Smart Meters - Measuring the Privacy Challenge

Energy is becoming a whole lot smarter

On 11 May 2009 the UK’s Department for Energy and Climate Change (DECC) confirmed the Government’s plans to install smart meters in all households by 2020 and launched a public consultation on domestic smart metering for electricity and gas in Britain (the Consultation). Having reviewed the replies to the Consultation the Government issued its response (the Response) in December 2009. This article examines the privacy challenge raised by smart meters in the domestic sector; the Government is developing its proposals for non-domestic (i.e. business) sectors separately.

Whilst there is no agreed definition of a “smart” meter, the term usually refers to a meter that transmits consumption data to an energy supplier remotely, removing the need to read meters on-site or rely on inaccurate estimates. Smart meters can offer a range of other “smart” functions, including remote control of the supply and two-way transmission that enables energy price and other data to be uploaded to the meters. The Consultation and Response detail the Government’s thoughts as to the functionality that British smart meters should offer.

Following their rollout across Britain, smart meters will become part of the UK’s Critical National Infrastructure. It is anticipated that the data and functionality they provide will enable energy demand to be managed more efficiently. The Government expects smart meters to enable suppliers and network operators to transform their business models, improve their business processes, reduce their environment impact and introduce new tariff-models to encourage changes in end-user energy consumption patterns. The Energy Retail Association recently suggested that the introduction of smart meters may also provide an opportunity to introduce simpler and more effective data validation.

Consumers are also intended to benefit. The use of smart meters in combination with consumption display devices should enable consumers to manage their energy consumption based on nearer real-time information. Together these devices can provide consumers with the information they need to decide how to change their energy use to reduce the running cost and carbon footprint of their households.

The Government hopes that consumers, empowered with these increased levels of consumption data and with the incentives provided by new tariff models, will be encouraged to change their consumption behaviour, resulting in a reduction in peak-time demand and overall energy consumption. The communication phenomenon of social networking could also play its part in influencing consumption behaviour; in time consumers may be able to share consumption data derived from smart meters and compare their energy usage against neighbourhood and national norms.

The privacy risk

Increased data flows are at the heart of every smart metering programme. Data transferred from smart meters may include meter readings, consumption data and even payment details for pre-payment meter customers. Recording, processing and transmitting significant quantities of data is something the energy industry does routinely and, following the introduction of market competition, to a greater degree today than ever before. However, the introduction of smart metering will not only change the nature of the data generated, but will dramatically increase its volume, utility and commercial value. The challenge for suppliers and network operators is to demonstrate to consumers and regulators that they can and will process that data securely and lawfully.

The Response confirmed that, for the domestic sector, the new communications backbone over which smart meters will transmit data will be co-ordinated centrally (the centralised communications model). Risks to this centralised network include the hacking of customer details, denial of service attacks and even infiltration by intelligence services and terrorist groups seeking to disrupt supplies. In its reply to the Consultation, technology consultants Detica warned that we have already seen examples of security breaches involving smart meter technology. In the United States, security firm IOActive recently sought to highlight the weaknesses of a smart meter network by successfully infiltrating systems with a worm.

The highly detailed information that can be generated and communicated by smart meters will be of interest to a wide spectrum of third parties. For example, it has been suggested that monitoring and analysing household consumption profiles could:

• reveal the absence or presence of individuals in a household, enabling criminals to establish when it is most vulnerable to burglary;
• alert law enforcement authorities to potential illegal activities such as the growing of cannabis;
• provide unprecedented amounts of information on the personal movements of individuals and the life patterns of households, which would have significant commercial value to marketers and advertisers; and
• identify energy inefficient consumers, facilitating the introduction by Government of taxes and incentives to promote reduced consumption.

Worldwide, privacy concerns will likely only increase as smart grid technology delivers more near real time information and improved communication with individual appliances in the home.

The potential for sharing data with third parties raises many concerns. There is likely to be considerable public concern regarding how data may be accessed on “public interest” grounds, for example public health, such as monitoring the vulnerable, or for combating crime. Many commentators have expressed the view that smart meters’ capabilities raise serious “Big Brother” concerns. Following the recent rejection by the Dutch Parliament of smart meter proposals, in part due to privacy concerns, the energy industry is generally well aware of the potential risks of a privacy backlash in relation to smart metering proposals.

Currently, data protection and privacy regulation in Britain is principally implemented through the Data Protection Act 1998 and the Privacy and Electronic Communications Regulations 2003 and, in the context of the energy industry, other laws such as the Utilities Act 2000 are also relevant.

Against a backdrop of recent high profile data losses, including by HM Revenue & Customs, and the explosive growth in the level of data held electronically by both Government and the private sector, the ownership, access rights, sharing and processing of the data generated by smart meters will no doubt prove to be one of the more heated and public issues for the Government and energy industry to settle, and is likely to lead to specific regulation targeted at the use of smart meters and the data they generate.

Designing in the safeguards

The generation and transfer by smart meters and smart grids of large volumes of individual consumer-related data will require suppliers and network operators to reconsider carefully basic issues such as why data is collected, how long it should be stored, how it will be protected, how (and by whom) it will be accessed and processed and whether all appropriate consents have been obtained.

DECC has long recognised that the key to realising the full benefits of smart metering is attaining the right level of data access within the energy industry coupled with appropriate safeguards to regulate this access and protect consumers. Regulating access to and ownership of consumer data, and ensuring the system and smart grid as a whole are secure, will be fundamental to ensuring consumer trust in the smart meter system and its overall success.

Clearly the energy industry will benefit if Government and regulators proactively provide clear rules and guidance on the protection, use, disclosure and commercialisation of smart meter data to assist businesses. The indications so far are that the Government are well aware of the importance of privacy issues and the potential for a public outcry if these are not properly addressed. The implementation of the proposed centralised communications model should make uniform high standards of privacy protection achievable, although even under a “central communications” model not all interactions will necessarily be routed through a central body. The amount of data and communications functions that will be handled centrally will need to be addressed as part of the detailed design work.

Security also needs to be an integral consideration in the design of the meters themselves, the networks within which they operate and the data centres in which the data is stored. Key to an effective security strategy will be the establishment of strong governance and the imposition of clear and compulsory guidance and standards at an early stage of the smart meter roll-out. Retrofitting such security could be risky, ineffective and costly.

Looking ahead

Following the Response, the implementation programme will start immediately. In respect of data and privacy issues, DECC aims to take forward the overall detailed design and delivery of the project in close co-operation with the Ministry of Justice, the Information Commissioner and Ofgem, and will seek to implement a range of mechanisms to ensure that the views of both consumers and industry participants are engaged. DECC hopes that Phase 1 of the implementation programme will be completed by summer 2010.

The energy industry will need to re-assess both now, and during the implementation, how data will be managed, how they will remain compliant with laws and how they will provide adequate security and information to consumers. Only the industry’s continued engagement with the Government on this issue will ensure they remain up-to-date in their regulatory compliance.

This article first appeared (in an abridged form) in the 5 March 2010 edition of Utility Week.