How America Could Go Dark

Dozens of break-ins examined by The Wall Street Journal show how orders to secure the power grid have still left tens of thousands of utility substations vulnerable to terrorist saboteurs

By Rebecca Smith WSJ
An early morning passerby phoned in a report of two people with flashlights prowling inside the fence of an electrical substation in Bakersfield, Calif. Utility workers from Pacific Gas & Electric Co. later found cut transformer wires.

The following night, someone slashed wires to alarms and critical equipment at the substation, which serves 16,700 customers. A guard surprised one intruder, who fled. Police never learned the identities or motive of the burglars.

The Bakersfield attacks last year were among dozens of break-ins examined by The Wall Street Journal that show how, despite federal orders to secure the power grid, tens of thousands of substations are still vulnerable to saboteurs.

The U.S. electric system is in danger of widespread blackouts lasting days, weeks or longer through the destruction of sensitive, hard-to-replace equipment. Yet records are so spotty that no government agency can offer an accurate tally of substation attacks, whether for vandalism, theft or more nefarious purposes.

Most substations are unmanned and often protected chiefly by chain-link fences. Many have no electronic security, leaving attacks unnoticed until after the damage is done. Even if there are security cameras, they often prove worthless. In some cases, alarms are simply ignored.

Watch the video: A series of equipment failures and unexplained attacks have exposed the vulnerabilities of the U.S. electrical grid. Keith Cloud, head of security for the Western Area Power Administration, which controls portions of the grid in 15 states, says he doesn’t receive enough funding to secure his substations. Video: Gabe Johnson/WSJ. Photo: Mark Peterman for The Wall Street Journal
The vulnerability of substations was broadly revealed in a Journal account of a 2013 attack on PG&E’s Metcalf facility near San Jose, Calif. Gunmen knocked out 17 transformers that help power Silicon Valley; a blackout was narrowly averted. The assailants were never caught.

The following year, the Federal Energy Regulatory Commission, which regulates the country’s interstate power system, began requiring that utilities better protect any substation that could disable parts of the U.S. grid if attacked.

FERC’s new rule, however, doesn’t extend to tens of thousands of smaller substations, including Metcalf and the one in Bakersfield. Security experts say a simultaneous attack on several of these substations also could destabilize the grid and cause widespread blackouts.

Gerry Cauley, head of the North American Electric Reliability Corp., —which writes standards for the grid—was asked at a FERC hearing in June on grid security what kept him up at night. He said the prospect of “eight or 10 vans going to different sites and blowing things up.” Recovery from a coordinated attack, he said, could take weeks or months.
The Metcalf substation, while undergoing security upgrades, was hit again in August 2014. Intruders cut through fences and burglarized equipment containers, triggering at least 14 alarms over four hours. Utility employees didn’t call police or alert guards, who were stationed at the site, according to a state inquiry.

Three days after the break-in, Stephanie Douglas, PG&E’s senior director of corporate security, sent a memo to the utility’s president saying security was in a fail mode, and her department lacked clout and resources: She had 26 full-time jobs to protect 900 substations, as well gas pipelines and other utility assets.

Ms. Douglas, no longer with PG&E, declined an interview request. PG&E spokesman Matt Nauman said the utility has responded with a $200-million program that includes better security equipment, more training and hiring.

The sprawling U.S. electric system is regulated by government but mostly owned and operated by utility companies and grid operators that monitor electricity supply and demand every minute, every day. The system is always on—and for years few thought anyone would try to turn it off.

The motive of most substation break-ins appears to be theft. Intruders and, potentially, terrorists also could be trying to hack into control systems through computer equipment in substations—either to cause immediate damage or to gather information for later use.

“A substation is not an obvious target for criminals like a bank,” said Joseph Weiss, a security consultant to utilities. “Common sense says they want to get into the electric system.”

Complex system

The U.S. power grid is like a giant puzzle that can be configured in different ways to deliver power where and when it is needed.

Major power sources—gas-fired generators and nuclear-power plants, for example—connect to substations that raise voltages to ferry electricity long distance over a network of power lines. At cities and other destinations, substations lower the voltage to safely deliver electricity to homes and businesses. Substation computers help grid operators control those electrical flows.

The grid was cobbled together during the electrification of the U.S. over the past 125 years. It is a fragile, interdependent system generally more vulnerable in summer when it is running closer to its limits. It is also at risk during low-demand periods, when power-plant operators and linemen perform maintenance. Fewer plants and transmission lines operating mean fewer options for delivering electricity during emergencies.

Transfer of Power

Major power sources connect to substations that raise voltages to ferry electricity over a network of power lines. At cities and other destinations, substations lower the voltage to safely deliver electricity to homes and businesses. Substation computers help grid operators to monitor and control those electrical flows.

Power plant
Step-up transmission substation
Increases the voltage to move large amounts of electricity over long distances.

DANGERS
•An individual substation is attacked.
High-voltage transmission lines

Step-down substation
Reduces the voltage as electricity approaches its ultimate destination; can split and distribute power in multiple directions
•Simultaneous attacks at multiple substations.
•A substation break-in to hack system computers.

Distribution substation
Located near the end users. Voltage is lowered again.
Pole transformer
Reduces voltage for home and office use
Source: Energy Information Administration

There is so much variability in the grid that what causes a catastrophe one day might not the next, which makes security issues complex. Small problems can quickly spiral out of control.

On Sept. 8, 2011, equipment problems and human error caused a large transmission line in Arizona to trip out of service. The grid is supposed to withstand the loss of any one line. On this day, electric current shifted to nearby lines and overloaded them; that overtaxed transformers at two small substations, which shut down defensively to prevent equipment damage, and disruptions spread.

San Diego was blacked out 11 minutes later. Traffic snarled. Flights were canceled. Raw sewage flowed into the ocean. Altogether, 2.7 million utility customers lost power in California, Arizona and Mexico.

Federal officials have long known about the vulnerability of electrical substations. A 1990 report from the federal Office of Technology Assessment warned that “virtually any region would suffer major, extended blackouts if more than three key substations were destroyed.”

A 2012 report from the National Research Council of the National Academies of Sciences looked at different parts of the electric system and concluded that substations were “the most vulnerable to terrorist attack.”

“We’ve known we had an issue for a long time and have been very slow to do anything about it,” said M. Granger Morgan, a professor of engineering at Carnegie Mellon University who studied the San Diego blackout.

Security adviser James Holler said his company, Abidance Consulting, inspected nearly 1,000 substations over the past year for utilities in 14 states. “At least half had nothing but a padlock on the gate,” he said. “No cameras. No motion sensors or alarms.”

