by Ann Cavoukian, Information and Privacy Commissioner, Ontario, Canada
Energy consumers participating in future smart grid conservation initiatives most likely wouldn’t think of the data collected by their smart meters as assets. Energy consumption data may have great value, however, because it can reveal individual behavior patterns, which could, in turn, be monetized.
In the U.S., privacy and smart grid questions still are being debated, and the question “Who owns the energy consumption data?” continues to be asked. While electricity distributors collect energy consumption data, we must reframe the question and move from the concept of data ownership to one of control. Privacy relates to a person’s ability to maintain control over his or her personal information, in this case, involving energy consumers. In Ontario, Canada, I oversee comprehensive privacy laws that relate to exerting control over one’s personal data flows, including energy consumption data.
Sound reasons support why energy consumers should remain in control of the energy consumption information they produce, even if a law requiring this does not exist. Consumer confidence and trust in the smart grid and one’s local electricity distributor is vital in achieving a more energy-efficient electrical grid.
Loss of Trust Might Diminish Consumer Participation in Smart Grid
Customers’ relationships with electricity distributors are generally borne of necessity; unless consumers can generate their own power, they must obtain it from a distributor or go without. The primary expectation, however, is that distributors only will supply electricity, not monitor customers’ behavior to generate revenue for purposes other than providing electricity.
If consumers are to participate in smart grid programs such as demand response, which might require significant consumer investments into smart appliances, they must trust that their personal information is strongly protected and will not be used or disclosed without their knowledge and consent.
In a report to the Colorado Public Utilities Commission, author Elias L. Quinn suggested that a possible revenue stream for energy consumption data would be the bundling of information into saleable packages. Such packages could vary conceivably from individual customer data, real-time and delayed data, and consumer preferences. Compare this to the practice of selling magazine subscription lists, but on a much larger scale.
Don Peppers and Martha Rogers in their book “Return on Customer” wrote that when a customer is offended by a particular experience, equity—the present value of future transactions—goes down, even if he or she completes the transaction. Once a consumer’s trust is gained, however, he or she is much more likely to share personal information. In another book, “Enterprise One to One: Tools for Competing in the Interactive Age,” Peppers and Rogers wrote, “The 1:1 enterprise, operating in an interactive environment, relies not just on information about customers, but information from them.”
And information from energy consumers is the lynchpin for smart grid success. If consumers do not participate in energy-saving programs or refrain from purchasing smart appliances because they fear their privacy will be compromised, then greater energy conservation through a more efficient electrical grid will not be achieved.
Privacy by Design as a Competitive Advantage
Privacy is a long-term investment central to retaining customers and essential to attracting new ones. Privacy delivers shareholder value, builds trust, strengthens the value chain and gives businesses a competitive advantage. Numerous studies confirm this view, and journalist Tyler J. Hamilton and I expand on these concepts in “The Privacy Payoff: How Successful Businesses Build Consumer Trust.”
Think of privacy as an aspect of customer relationship management (CRM), a well-known business strategy that focuses on better understanding customers’ needs and preferences so a company can strengthen its relationship with customers. If there were a list of CRM most challenging privacy areas, direct marketing would be near the top. In 2004, I published a joint report with the Canadian Marketing Association, “Incorporating Privacy into Marketing and Customer Relationship Management.” We showed marketers practical steps to integrate fair information practices into their CRM projects.
Remember, privacy is not meant to serve as a business-goal barrier. An essential component of Privacy by Design, a concept I developed back in the ’90s, is that all legitimate interests and objectives must be accommodated in a positive-sum, or win-win, manner, not through the dated zero-sum approach where unnecessary trade-offs are made often in the form of false dichotomies. Privacy by Design avoids the pretence of false dichotomies, such as privacy vs. security, demonstrating the possibility to have both.
Electrical distributors and other energy stakeholders gaining the Privacy by Design competitive advantage will ensure that smart grid programs can collect the least personal information necessary from consumers without diminishing the quality and range of services offered. Also, electricity stakeholders should be transparent in their relationships with consumers to communicate information regarding the collection, use and disclosure of their personal information. They also should be flexible enough to accept consumer preferences regarding the retention, use and disclosure of personal information, all while making these options easily accessible to customers. Consent should be obtained proactively before disclosing energy-use information to a third party, not afterward.
Ontario Smart Grid Privacy Initiatives
U.S. utility regulators and electricity distributors have an important role in setting best practices, such as the National Association of Regulatory Utility Commissioners’ 2000 resolution on the privacy of utility customer information. As the smart grid develops and the nature of information exchanges on it become clear, utility regulators can look to other jurisdictions’ insights, including in Ontario, where the government has committed to installing a smart meter in all Ontario homes and small businesses by the end of 2010 and has passed legislation to facilitate that program.
My office has co-authored two seminal publications on privacy and the smart grid. In November 2009, it released “Smart Privacy for the Smart Grid: Embedding Privacy in the Design of Electrical Conservation” with the Washington-based Future of Privacy Forum, and in July, it issued “Privacy by Design: Achieving the Gold Standard in Data Protection for the Smart Grid” with two major electricity distributors: Hydro One Inc., which is said to have the largest smart grid implementation in North America; and Toronto Hydro Electric Systems. These publications serve as a road map for electricity distributors on how to implement the government’s energy mandates—starting with smart meters—in a manner that protects energy consumers’ privacy. Privacy and the smart grid can be achieved in a positive-sum manner; we are doing it.
As part of the Ontario government’s smart meter initiative, it created a Smart Metering Entity (SME). Among other legislated responsibilities, the SME is required to comply with Ontario’s Freedom of Information and Protection of Privacy Act, for which I oversee compliance.
My office will continue to ensure the protection of energy consumer privacy as electricity distributors implement smart grid programs. We are working with Hydro One Inc. to build privacy into live smart grid systems in a smart grid demonstration area, which will be documented in a joint paper available at http://ipc.on.ca.
When trust is broken, it is nearly impossible to regain it. If consumer trust is maintained, however, it will unlock greater energy conservation participation and provide a competitive advantage for businesses that protect customers’ privacy. In this way, energy consumers and privacy are assets that go well beyond the meter. It is preferable to reframe our thinking from ownership of energy consumption data to one of consumers’ retaining control over its use and dissemination. Without Ontario’s comprehensive privacy laws that speak to gaining control over one’s personal information, including energy consumption data, U.S. electricity distributors and energy stakeholders must own privacy as an asset if they are to reap the benefits of consumer participation in the smart grid.
Ann Cavoukian, Ph.D., is the information and privacy commissioner of Ontario, Canada. One of the world’s leading privacy experts, Cavoukian advises North American and European businesses on privacy and data protection issues. She is involved in international committees on privacy, security, technology and business, and she endeavours to focus on strengthening trust and confidence in emerging technology applications. Cavoukian raises awareness that privacy can be achieved alongside all other smart grid benefits. Reach her at firstname.lastname@example.org. Visit http://privacybydesign.ca for more information.