Do Time-of-Use rates help protect the environment?

It is generally agreed upon that if TOU rates reduce the peak demand then yes there is an environmental benefit to having these rates. The power grid has to be designed to meet peak demand. It’s like having a car with a big engine because once in a while you need the power to drive fast. The rest of the time a smaller engine could work but you still need to have the extra power in reserve in order to drive fast again.

Charging higher electricity prices during peak demand has the effect of shifting demand to the least expensive times. This in turn means that fewer new power plants (often powered by coal or natural gas – fossil fuels that produce greenhouse gases and air pollution) need to be built to meet the peak. In short, it is a good way to better use what you already have.