In order to reap the benefits promised by the Smart Grid, communications between the IEDs in IEC 61850 Substation Automation System (SAS) will need to be made much more secure.Traditional security solutions based on Public Key Infrastructure (PKI) are calculation intensive and introduces latency that will be difficult to meet substation environmental and electrical requirements, so they are not well suited for IEC 61850 SAS. Identity based encryption (IBE) schemes, introduced by Shamir in 1984  are based on the idea to use participant’s unique identities as public key and public key directories are unnecessary. Thus, utilizing IBE in IEC 61850 SAS is a reasonable choice. This paper briefly introduces the features of IEC 61850 SAS communication security and IBE and then propose an IBE-based Self Private Key Generated (SPKG) encryption scheme to establish encryption system in IEC 61850 SAS. Advantages of this SPKG Scheme are also discussed in the paper.