increase of about 3.4 percent year over year. July 2026 had been slightly higher, at 18.31 cents. The EIA's figures are averages of what customers actually paid per unit sold, not a single tariff anyone can sign up for, but they set the context: the grid power your solar displaces is getting more expensive, which helps solar — but only for the kilowatt-hours you actually displace at the price you would otherwise have paid.

State averages from the same EIA release show how wide the spread is. In August 2026, New York averaged 28.65 cents per kWh, Pennsylvania 21.77 cents, California 29.75 cents, Florida 14.99 cents, and Texas 15.91 cents. A solar kilowatt-hour that displaces a 29.75-cent California kWh is worth roughly twice one that displaces a 14.99-cent Florida kWh. Our state-by-state price breakdown covers that spread in detail; the point here is that under TOU rates, the relevant price is not even your state average — it is the price in the specific hours when you use power.

Why the midday-evening mismatch costs solar owners money

A rooftop array's production curve is a bell: it rises in the morning, peaks around solar noon, and falls to zero at sunset. A typical household's demand curve is almost the opposite shape on weekdays — low while everyone is out, then a sharp evening peak. On a flat rate with full net metering, that mismatch barely matters: midday exports earn the same credit as evening imports cost. But under TOU rates combined with reduced export credits — the arrangement now common in California and spreading elsewhere — the two sides of the trade are priced very differently. You may export midday power at a low off-peak or wholesale-ish credit, then buy evening power back at the peak price.

Our guide to how net metering works explains the export side of this trade. The TOU twist is that even a generous export credit is worth less if it is credited at off-peak value while your consumption is billed at peak value. The gap between the two prices — not the size of your array — is what determines how much of your solar production actually saves you money.

An illustrative example: shifting 300 kWh out of the peak window

The following example is an illustration with rounded, assumed rates — not a quote from any utility — designed to show how the arithmetic works. Suppose a household uses 900 kWh a month, of which 300 kWh falls in the peak window. Suppose the peak price is 45 cents per kWh and the off-peak price is 22 cents. Buying those 300 peak kWh costs $135 a month. If the household shifts half of that peak usage — 150 kWh, roughly a daily dishwasher load, laundry, and water heating moved to daytime or after the peak window — into off-peak hours, the cost of that 150 kWh falls from $67.50 to $33, a saving of $34.50 a month, or about $414 a year, without using one kWh less in total.

Now add solar to the same household. If the array produces enough midday power to cover the daytime load but the family still buys all 300 peak kWh from the grid, the evening peak remains a $135 monthly bill even on a sunny month. The array did its job — it covered daytime use — but the bill did not fall as far as the annual kWh math suggested, because the most expensive hours were never touched by solar production. That is the single most common reason solar owners report bills higher than their installer's estimate: the estimate priced every solar kWh at the average rate, while the bill prices the remaining grid kWh at the peak rate.

Three practical answers to the mismatch

1. Shift load into solar hours. This is the cheapest answer and the one to try first. Run the dishwasher, washing machine, and dryer during the day; pre-cool or pre-heat the house before the peak window; set a pool pump or water heater timer for midday. Every kWh you move from a peak hour to a solar hour is a kWh you no longer buy at the highest price and no longer need to store. The constraint is lifestyle: not every load can move, and evening cooking and lighting largely cannot.

2. Shift load out of the peak window, even without solar. If you cannot run an appliance at midday, running it after 9 p.m. still beats running it at 6 p.m. under most TOU tariffs. Electric vehicle owners have the biggest version of this lever: our guide to how much solar an EV needs shows that charging after the peak window, rather than at 6 p.m., can save tens of dollars a month on its own — and it is free to do, since it only requires a charging timer.

3. Add a battery — but size it for the peak window, not the whole night. A battery stores midday solar and discharges it during the evening peak, closing exactly the gap described above. The right size is the amount of energy you actually use during peak hours — in the example above, about 10 kWh a day (300 kWh a month) — not your total nightly use. Oversizing a battery to cover the whole night wastes money; undersizing it leaves peak kWh on the table. Our pros and cons of solar batteries walks through that sizing trade-off, and the export-versus-import price gap is the number that decides whether storage pays.

How to read your own bill before you sign a solar contract

Before accepting any payback estimate, pull one summer bill and one winter bill and answer four questions. First, what rate plan are you on — flat, TOU, or tiered — and what are the exact peak hours and prices? Second, how many of your kWh fall in the peak window? Third, what does your utility pay or credit for exported solar, and is that credit priced at the off-peak rate, the retail rate, or a separate avoided-cost rate? Fourth, does the installer's estimate use your peak price, your average price, or your off-peak price for the kWh the array will displace? If the estimate uses a single average price and you are on a TOU plan, ask for a second estimate split by time period. The difference between the two is the honest range for your payback — and it is usually wider than the installer would like.

Time-of-use pricing does not make solar a bad investment. In high-price states it can make solar more valuable, because the peak kWh you displace — by shifting load or by storing power — are the most expensive kWh on your bill. What TOU pricing does is punish lazy math. An array sized on annual totals and priced at an average rate will disappoint; an array sized around your peak-window usage, paired with load shifting and, where the price gap justifies it, a right-sized battery, will not. The clock on your meter matters as much as the panels on your roof — so read it before you buy.

Sources

  • U.S. average residential price of 18.16 cents per kWh in August 2026 (17.57 cents in August 2025), and July 2026 at 18.31 cents — U.S. Energy Information Administration, Electric Power Monthly, released October 23, 2026. State averages for August 2026 (New York 28.65, Pennsylvania 21.77, California 29.75, Florida 14.99, Texas 15.91 cents per kWh) from the same release.
  • California time-of-use as the default residential rate plan, with a 4 p.m. to 9 p.m. peak window — California Public Utilities Commission time-of-use rate plan descriptions, as summarized in utility rate guides.
  • June 2026 average residential rates of about 34 cents per kWh (PG&E, SCE) and about 45.5 cents per kWh (SDG&E) — California Public Advocates Office, Q2 2026 report, as reported in October 2026.

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