One utility lost a set of substation keys that were in a truck stolen for a joy ride. After the truck and keys were recovered, Mr. Holler said, the utility didn’t change the substation locks.

Richard Donohoe, director of security for the consulting firm Black & Veatch, said the security departments of utility companies are often so low in the pecking order that “the rest of the organization ignores them half the time.”

After the gunfire attack on the Metcalf substation, FERC required enhanced protection for individual substations “that if rendered inoperable or damaged could result in widespread instability,” or cascading blackouts in any of the three separate sections of the U.S. power grid.

A large security wall now surrounds the Metcalf electric substation near San Jose, Calif., which helps power Silicon Valley. The facility, owned by Pacific Gas & Electric Co., was attacked by gunmen in 2013 and burglarized the following year.
A large security wall now surrounds the Metcalf electric substation near San Jose, Calif., which helps power Silicon Valley. The facility, owned by Pacific Gas & Electric Co., was attacked by gunmen in 2013 and burglarized the following year. PHOTO: BRIAN L. FRANK FOR THE WALL STREET JOURNAL
That is a high bar. Utility experts aren’t sure how many substations the new rules cover but estimate it is fewer than 350 out of approximately 55,000. They say more protections are needed at smaller substations that could trigger blackouts if attacked in combination.

The exact combinations depend on energy demand and the direction of electricity flow. In spring, for example, hydroelectric power plants send electricity from the Pacific Northwest to California. In winter, electricity flows in the opposite direction, mostly from gas-fired and nuclear power plants in California and Arizona.

One security-focused nonprofit group called the Foundation for Resilient Societies has called for an analysis of the impact of simultaneous attacks, both physical and cyber.

Thomas Popik, chairman of the group, told FERC in June that existing grid protections were inadequate and his group believed the grid was “a battlefield of the future” that required military-type defenses for key infrastructure.

Michael Bardee, director of the Office of Electric Reliability at FERC, said the agency could do more to study security vulnerabilities at the thousands of substations not covered by the new rule. FERC expects a progress report on the new rule later this year.

“Clearly, there’s some sense that as events go on we may need to re-evaluate the applicability of this standard,” Mr. Bardee said, and possibly expand its reach.

The Vermont Electric Power Co. approved a $12 million program to beef up security at 55 locations after substations were penetrated more than a dozen times by thieves stealing copper during break-ins from 2012 through early 2014.

“We haven’t seen a theft in over a year,” said Kerrick Johnson, a spokesman. The utility installed more secure fencing and better security cameras.

Most utilities are reluctant to spend money on security unless under government orders. They must justify their expenses to regulatory agencies to pass on the costs to ratepayers, said John Kassakian, an emeritus professor of electrical engineering at the Massachusetts Institute of Technology.

Security upgrades generally include cameras, lights and motion sensors, as well as password-controlled doors and gates that electronically monitor entries and exits. Terror threats, Mr. Kassakian said, probably seem less pressing than spending to comply with federal environmental rules.

Alarms unheeded

Utilities don’t always report attacks despite a legal requirement to notify the Energy Department within six hours of any event that could interrupt electricity or if a break-in targets security systems.

No utility has been fined for failing to comply as far as he knew, said David Ortiz, deputy assistant secretary at the Energy Department: “I don’t have an enforcement team.”

The Journal found nine substation break-ins over the past two years where theft wasn’t the apparent motive. The tally and details of the break-ins were gleaned from interviews and public records requests. The count included attacks affecting the federally owned Liberty substation in Buckeye, Ariz.

The substation, about 35 miles west of Phoenix, is a critical link in the southwest power corridor, delivering electricity to heat homes in northwestern states during winter and cool buildings in the southwest during summer.

On Nov. 5, 2013, someone slashed fiber-optic cables that serve Liberty, as well as the larger Mead substation near Hoover Dam. It took workers about two hours to re-establish proper communications and normal controls.

Liberty is operated by the Western Area Power Administration, which controls 17,000 miles of high-voltage power lines used by utilities serving 40 million people in 15 states. If this system suffered a catastrophic failure, it would take down other utilities with it, experts said.

Alarms signaling trouble at Liberty began ringing at a utility operations center in Phoenix 13 days after the communications outage. Dozens of alarms sounded over two days before an electrician was dispatched.

The electrician expected a false alarm. Instead, he found the perimeter fence sliced open and the steel door to the control building “peeled back like a sardine can,” said Keith Cloud, the utility’s head of security.

The substation’s computer cabinets were pried open. The substation’s security cameras proved useless: eight of 10 were broken or pointed at the sky, Mr. Cloud said. Most had been out of operation for a year or more.

Two months later, on Jan. 30, 2014, Liberty was hit again. Two men with a satchel cut the gate lock and headed to the control building. They left after trying, unsuccessfully, to cut power to a security trailer outfitted with cameras and blinking lights, which were installed after the first break-in.

This time, Mr. Cloud said, utility officials found 16 of 18 security cameras had failed. Most were installed after the first break-in and hadn’t been properly programmed. Investigators retrieved a single fuzzy video from a thermal-imaging camera.

Mark Gabriel, WAPA’s administrator, said the utility has “taken steps to improve our physical security program and processes,” including creating the security department in 2013 that Mr. Cloud now heads.

A federal audit faulted WAPA in April for violations of security regulations, including broken or obsolete equipment, lax control over keys to critical substations and failure to install intrusion-detection systems.

Mr. Gabriel said WAPA spends a couple of hundred million dollars on capital improvements annually, which includes money for security improvements. “The bigger story is how that break-in and others in the industry changed the thinking,” he said.

Mr. Cloud said he has received about $300,000 for security upgrades at a handful of WAPA’s 328 substations, including Liberty. To protect the system’s 40 most important substations and control centers, he said, he needs $90 million: “I don’t have the authority or budget to protect my substations.”

Write to Rebecca Smith at rebecca.smith@wsj.c

Another Oil Crash Is Coming, and There May Be No Recovery

http://bloom.bg/1OubYHH (See Video)

Superior electric cars are on their way, and they could begin to wreck oil markets within a decade.

February 24, 2016 — 4:45 AM ES Bloomberg

 

It’s time for oil investors to start taking electric cars seriously.

In the next two years, Tesla and Chevy plan to start selling electric cars with a range of more than 200 miles priced in the $30,000 range. Ford is investing billions, Volkswagen is investing billions, and Nissan and BMW are investing billions. Nearly every major carmaker—as well as Apple and Google—is working on the next generation of plug-in cars.

