At the advent of the Internet 30 years ago, having large amounts of personal information accessible on a shared network would have been unthinkable — even if that network would make our lives easier. But we found a way to navigate this privacy minefield with one straightforward idea: Entrust our personal information to certain entities with the expectation that it will be secured, and, in exchange, we get a life with more choices. While there is sometimes an inverse relationship between access and privacy, it is a challenge we have overcome.

The tension between data access and privacy is evident today in the smart electrical grid. It is “smart” because it can harness new information and communications technology to expand its functions while increasing efficiency and accessibility. The transformative potential of this information intelligence is amazing — just ask anyone making the choice between a landline and a smart phone.

Over the next few years, deployment of new technologies will ensure that the quality and quantity of energy information increases dramatically. Qualitatively, smart appliances will reveal much more detailed feedback about consumers’ patterns, such as time and length of use. Quantitatively, the data points about a consumer’s energy usage will go from thousands to millions annually.

This data will empower consumers in two ways. First, managing their energy consumption will help save them money. They’ll see lower energy bills from setting HVAC systems to operate intermittently when no one’s home and having appliances go dark when they’re unused. Second, two-way energy flow between consumers and electric utilities will allow consumers to participate in energy commerce, selling unused energy back onto the grid for profit. Harnessing distributed generation projects, such as rooftop solar panels, using demand response by getting cash rebates for not consuming energy at peak hours, and taking advantage of personal electric vehicles as battery storage units for the grid are all examples of how people can use enabling technology to change the game.

But here’s the rub. The data reveals a tremendous amount of real-time information about the consumer, which could lead to severe privacy violations if it were mined for behaviors and preferences.

This data clearly needs to be secured. However, if the security is too restrictive, it will inhibit third-party innovation, hurting businesses trying to enter the market. If it is too lax, consumers may be exploited, and companies could face serious legal action.

Compounding the problem is the fact that deployment of new technology is rapidly changing ownership schemes, clouding responsibility for securing data. Traditionally, data has belonged to the consumer. But because electric utilities own the meters — and are expected to collect enough data to do their jobs — consumer access has been limited. Even with increased access, the aggregate energy information reports produced by last-generation meters limited the scope and impact data could have on energy use.

The introduction of new technologies and capabilities, such as advanced metering infrastructure (AMI), home energy management systems, and two-way energy and information flow, fundamentally alters this equation. The roles and responsibilities between new players will have to be clearly defined.

In a balanced and secure system, smart meters should receive consumer data blind and in aggregate (how much energy is used and when), while providing signals to the home’s management system (energy price and total energy consumption). The electric utility would be responsible for securing that data. The management system would contain settings for home appliances (TV goes dark and HVAC system floats 5°F during the day) and gather the specific information it needs to fulfill its capabilities.

The third party who creates the management system would be responsible for security and privacy as part of its customer service. The two-way energy switch would require careful coordination between the management system and the AMI, but predetermined conditions under which energy should be bought and sold (selling at peak hours, high prices, or when there is surplus distributed generation) would likely govern those interactions.

Although these issues will take time to work out, one thing is certain. Decisions about data access and security will determine whether the smart grid will open up a new era in privacy violations or empower consumers in unprecedented ways while creating exciting new markets.

James is a special assistant for energy policy at the Center for American Progress, Washington D.C. He can be reached at:
