Energy consultant Craig Miller, who spends much of his time working to make the smart grid a reality, got a jolt when he mentioned his work to a new acquaintance. The man, who happened to be a lineman at a Pennsylvania utility, responded earnestly: "Smart meters are a plot by Obama to spy on us."
The encounter was a disheartening sign of the challenge ahead for proponents of the smart grid, who say that the technology can help the industry meet power demand, fix problems faster, and help consumers lower their electricity bills. Advocates of such a 21st-century grid are learning that they need to take privacy concerns seriously. Though smart meters are not, in fact, a domestic espionage scheme, they do raise questions: In a world where households start talking with the power grid, what exactly will be revealed? And who will be listening? (See related quiz: "What You Don't Know About Electricity.")
The term "smart grid" encompasses an array of technologies that can be implemented at various points along the line of transmission from power plant to electricity user, but for many consumers, it is symbolized by one thing: the smart meter. A majority of U.S. states have begun deploying the wireless meters, which can send electricity usage information from a household back to the utility remotely at frequent intervals. According to the U.S. Energy Information Administration, more than 36 million smart meters were installed across the nation as of August 2012, covering about a quarter of...