This is a problem for oil markets. OPEC still contends that electric vehicles will make up just 1 percent of global car sales in 2040.Exxon’s forecast is similarly dismissive.

QUICKTAKEOil Prices

The oil price crash that started in 2014 was caused by a glut of unwanted oil, as producers started cranking out about 2 million barrels a day more than the market supported. Nobody saw it coming, despite the massively expanding oil fields across North America. The question is: How soon could electric vehicles trigger a similar oil glut by reducing demand by the same 2 million barrels?

That’s the subject of the first installment of Bloomberg’s new animated web series Sooner Than You Think, which examines some of the biggest transformations in human history that haven’t happened quite yet. Tomorrow, analysts at Bloomberg New Energy Finance will weigh in with a comprehensive analysis of where the electric car industry is headed.

Even amid low gasoline prices last year, electric car sales jumped 60 percent worldwide. If that level of growth continues, the crash-triggering benchmark of 2 million barrels of reduced demand could come as early as 2023. That’s a crisis. The timing of new technologies is difficult to predict, but it may not be long before it becomes impossible to ignore.

Musk Bulks Up Tesla Batteries in Leap Beyond Cars to GridBy Mark Chediak and Dana Hull – Apr 28, 2015, 7:51:59 PM Bloomberg 

Musk Bulks Up Tesla Batteries in Leap Beyond Cars to Grid

Elon Musk, co-founder and chief executive officer of Tesla Motors Inc., smiles during the GPU Technology Conference (GTC) in San Jose on March 17. Photographer: David Paul Morris/Bloomberg

Billionaire Elon Musk thinks he can pave the way to a better energy future by turning the mattress-shaped batteries in Tesla’s electric car into upright pillars so they can be used to power homes, businesses and even utilities.

Musk will lift the veil Thursday on a new generation of batteries designed to store growing volumes of solar and wind energy. If he gets it right, Tesla Motors Inc. will have spun a significant second business off the technology originally designed for its electric vehicles — and will gain a toehold in a business projected to generate tens of billions of dollars in a decade.

Nobody in the power industry has yet been able to come up with a cost-effective way to store large volumes of energy for later distribution. Tesla is making a bet that its huge $5 billion “gigafactory” currently under construction near Reno, Nevada, will enable the mass production needed to drive down the cost of batteries and make them competitive for a broad range of customers, including traditional suppliers of electricity.

Tesla has scheduled an event Thursday at its design studio in Hawthorne, California, to announce both a Tesla home battery and what it called last week in a note to investors “a very large utility scale battery.”

Eagerly Awaiting

“Whatever Tesla announces on Thursday is just the beginning,” said Peter Rosegg, spokesman for Hawaiian Electric Co., where 12 percent of the utility’s customers have rooftop solar panels. “Tesla doesn’t have to go after the market — the market will come to them. We’re very eager to see what they have to say.”

Tesla, based in Palo Alto, California, has its eye on a business that’s poised for tremendous growth. As homes, businesses and utilities use more renewable energy generated by sun and wind, the need to provide for reliable power grows. Batteries can be used to store electricity during peak production times, and then dispense it later when the sun isn’t shining or the wind isn’t blowing.

Musk tweeted a teaser about their Thursday announcement: “For the future to be good, we need electric transport, solar power and (of course) … the missing piece,” he posted on Twitter Tuesday. Tesla fell 0.8 percent to $228.63 at 10:58 a.m. in New York.

Global Growth

A January report from Navigant Research estimates that worldwide revenue from grid-scale energy storage could total more than $68 billion by 2024 as renewable resources multiply and electricity grid operators seek ways to balance their mix of generation assets.

Tesla is already supplying batteries to homes and commercial businesses such as Wal-Mart Stores Inc. through pilot projects and a supply agreement with SolarCity Corp., a relationship that generated $2.7 million in revenue for Tesla in 2014, according to a recent regulatory filing. That’s less than 1/10 of 1 percent of the automaker’s total for last year.

But Tesla is thinking much bigger, saying in job postings that its energy-storage business will soon grow to billions in sales. Musk plans to combine the strengths of the company’s patented lithium-ion batteries, which currently can run a car for about 265 miles (426 kilometers) per charge, with its expertise in power management software.

Green Trio

Musk’s green power ambitions involve three inter-connected enterprises: SolarCity, where he serves as chairman, the battery factory in Nevada, and the Tesla car business. With the move into energy storage, Tesla can help green the grid that fuels its cars while offering solar customers a way to store any excess electricity in batteries for use during hours of less sunlight and greater demand.

An even larger potential market will be utilities that have traditionally generated power with coal and natural gas.

“Tesla isn’t just going to sell batteries to SolarCity,” said Ben Kallo, an analyst with R.W. Baird & Co. “They are going to sell to project developers, wind and solar developers, and directly to utilities. The residential product isn’t going to be a huge needle mover in the near term, but the numbers are very big on the utility side.”

Tesla will face competition from other battery makers such as Korea’s LG Chem Ltd. and legacy U.S. power providers such as AES Corp. and startups such as JLM Energy Inc. It will have to navigate regulatory hurdles in a state-by-state market with varying degrees of subsidies and incentives for the technology.

Moving Slowly

Utilities, more cautious by nature, have been slow to adopt storage on their own.

“Storage doesn’t neatly fit into transmission, distribution or generation categories so it can be tough for utilities to justify investing in storage projects,” said Brian Warshay, an analyst for Bloomberg New Energy Finance. “Some utilities, like the California investor-owned companies, are getting into storage because their regulator basically told them they have to.”

In Tesla’s home state, a groundbreaking energy-storage mandate requires PG&E Corp., Edison International’s Southern California Edison and Sempra Energy’s San Diego Gas & Electric to collectively buy 1.3 gigawatts of energy storage capacity by the end of 2020. New York is also pushing utilities to use storage to relieve congestion on transmission lines and plans for the retirement of the Indian Point nuclear power plant.

All these companies are potential customers for Tesla. The automaker has been in talks to provide its batteries to Oncor Electric Delivery Co., the largest power-line owner in Texas.

“Batteries really are kind of a panacea for the grid,” said Don Clevenger, senior vice president of strategic planning for Oncor. “They provide better reliability.”

Judge Rules Against Restarting 2 Nuclear Reactors in Japan

Judge Rules Against Restarting 2 Nuclear Reactors in Japan

The Takahama nuclear power station in Fukui Prefecture, Japan, in 2013.
KYODO NEWS

    TOKYO — The 13 commercial nuclear reactors clustered along the short, rugged coastline of Fukui Prefecture in Japan have earned the area a reputation as a political stronghold for the atomic power industry.

