The utilization of fog-based technology within the realm of smart grids stands out as one of the most promising advancements. Smart grids, being repositories of highly sensitive data, carry the inherent risk of potentially exposing user’s private information. Traditional security models often rely on complex cryptographic operations, resulting in high computational complexity and latency. In response to this challenge, we propose the adoption of a lightweight encryption technique known as the PICO cipher. This cipher not only consumes fewer resources, including flash and RAM, when compared to other cryptographic algorithms but also exhibits a greater avalanche effect. The overall computation time for various functionalities (data aggregation, dynamic pricing, and load forecasting) should be less. To maintain data integrity, hash-based message authentication code (HMAC) authentication technique is used. We introduced the concept of the message queue telemetry transport (MQTT) publish-subscribe model for data aggregation. The model is evaluated in iFogSim simulator to understand real-time parameters. Also, we implemented PICO cipher and other similar cipher algorithms to study time and complexity. Upon thorough examination, our proposed smart grid design model outperforms a conventional fog-based smart grid architecture, demonstrating its enhanced capabilities in preserving data privacy and minimizing computational overhead.