Changing attitudes toward energy security and energy conservation have led to the introduction of distributed power systems such as photovoltaic, gas-cogeneration, biomass, water, and wind power generators. The mass installation of distributed energy generators often causes instability in the voltage and frequency of the power grid. Moreover, the power quality of distributed power grids can become degraded when system faults or the activation of highly loaded machines cause rapid changes in power load. To avoid such problems and maintain an acceptable power quality, it is important to detect the source of these rapid changes. To address these issues, next-generation power grids that can detect the fault location have been proposed. Fault location demands accurate time synchronization. Conventional techniques use the Global Positioning System (GPS) and/or IEEE 1588v2 for time synchronization. However, both methods have drawbacks — GPS cannot be used in indoor situations, and the installation cost of IEEE 1588v2 devices is high. In this paper, a time synchronization technique using the broadcast function of an Ethernet Passive Optical Network (EPON) system is proposed. Experiments show that the proposed technique is low-cost and useful for smart grid applications that use time synchronization in EPON-based next-generation power grids.