    Nuclear-friendly politicians dominate most of Fukui’s government offices, and some of the area’s reactors continued to operate for a time after the meltdowns at the Fukushima Daiichi plant four years ago, even as others elsewhere shut down because of safety concerns. The region is nicknamed Genpatsu Ginza, or Nuclear Alley.

    Currently, none of the 48 usable reactors in Japan are producing power. Japan’s carbon emissions have risen as a result, and business groups say delays in returning some plants to service are hurting the economy.

    The price of electricity has increased by 20 percent or more, reflecting the cost of importing more oil and natural gas. That translates to the equivalent of several tens of billions of dollars a year in added expenses for households and companies.

    Now, a local judge has made Fukui an unexpected focus of antinuclear activism and turned the prefecture into a battleground for Prime Minister Shinzo Abe’s government, which is seeking to rebuild the nuclear industry and reverse the economic impact of the reactor shutdowns.

    On Tuesday, the judge, Hideaki Higuchi, issued an injunction forbidding the restart of two nuclear reactors at the Takahama plant in Fukui. The plant’s owner, Kansai Electric Power Company, had intended them to be among the first in the country to be returned to service after the introduction of post-Fukushima safety standards two years ago.

    Five Ways That Apple Is Already Positioned to Be a Car Company By Tim Higgins – Feb 14, 2015, 8:02:51 PM

    Five Ways That Apple Is Already Positioned to Be a Car Company
    By Tim Higgins – Feb 14, 2015, 8:02:51 PM

    Bloomberg Photo Service ‘Best of the Week’: Tim Cook, chief executive officer of Apple Inc., center, arrives to speak with Gary Cohn, president and chief operating officer of Goldman Sachs Group Inc., right, at the Goldman Sachs Technology And Internet Conference in San Francisco, California, U.S., on Tuesday, Feb. 10, 2015. Apple Inc., which began flirting with a record valuation of $700 billion during midday trading in November, ended the day at $710.7 billion, marking the first time a U.S. company has reached that milestone. Shares rose 1.9 percent to $122.02 at the close in New York. Photographer: David Paul Morris/Bloomberg *** Local Caption *** Tim Cook; Gary Cohn

    Apple Inc. may already be positioned to evolve into a global automaker in many ways that other Silicon Valley companies aren’t.

    The Cupertino, California-based tech company has put a few hundred employees to work on a secretive project to develop an electric automobile, a person familiar with the matter has said. While Apple often tests ideas that don’t get released, the work underscores the company’s long-held desire to play a greater role in the automotive space, which is ripe for more of a merging with users’ digital lives.

    “It makes a ton of sense,” Gene Munster, an analyst with Piper Jaffray Cos., said Saturday in an interview. “If you would’ve said 10 years ago, ‘Apple is going to be in the car business,’ I think people would’ve said you’re crazy — because it would’ve been crazy — and today it’s a much different company that’s able to tackle these massive addressable markets.”

    Apple, with a market capitalization that’s more than $700 billion, needs to continue growing sales in iPhones, its largest revenue generator, while also expanding into new markets, such as automobiles, if it’s to reach a $1 trillion valuation, Munster said. He added that he doesn’t think Apple would bring out a car in the next five years.

    Nonetheless, Apple boasts some advantages versus other Silicon Valley companies with car ambitions. Tesla Motors Inc., which delivers less than 10,000 vehicles a quarter, surprised investors last month when Chief Executive Officer Elon Musk said the company wouldn’t be profitable until 2020.

    Apple’s strengths as a potential automaker include:

    1. $178 Billion

    The automotive industry churns through cash at an astonishing pace. Apple, as it turns out, has a cash hoard of almost $180 billion. As Musk said last week, Apple is “just running out of ways to spend money. They spend money like it’s water over there and they still can’t spend enough of it.”

    While the old rule of thumb was that it cost about $1 billion to develop a new car, those costs are now being spread over more vehicles as traditional automakers work to use vehicle platforms for more models, said Dave Sullivan, an automotive industry analyst with AutoPacific. That would be one challenge for Apple, as would a lack of experience building cars, though Thilo Koslowski, vice president and automotive practice leader at Gartner, said they could acquire those manufacturing skills.

    “It’s well understood because it has been around for 100 years,” he said of building cars. “What isn’t that well understood are the pieces that Apple would potentially bring to the table.”

    2. The Ultimate Mobile Device

    Apple has built its fortune on creating products that are compellingly designed and that integrate software in such a fashion that immerses users’ lives deeper into the Apple world, further hooking them for future upgrades. And it already has car-suited technology — mapping software, for instance — ready to go.

    “The car is one of the most important and critical pieces of the puzzle that you need to master if you want to interact with customers wherever they are,” Koslowski said. “It’s pretty important to have a phone that’s connected, and can show you your calendar and do all kinds of other things, but now extending it to this other device that happens to have four wheels.”

    3. Car Guys?

    The car business seems simple to outsiders, tempting some to think they can do better than Detroit, which spent a generation sliding toward bankruptcy reorganizations before re-emerging to new profits.

    But the modern automotive industry has a mixed record on how outsiders perform. For every Alan Mulally, who jumped from Boeing Co. to oversee Ford Motor Co.’s renaissance, there’s a Bob Nardelli, the former General Electric Co. executive and Home Depot Inc. CEO, who was at the helm of Chrysler during its bankruptcy. Tesla has so far succeeded while Fisker Automotive, another high-profile electric car company, had its assets sold off in bankruptcy.

    Apple, meanwhile, has a unique mix of executives with tech and auto experience. The company has long hired engineers from the automotive space, often with experience in supply chain management, battery technology and user-interface experience.

    Luca Maestri, Apple’s chief financial officer, spent 20 years at General Motors in areas of finance and operations. Eddy Cue, the influential senior vice president of Internet software, is a car enthusiast and on the board of Ferrari. Steve Zadesky, vice president of iPhone product design, who is leading Apple’s car effort, spent time working at Ford earlier in his career. Marc Newson, a well-regarded industrial designer who joined Apple’s secretive design team last year, did a high-profile concept car for Ford in 1999.

    4. Retail Network

    One of the strengths — and weaknesses — of traditional automakers has been their dealer networks. It’s hard to open up store fronts around the world fast enough to get the scale needed to sell cars. In the U.S., there are added complexities such as state franchise laws that often prohibit manufacturers from selling cars directly to customers.

