1. Introduction The rapid deployment of smart grids has transformed modern energy systems by enabling real-time monitoring, decentralized generation, and enhanced operational efficiency. However, these advancements have also introduced new vulnerabilities, particularly energy theft and privacy breaches. This research introduces an incentive-based, privacy-aware energy theft detection framework grounded in contract theory, aiming to balance detection efficiency with consumer data protection while supporting sustainable and secure smart grid ecosystems. 2. Contract Theory in Smart Grid Security Contract theory provides a powerful analytical tool to model asymmetric information between utility providers and consumers in smart grids. This topic examines how incentive-compatible contracts can motivate truthful energy usage reporting, reduce fraudulent behavior, and align stakeholder objectives while addressing information imbalance in cyber-physical energy systems. 3. Privacy-Awar...