Powering up privacy concerns with the smart grid

contract review by attorney

For those that aren’t aware, the United States electrical grid is about to undergo a massive transformation. The traditional electric grid, which now distributes power through over 360,000 miles of transmission lines, has reached the end of its operational life. A new “smart grid” will use the Internet and various data sources to more efficiently power homes across the country. However, as the new smart grid will collect and store data on millions of consumer’s energy habits, there are countless privacy concerns with such a transition.

The Smart Grid’s secret weapon

Of main concern are the new grids “smart meters” that will likely be placed in most consumer and business dwellings. The smart meter tracks energy use by consumers and can automatically adjust when energy is provided, and in some cases can determine when to switch to a more efficient energy source, such as wind or solar energy stored in the grid.

Illinois is leading the way in smart meter deployment, with a projected 65 million homes across the U.S. to have smart meters installed by the end of this year (25 million above the Obama administrations estimate). This means that customers need to understand what they are agreeing to before they rush to sign up for this new technology.

“Very sensitive information can be revealed about homes, and homes are the most sacred privacy environment,” said Nancy King of Oregon State University.

Inferences about people’s private lives such as daily routines, degree of religious observance, what families watch on TV are all potentially available from energy consumption data collected by smart meters.

More than just data collection

In addition to smart meter collection and storage consumer data, what’s troubling is the value of such information. “I think the data is going to be worth a lot more than the commodity that’s being consumed to generate the data,” said Miles Keogh of the National Association of Regulatory Utility Commissioners. Critics of the smart grid claim that many consumers will be conned into giving up personal data not only to electric utilities, but to third-party intermediaries as well.

Recently, the U.S. Department of Energy (DOE) published a code of conduct governing data privacy for smart meters that is meant to “encourage innovation while appropriately protecting the privacy and confidentiality of consumer data . . .” However, this voluntary code of conduct is not very reassuring to customers who may be misled or are not fully aware of how smart meters work, let alone the vulnerability of their own data.

The market for this kind of big data could be a gold mine for purposes of market profiling or other retail-related business decisions. According to a senior attorney for the Electric Frontier Foundation, exhaustive energy consumption data is a holy grail in many ways for marketing analysis – “few other types of data get inside the home the way the electrical usage data does.”

Looking ahead

Smart grid deployment is at an interesting point from a legal prospective because as more smart meters are rolled out across the country, the more consumers are becoming aware of privacy issues with such technology. Moreover, there is tension between the public and private sectors about how the smart grid and data collection will be regulated, and to what extent.

As history shows that consumers are typically willing to trade their privacy for little monetary reward, it’s likely that most people will switch to smart meters without considering privacy concerns. But as the possibility of a significant and new market develops for such data, it may be worth it to comb over the details of any agreements before having the latest and greatest energy equipment installed in your home.

For those interested in learning more about the smart grid, how it works, or implications for homes and businesses, visit DOE’s smart grid informational website.