    That’s something Tesla has sought to upend. Rather than selling through franchised dealers, the Palo Alto, California-based automaker operates its own showrooms — which were created by a former Apple executive — and takes orders over the Internet. The approach has drawn the ire of franchise dealers and the automaker has butted heads with dealer groups last year in Georgia, Missouri, New Jersey, New York, Ohio and Pennsylvania before reaching compromises.

    Apple, of course, already has a giant retail network through its hundreds of Apple Stores worldwide, from Brazil to Sweden to Turkey.

    5. Apple Does Global

    The automotive business has a global complexity like few other industries, with regulatory, marketing and logistics issues that can trip up the capital-intense business on any given day.

    Apple, which designs its products in California but depends upon contractors to assemble them mostly in Asia, is used to managing an on-time supply chain around the world — something Google Inc. doesn’t do in its day-to-day Internet search business — and handling the complexities of currency swings throughout global markets. CEO Tim Cook built his reputation at Apple for his ability to navigate those global operations.

    “That would be a huge plus should they decide to manufacture cars,” Tim Bajarin, president of Creative Strategies, said.

    He said he remains skeptical that Apple wants to get into the actual business of selling cars, rather than just moving deeper into creating operating systems for automakers.

    “Doing cars is not in Apple’s wheelhouse,” Bajarin said. “It’s more likely they are trying to create a richer, more immersive electronics experience tied to iOS where not only the audio system but the information and possibly new levels of security through sensors and cameras would be part of what they would offer to other carmakers.”

    Apple could be creating concepts, or reference designs, to integrate technology to demonstrate to automakers, he said.

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    Russia’s aggression in Ukraine is part of a broader, and more dangerous, confrontation with the West THE ECONOMIST FEB. 15, 2015

    THE pens were on the table in Minsk, Belarus’s capital, for the leaders of France, Germany, Russia and Ukraine to sign a deal to end a year-long war fuelled by Russia and fought by its proxies.

    But on February 12th, after all-night talks, they were put away. “No good news,” said Petro Poroshenko, Ukraine’s president. Instead there will be a ceasefire from February 15th. A tentative agreement has been reached to withdraw heavy weaponry.

    But Russia looks sure to be able to keep open its border with Ukraine and sustain the flow of arms and people. The siege of Debaltseve, a strategic transport hub held by Ukrainian forces, continues. Russia is holding military exercises on its side of the border. Crimea was not even mentioned.

    Meanwhile the IMF has said it will lend Ukraine $17.5 billion to prop up its economy. But Mr Putin seems to be relying on a familiar Russian tactic of exhausting his negotiating counterparts and taking two steps forward, one step back. He is counting on time and endurance to bring the collapse and division of Ukraine and a revision of the post-cold war world order.

    Nearly a quarter-century after the collapse of the Soviet Union, the West faces a greater threat from the East than at any point during the cold war. Even during the Cuban missile crisis of 1962, Soviet leaders were constrained by the Politburo and memories of the second world war.

    Now, according to Russia’s chief propagandist, Dmitry Kiselev, even a decision about the use of nuclear arms “will be taken personally by Mr Putin, who has the undoubted support of the Russian people”. Bluff or not, this reflects the Russian elite’s perception of the West as a threat to the very existence of the Russian state.

    In this view Russia did not start the war in Ukraine, but responded to Western aggression. The Maidan uprising and ousting of Viktor Yanukovych as Ukraine’s president were engineered by American special services to move NATO closer to Russia’s borders.

    Once Mr Yanukovych had gone, American envoys offered Ukraine’s interim government $25 billion to place missile defences on the Russian border, in order to shift the balance of nuclear power towards America. Russia had no choice but to act.

    Even without Ukraine, Mr Putin has said, America would have found some other excuse to contain Russia.

    Ukraine, therefore, was not the cause of Russia’s conflict with the West, but its consequence. Mr Putin’s purpose is not to rebuild the Soviet empire–he knows this is impossible–but to protect Russia’s sovereignty.

    By this he means its values, the most important of which is a monopoly on state power.

    Behind Russia’s confrontation with the West lies a clash of ideas. On one side are human rights, an accountable bureaucracy and democratic elections; on the other an unconstrained state that can sacrifice its citizens’ interests to further its destiny or satisfy its rulers’ greed. Both under communism and before it, the Russian state acquired religious attributes. It is this sacred state which is under threat.

    Mr Putin sits at its apex. “No Putin–no Russia,” a deputy chief of staff said recently. His former KGB colleagues–the Committee of State Security–are its guardians, servants and priests, and entitled to its riches. Theirs is not a job, but an elite and hereditary calling. Expropriating a private firm’s assets to benefit a state firm is therefore not an act of corruption.

    When thousands of Ukrainians took to the streets demanding a Western-European way of life, the Kremlin saw this as a threat to its model of governance. Alexander Prokhanov, a nationalist writer who backs Russia’s war in Ukraine, compares European civilisation to a magnet attracting Ukraine and Russia. Destabilising Ukraine is not enough to counter that force: the magnet itself must be neutralised.

    Russia feels threatened not by any individual European state, but by the European Union and NATO, which it regards as expansionist. It sees them as “occupied” by America, which seeks to exploit Western values to gain influence over the rest of the world.

    America “wants to freeze the order established after the Soviet collapse and remain an absolute leader, thinking it can do whatever it likes, while others can do only what is in that leader’s interests,” Mr Putin said recently. “Maybe some want to live in a semi-occupied state, but we do not.”

    Russia has taken to arguing that it is not fighting Ukraine, but America in Ukraine. The Ukrainian army is just a foreign legion of NATO, and American soldiers are killing Russian proxies in the Donbas. Anti-Americanism is not only the reason for war and the main pillar of state power, but also an ideology that Russia is trying to export to Europe, as it once exported communism.

    Anti-Westernism has been dressed not in communist clothes, but in imperial and even clerical ones (see page 77). “We see how many Euro-Atlantic countries are in effect turning away from their roots, including their Christian values,” said Mr Putin in 2013.

    Russia, by contrast, “has always been a state civilisation held together by the Russian people, the Russian language, Russian culture and the Russian Orthodox church.” The Donbas rebels are fighting not only the Ukrainian army, but against a corrupt Western way of life in order to defend Russia’s distinct world.

