The traditional electrical grid has become inadequate in meeting the needs and demands of electricity users in the 21st century. To address this challenge, smart grid technologies have emerged, which promise more efficient production and usage of electricity through bidirectional interactions between the consumer and the utility provider. This two-way interaction allows electricity to be generated in real time based on the actual needs of the consumers. However, this two-way interaction also raises concerns related to the privacy and the personal habits of consumers. To protect sensitive energy usage information of consumers, we propose a virtual ring architecture that can provide a privacy protection solution using symmetric or asymmetric encryptions of customers' requests belonging to the same group. We compare the efficiency of our proposed approach with two recently proposed smart grid privacy approaches namely, one based on blind signature and other based on a homomorphic encryption solution. We show that our approach maintains the privacy of customers while reducing the performance overhead of cryptographic computations by more than a factor of 2 when compared with the aforementioned past solutions. We further demonstrate that our smart grid privacy solution is simple, scalable, cost-effective, and incurs minimal computational processing overheads. © 2013 IEEE.