"These patterns can be useful for analyzing our energy use for energy conservation but, together with data from other sources, the potential for extensive data mining is very significant," said Giovanni Buttarelli, assistant director of the EDPS.
"Profiles can be used for many other purposes, including marketing, advertising and price discrimination by third parties."
The European commission is now under pressure to consider whether legislation should be introduced to ensure that smart meters do not breach data protection rules.
All homes are expected to have their old meters replaced with the new technology by the end of 2019. The installation of smart meters will cost an estimated £11 billion in the U.K. However, few consumers are aware of the new technology.
"Many consumers don't know anything about smart meters, despite a nationwide roll-out from 2014," said Zoe McLeod, head of smart and sustainable energy markets at Consumer Focus. "As with any new technology, there are potential benefits such as accurate bills and opportunities to help you save money on your energy bills, but also new issues that customers should be aware of."
Anna Fielder, consumer rights advocate and campaigner at Privacy International, which campaigns against commercial and state intrusion, said consumers in other countries were starting to question the roll-out of smart meters. "Research in Germany, for example, has found that consumers say it's really creepy and they don't want Big Brother in their houses," said Fielder.
She added that a key issue for privacy watchdogs would be the frequency at which information would be collected from the new meters. "If you collect energy information from a household very often, particularly live, even a few things at the end of each day, you get an awful lot of information about people's lifestyles that can potentially be abused in a number of different ways," said Fielder.
The EDPS recommends that states issue guidance on the frequency of meter readings, how long data can be stored and the use of sophisticated algorithms that allow companies to create profiles of their customers.
Intellpuke: You can read this article by the Observer's correspondents Jamie Doward and Caroline Mortimer in context here: www.guardian.co.uk/environment/2012/jul/01/household-energy-trackers-threat-privacy