    Mistaken hopes

    Many in the West equate the end of communism with the end of the cold war. In fact, by the time the Soviet Union fell apart, Marxism-Leninism was long dead. Stalin replaced the ideals of internationalism, equality and social justice that the Bolsheviks had proclaimed in 1917 with imperialism and state dominance over all spheres of life. Mikhail Gorbachev’s revolution consisted not in damping down Marxism but in proclaiming the supremacy of universal human values over the state, opening up Russia to the West.

    Nationalists, Stalinists, communists and monarchists united against Mr Gorbachev. Anti-Americanism had brought Stalinists and nationalists within the Communist Party closer together. When communism collapsed they united against Boris Yeltsin and his attempts to make Russia “normal”, by which he meant a Western-style free-market democracy.

    By 1993, when members of this coalition were ejected by pro-Yeltsin forces from the parliament building they had occupied in Moscow, they seemed defeated. Yet nationalism has resurfaced. Those who fought Yeltsin and his ideas were active in the annexation of Crimea and are involved in the war in south-east Ukraine.

    Alexander Borodai, the first “prime minister” of the self-proclaimed Donetsk People’s Republic, who fought with anti-Yeltsin forces, hails Mr Putin as the leader of the nationalist movement in Russia today.

    Yet for a few years after Mr Putin came to power he built close relations with NATO. In his first two presidential terms, rising living standards helped buy acceptance of his monopoly on state power and reliance on ex-KGB men; now that the economy is shrinking, the threat of war is needed to legitimise his rule.

    He forged his alliance with Orthodox nationalists only during mass street protests by Westernised liberals in 2012, when he returned to the Kremlin. Instead of tear gas, he has used nationalist, imperialist ideas, culminating in the annexation of Crimea and the slow subjugation of south-east Ukraine.

    Hard power and soft

    Mr Putin’s preferred method is “hybrid warfare”: a blend of hard and soft power. A combination of instruments, some military and some non-military, choreographed to surprise, confuse and wear down an opponent, hybrid warfare is ambiguous in both source and intent, making it hard for multinational bodies such as NATO and the EU to craft a response.

    But without the ability to apply hard power, Russia’s version of soft power would achieve little. Russia “has invested heavily in defence,” says NATO’s new secretary-general, a former Norwegian prime minister, Jens Stoltenberg. “It has shown it can deploy forces at very short notice…above all, it has shown a willingness to use force.”

    Putin drew two lessons from his brief war in Georgia in 2008. The first was that Russia could deploy hard power in countries that had been in the Soviet Union and were outside NATO with little risk of the West responding with force.

    The second, after a slapdash campaign, was that Russia’s armed forces needed to be reformed. Military modernisation became a personal mission to redress “humiliations” visited by an “overweening” West on Russia since the cold war ended.

    According to IHS Jane’s, a defence consultancy, by next year Russia’s defence spending will have tripled in nominal terms since 2007, and it will be halfway through a ten-year, 20 trillion rouble ($300 billion) programme to modernise its weapons.

    New types of missiles, bombers and submarines are being readied for deployment over the next few years. Spending on defence and security is expected to climb by 30% this year and swallow a more than a third of the federal budget.

    As well as money for combat aircraft, helicopters, armoured vehicles and air-defence systems, about a third of the budget has been earmarked to overhaul Russia’s nuclear forces. A revised military doctrine signed by Mr Putin in December identified “reinforcement of NATO’s offensive capacities directly on Russia’s borders, and measures taken to deploy a global anti-missile defence system” in central Europe as the greatest threats Russia faces.

    In itself, that may not be cause for alarm in the West. Russian nuclear doctrine has changed little since 2010, when the bar for first use was slightly raised to situations in which “the very existence of the state is under threat”. That may reflect growing confidence in Russia’s conventional forces.

    But Mr Putin is fond of saying that nobody should try to shove Russia around when it has one of the world’s biggest nuclear arsenals. Mr Kiselev puts it even more bluntly: “During the years of romanticism [ie, detente], the Soviet Union undertook not to use nuclear weapons first. Modern Russian doctrine does not. The illusions are gone.”

    Mr Putin still appears wedded to a strategy he conceived in 2000: threatening a limited nuclear strike to force an opponent (ie, America and its NATO allies) to withdraw from a conflict in which Russia has an important stake, such as in Georgia or Ukraine. Nearly all its large-scale military exercises in the past decade have featured simulations of limited nuclear strikes, including one on Warsaw.

    Mr Putin has also been streamlining his armed forces, with the army recruiting 60,000 contract soldiers each year. Professionals now make up 30% of the force. Conscripts may bulk up the numbers, but for the kind of complex, limited wars Mr Putin wants to be able to win, they are pretty useless.

    Ordinary contract soldiers are also still a long way behind special forces such as the GRU Spetsnaz (the “little green men” who went into Crimea without military insignia) and the elite airborne VDV troops, but they are catching up.

    Boots on the ground

    South-east Ukraine shows the new model army at work. Spetsnaz units first trained the Kremlin-backed separatist rebels in tactics and the handling of sophisticated Russian weapons. But when the Ukrainian government began to make headway in early summer, Russia had regular forces near the border to provide a calibrated (and still relatively covert) response.

    It is hard to tell how many Russian troops have seen action in Ukraine, as their vehicles and uniforms carry no identifiers. But around 4,000 were sent to relieve Luhansk and Donetsk while threatening the coastal city of Mariupol–enough to convince Mr Poroshenko to draw his troops back.

    Since November a new build-up of Russian forces has been under way. Ukrainian military intelligence reckons there may be 9,000 in their country (NATO has given no estimate). Another 50,000 are on the Russian side of the border.

    Despite Mr Putin’s claim last year that he could “take Kiev in two weeks” if he wanted, a full-scale invasion and subsequent occupation is beyond Russia. But a Russian-controlled mini-state, Novorossiya, similar to Abkhazia and Transdniestria, could be more or less economically sustainable.

    And it would end Ukraine’s hopes of ever regaining sovereignty over its territory other than on Russian terms, which would undoubtedly include staying out of the EU and NATO. Not a bad outcome for Mr Putin, and within reach with the hard power he controls.

    The big fear for NATO is that Mr Putin turns his hybrid warfare against a member country. Particularly at risk are the Baltic states–Latvia, Estonia and Lithuania–two of which have large Russian-speaking minorities.

    In January Anders Fogh Rasmussen, NATO’s previous secretary-general, said there was a “high probability” that Mr Putin would test NATO’s Article 5, which regards an attack on any member as an attack on all–though “he will be defeated” if he does so.

    A pattern of provocation has been established that includes a big increase in the number of close encounters involving Russian aircraft and naval vessels, and snap exercises by Russian forces close to NATO’s northern and eastern borders. Last year NATO planes carried out more than 400 intercepts of Russian aircraft.

