In this study, a multi-layer encryption system is proposed through which sensitive and important data in smart grids can be secured from unauthorized persons as well as cyber threats. The suggested system is analyzed using fundamental performance assessment metrics say as average processing times across ten runs, peak signal-to-noise ratio (PSNR), and root mean square error (RMSE). The encryption process involves hiding the data encrypted by a digital dictionary and the advanced encryption standard (AES) algorithm in an image. In this way, AES encryption suggests rapid processing with a short average time per each block; similarly, the decryption technique, which includes the dictionary and AES decryption also renders the results in a justified computational time nominating it as a practical approach. It is worth noting that the small key era and dictionary construction instances provoke innovations in the general efficiency of the encryption mechanism. The conducted study, based on recorded values for PSNR, RMSE, UACI, and NPCR, demonstrates that the proposed multi-layer encryption system, which incorporates dictionary encryption and AES, is a robust and a fast method to shield important information and attaining a balance between protection and computational time.