Trump signed an executive order banning foreign grid equipment, and local producers of US power equipment ushered in favorable policies

The Zhitong Finance App learned that US President Trump signed Executive Order No. 14420 on Wednesday (August 26) declaring a state of emergency, prohibiting the US from procuring, importing, or installing some large-scale foreign-made power system equipment and related software that may pose a cybersecurity or operational risk on national security grounds. Among them, key energy equipment such as transformers is the core target of this ban.

The core of the ban: locking down high-voltage transmission systems, covering substations, energy storage systems and industrial control

The White House clearly stated in its factsheet that the executive order aims to protect the safety, integrity, and reliability of equipment used in America's large-scale power systems (bulk-power systems), particularly to prevent interference from foreign actors. Citing the International Emergency Economic Powers Act (IEEPA) and the National Emergency Act, the order determined that problems with the supply of electrical equipment to large foreign power systems posed an “unusual and extreme threat” to US national security, foreign policy, and economy.

According to the White House factsheet, the ban mainly targets high-voltage transmission systems and does not apply to local distribution facilities. A wide range of equipment was affected, including substation transformers, large generators, industrial control systems, battery energy storage systems, and related critical software and digital functions. The executive order also specifically states that foreign-made devices may include “digital backdoors” to enable foreign governments to remotely access US grid equipment.

The Minister of Energy has the power to request the identification, isolation, monitoring, disconnection, replacement or removal of foreign equipment that has already been installed. The executive order also instructs the Ministry of Energy to formulate supporting implementation rules within 120 days and establish “pre-qualified equipment and suppliers” standards to promote a shift in future procurement to a credible supply chain.

Grid safety becomes a new focus in the AI era: the geopolitical game behind the executive order

This emergency executive order is a continuation of the Trump administration's series of supply chain security measures in recent years. The proliferation of artificial intelligence data centers and other high-tech projects has made the US more dependent on a stable electricity supply than ever before. The White House said that the rapid growth in advanced manufacturing, artificial intelligence, and defense production has increased America's dependence on certain foreign components.

Trump clearly stated in his previous executive order that protecting national security is his “supreme duty,” and determined that the supply of large-scale foreign power system equipment poses an “unusual and extreme threat.”

Notably, the European Commission also decided earlier this year to ban the use of inverters made in China in publicly funded energy projects. Reuters reported last year that when inspecting equipment connected to the power grid, American experts discovered abnormal communication equipment not included in product technical documentation in some Chinese solar inverters.

According to International Energy Agency (IEA) data, China accounts for about 80% of the world's battery and solar inverter manufacturing capacity. A 2020 US Department of Commerce survey found that in the past ten years, the US has imported a large number of large-scale power transformers made in China.

Local manufacturers welcome significant benefits: SolarEdge, Enphase, and Tesla are the focus of the market

Analysts pointed out that this move will reshape the US energy equipment supply chain pattern in the medium to long term and create significant market opportunities for local US electrical equipment manufacturers.

The analysis indicates that the current US power emergency executive order may drive up power grid investment costs in the short term, but in the medium to long term, it will reshape the supply chain map and open up new business opportunities for local manufacturers such as SolarEdge Technologies (SEDG.US), Enphase Energy (ENPH.US), and Tesla (TSLA.US). The US inverter market has previously received attention due to the government's proposed ban.

Experts pointed out that the executive order requires the Department of Energy and the Federal Procurement Regulatory Commission to revise procurement regulations to prioritize procurement of energy infrastructure manufactured in the United States. This policy orientation means that in the field of equipment such as transformers, large generators, industrial control systems, and battery energy storage systems related to high-voltage transmission systems, local manufacturers in the US will experience an increase in structural demand over the next few years.

SolarEdge Technologies and Enphase Energy: As leading manufacturers of inverters and power electronics products in the US, they are seen as the core targets to fill the gap in foreign products and meet the explosion of local demand.

Tesla: Tesla not only has the ability to manufacture large-scale battery energy storage systems such as Megapack, but also has advantages in energy software and integration, making it a key participant in building a new “safe, reliable, and localized” power grid.