The European Data Protection Supervisor has warned against a potential misuse of smart meter technology if safeguards are not put into place.
The European watchdog says that 'massive collection of personal data' could be accessed without safeguards.
"These patterns can be useful for analysing 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 Guardian reports that 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 £11bn in the UK. However, few consumers are aware of the new technology.
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.
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