Protecting energy consumers's data and privacy is a key factor for the further adoption and diffusion of smart grid technologies and applications. However, current smart grid initiatives and implementations around the globe tend to either focus on the need for technical security to the detriment of privacy or consider privacy as a feature to add after system design. This paper aims to contribute towards filling the gap between this fact and the accepted wisdom that privacy concerns should be addressed as early as possible (preferably when modeling system's requirements). We present a methodological framework for tackling privacy concerns throughout all phases of the smart grid system development process. We describe methods and guiding principles to help smart grid engineers to elicit and analyze privacy threats and requirements from the outset of the system development, and derive the best suitable countermeasures, i.e. privacy enhancing technologies (PETs), accordingly. The paper also provides a summary of modern PETs, and discusses their context of use and contributions with respect to the underlying privacy engineering challenges and the smart grid setting being considered.