    More than 150 were by the alliance’s beefed-up Baltic air-policing mission–four times as many as in 2013. In the first nine months of the year, 68 “hot” identifications and interdictions occurred along the Lithuanian border alone. Latvia recorded more than 150 incidents of Russian planes entering its airspace.

    There have also been at least two near-misses between Russian military aircraft and Swedish airliners. This is dangerous stuff: Russian pilots do not file flight plans. They fly with transponders switched off, which makes them invisible to civil radar. On January 28th two Russian, possibly nuclear-armed, strategic bombers flew down the English Channel, causing havoc to commercial aviation. Such behaviour is intended to test Western air defences, and was last seen in the cold war. Mr Stoltenberg calls it “risky and unjustified”.

    Since 2013, when Russia restarted large-scale snap military exercises, at least eight have been held. In December the Kremlin ordered one in Kaliningrad, an exclave that borders Lithuania and Poland, both NATO members. It mobilised 9,000 soldiers, more than 55 navy ships and every type of military aircraft. “This pattern of behaviour can be used to hide intent,” says General Philip Breedlove, NATO’s most senior commander. “What is it masking? What is it conditioning us for?”

    A huge problem for NATO is that most of what Russia might attempt will be below the radar of traditional collective defence. According to Mr Stoltenberg, deciding whether an Article 5 attack has taken place means both recognising what is going on and knowing who is behind it.

    “We need more intelligence and better situational awareness,” he says; but adds that NATO allies accept that if the arrival of little green men can be attributed “to an aggressor nation, it is an Article 5 action and then all the assets of NATO come to bear.”

    For all the rhetoric of the cold war, the Soviet Union and America had been allies and winners in the second world war and felt a certain respect for each other. The Politburo suffered from no feelings of inferiority. In contrast, Mr Putin and his KGB men came out of the cold war as losers.

    What troubles Mr Stoltenberg greatly about Mr Putin’s new, angry Russia is that it is harder to deal with than the old Soviet Union. As a Norwegian, used to sharing an Arctic border with Russia, he says that “even during the coldest period of the cold war we were able to have a pragmatic conversation with them on many security issues”. Russia had “an interest in stability” then, “but not now”.

    Meddling and perverting

    Destabilisation is also being achieved in less military ways. Wielding power or gaining influence abroad–through antiestablishment political parties, disgruntled minority groups, media outlets, environmental activists, supporters in business, propagandist “think-tanks”, and others–has become part of the Kremlin’s hybrid-war strategy. This perversion of “soft power” is seen by Moscow as a vital complement to military engagement.

    Certainly Russia is not alone in abusing soft power. The American government’s aid agency, USAID, has planted tweets in Cuba and the Middle East to foster dissent. And Mr Putin has hinted that Russia needs to fight this way because America and others are already doing so, through “pseudo-NGOs”, CNN and human-rights groups.

    At home Russian media, which are mostly state-controlled, churn out lies and conspiracy theories. Abroad, the main conduit for the Kremlin’s world view is RT, a TV channel set up in 2005 to promote a positive view of Russia that now focuses on making the West look bad.

    It uses Western voices: far-left anti-globalists, far-right nationalists and disillusioned individuals. It broadcasts in English, Arabic and Spanish and is planning German- and French-language channels.

    It claims to reach 700m people worldwide and 2.7m hotel rooms. Though it is not a complete farce, it has broadcast a string of false stories, such as one speculating that America was behind the Ebola epidemic in west Africa.

    The Kremlin is also a sophisticated user of the internet and social media. It employs hundreds of “trolls” to garrison the comment sections and Twitter feeds of the West. The point is not so much to promote the Kremlin’s views, but to denigrate opposition figures, and foreign governments and institutions, and to sow fear and confusion.

    Vast sums have been thrown at public-relations and lobbying firms to improve Russia’s image abroad–among them Ketchum, based in New York, which helped place an op-ed by Mr Putin in the New York Times. And it can rely on some of its corporate partners to lobby against policies that would hurt Russian business.

    The West’s willingness to shelter Russian money, some of it gained corruptly, demoralises the Russian opposition while making the West more dependent on the Kremlin. Russian money has had a poisonous effect closer to home, too. Russia wields soft power in the Baltics partly through its “compatriots policy”, which entails financial support for Russian-speaking minorities abroad.

    econ 2The Economist

    Mr Putin’s most devious strategy, however, is to destabilise the EU through fringe political parties (see box).

    Russia’s approach to ideology is fluid: it supports both far-left and far-right groups. As Peter Pomerantsev and Michael Weiss put it in “The menace of unreality”, a paper on Russian soft power: “The aim is to exacerbate divides [in the West] and create an echo-chamber of Kremlin support.”

    Disruptive politics

    Far-right groups are seduced by the idea of Moscow as a counterweight to the EU, and by its law-and-order policies. Its stance on homosexuality and promotion of “traditional” moral values appeal to religious conservatives. The far left likes the talk of fighting American hegemony.

    Russia’s most surprising allies, however, are probably Europe’s Greens. They are opposed to shale-gas fracking and nuclear power–as is Moscow, because both promise to lessen Europe’s dependence on Russian fossil fuels. Mr Rasmussen has accused Russia of “sophisticated” manipulation of information to hobble fracking in Europe, though without producing concrete evidence.

    There is circumstantial evidence in Bulgaria, which in 2012 cancelled a permit for Chevron to explore for shale gas after anti-fracking protests. Some saw Russia’s hand in these, possibly to punish the pro-European government of the time, which sought to reduce its reliance on Russian energy (Gazprom, Russia’s state-controlled gas giant, supplies 90% of Bulgaria’s gas).

    Previously, Bulgaria had been expected to transport Russian oil through its planned South Stream pipeline, and its parliament had approved a bill that would have exempted the project from awkward EU rules. Much of it had been written by Gazprom, and the construction contract was to go to a firm owned by Gennady Timchenko, an oligarch now under Western sanctions.

    Gazprom offered to finance the pipeline and to sponsor a Bulgarian football team. The energy minister at the time later claimed he had been offered bribes by a Russian envoy to smooth the project’s passage. Though European opposition means it has now been scrapped, the episode shows the methods Moscow uses to protect its economic interests.

    In all this Mr Putin is evidently acting not only for Russia’s sake, but for his own. Mr Borodai, the rebel ideologue in Donetsk, says that if necessary the Russian volunteers who are fighting today in Donbas will tomorrow defend their president on the streets of Moscow.

