Why does the grid needs cryptography ?

New developments and the future of electrical energy production and distribution system are investigated first. Use of alternative energy resources, synergy with the existing large energy generation facilities, control of the distribution, integrated billing and control, information distribution via the grid and many others are the facts that are to be considered while conceiving the system in future. It comes that electronics and ICT will play a major role in control, billing and communication. Information is expected to flow at any level of distribution and control. That already gives opportunities for misuses such as tampering and eavesdropping at the power lines used for communication imposes the need of secure communication. We will, therefore, explain how and why cryptography is intended to be used within the TR 1107 project (financed by the Serbian Ministry of Science) in order to prevent attacks on the information distributed via the grid. We also discuss the physical implementation of the cryptographic infrastructure with special attention paid to the so-called side channel attacks (SCA).