    Yet, although Mr Putin may believe he is using nationalists, the nationalists believe they are using him to consolidate their power. What they aspire to, with or without Mr Putin, is that Russians rally behind the nationalist state and their leader to take on Western liberalism. This is not a conflict that could have been resolved in Minsk.

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    Tesla Planning Battery for Emerging Home Energy-Storage Market By Dana Hull and Mark Chediak – Feb 11, 2015, 10:48:18 PM

    Tesla Planning Battery for Emerging Home Energy-Storage Market
    By Dana Hull and Mark Chediak – Feb 11, 2015, 10:48:18 PM

    (Bloomberg) — Tesla Motors Inc., best known for making the all-electric Model S sedan, is using its lithium-ion battery technology to position itself as a frontrunner in the emerging energy-storage market that supplements and may ultimately threaten the traditional electric grid.

    “We are going to unveil the Tesla home battery, the consumer battery that would be for use in people’s houses or businesses fairly soon,” Chief Executive Officer Elon Musk said during an earnings conference call with analysts Wednesday.

    Combining solar panels with large, efficient batteries could allow some homeowners to avoid buying electricity from utilities. Morgan Stanley said last year that Tesla’s energy-storage product could be “disruptive” in the U.S. and in Europe as customers seek to avoid utility fees by going “off-grid.” Musk said the product unveiling would occur within the next month or two.

    “We have the design done, and it should start going into production in about six months or so,” Musk said. “It’s really great.”

    Tesla already offers residential energy-storage units to select customers through SolarCity Corp., the solar-power company that lists Musk as its chairman and biggest shareholder. Tesla’s Fremont, California, factory is also making larger stationary storage systems for businesses and utility clients. The Palo Alto, California-based automaker has installed a storage unit at its Tejon Ranch Supercharger station off Interstate 5 in Southern California and has several other commercial installations in the field.

    Utility Clients

    But the even larger market may be utility clients.

    “A lot of utilities are working in this space and we are talking to almost all of them,” Chief Technology Officer JB Straubel said on the earnings call Wednesday. “This is a business that is gaining an increasing amount of our attention.”

    California sees energy storage as a critical tool to better manage the electric grid, integrate a growing amount of solar and wind power, and reduce greenhouse gas emissions. Utilities like PG&E Corp. are now required to procure about 1.3 gigawatts of energy storage by 2020, enough to supply roughly 1 million homes.

    To contact the reporters on this story: Dana Hull in San Francisco at dhull12@bloomberg.net; Mark Chediak in San Francisco at mchediak@bloomberg.net

    To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net Terje Langeland

    U.S. Energy Boom’s Other Winner: Utilities Industrial Demand for Electricity Surges in Shale-Gas Counties as Plants Expand

    By REBECCA SMITH WSJ

    Dec. 12, 2014 7:33 p.m EST

    New or expanding manufacturing plants tied to the U.S. energy boom are increasing demand for electricity, reversing years of stagnant power use in the country, utility executives say.

    Leo Denault, chief executive of New Orleans-based Entergy Corp. , said his company is witnessing “a renaissance in the industrial South” as heavy manufacturing returns to take advantage of abundant U.S. fuel supplies that are bringing down prices for natural gas and electricity.

    For example, Big River Steel broke ground in September on a $1.3 billion steel mill in Osceola, Ark., that will melt scrap metal and make 1.6 million tons a year of flat-rolled steel using a massive electric furnace. The inexpensive electricity produced by Entergy’s Arkansas utility helped entice the company to locate on the Mississippi River site.

    “There are three things we need—power, power, power,” said Mark Bula, Big River’s chief commercial officer.

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    Entergy’s utilities serve Texas, Louisiana and Mississippi, in addition to Arkansas. Industrial demand for electricity jumped 5.3% from a year earlier during the company’s latest quarter, compared to a decline of 0.2% in residential sales and a slight 0.9% increase in commercial and government sales.

    Growing demand for power isn’t limited to the Gulf Coast. American Electric Power Co. , which owns utilities from Texas to Michigan, including several in Rust Belt areas, said eight of 10 industrial sectors it serves consumed more electricity in the third quarter than a year earlier.

    Industrial electricity sales in counties with shale-gas production jumped 28% in the third quarter when compared with the same period of last year, said Nick Akin, chief executive of Columbus, Ohio-based AEP. Gains were especially notable in Texas and Ohio, he said, lifted by energy production in the Eagle Ford and Utica Shale formations.

    Total industrial electricity sales rose 1.2% in AEP’s most recent quarter. That might seem staid, but utilities consider growth of 1% to 2% a year good because their customer bases are enormous.

    Mr. Akin said industrial spending leads to job creation and new-household formation, both of which stimulate power demand. He expects commercial and residential usage to grow too, though AEP hasn’t had a comparable uptick in electricity sales in those sectors yet. Because companies buy electricity in bulk, profit margins on industrial sales are roughly a third the size of margins on sales to residential customers.

    Industrial electricity sales began drifting lower for AEP in late 2008 and then dropped sharply during the 2009 recession. Power sales have grown between 2010 and 2014, but overall industrial-electricity sales are still 5% below pre-recession levels, the company said.

    The Energy Information Administration, the statistics arm of the Department of Energy, expects residential power sales to remain flat next year but thinks sales to commercial and industrial consumers will grow.

    Power sales to heavy industrial users have been a mixed bag for Exelon Corp. But the Chicago-based utility owner expects manufacturing employment will increase in most markets it serves next year, which should stimulate electricity sales.

    Citing IHS Economics research, Exelon says it expects manufacturing employment to rise 1.7% in 2015 in parts of Pennsylvania served by its PECO utility, reversing 14 years of declines. The research also projects manufacturing employment growth of 1.4% in parts of Illinois served by Commonwealth Edison, Exelon’s hicago utility.

    Southern Co. , which operates power utilities in four Southeastern states, said commercial and residential electricity sales fell during its latest quarter, compared to the prior-year period, but power sales to industrial consumers jumped 4.8%. The strongest growth came from industries that work with metals, stone, clay, glass, lumber and transportation; six of 10 industries moved back to pre-recession levels.

    Industrial power demand isn’t limited to heavy manufacturing. Tom Farrell, chief executive of Virginia-based Dominion Resources Inc., said his utility is selling a lot more electricity to data centers that are constantly expanding.

    “Half the nation’s Internet traffic runs through data centers in Virginia,” he said. “The biggest cost for them is the cost of electricity.”

    Write to Rebecca Smith at rebecca.smith@wsj.com