The White House issued an executive order on Thursday imposing restrictions on bulk-power electrical equipment produced by certain foreign entities, declaring a national emergency around the supply of such equipment to the U.S. power grid.
Under the order, the Administration may prohibit the import or installation of equipment or software designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a "Covered Foreign Entity" if it poses an undue risk to grid integrity or national security. The restrictions apply to equipment rated at 69 kilovolts or above, focusing on components essential to interconnected energy systems rather than local distribution networks.
Covered product categories include transformers, inverters, uninterruptible power supplies, high-voltage circuit breakers, generators, generation turbines, battery energy storage systems, and control systems such as programmable logic controllers. The order follows broader concerns over supply chain vulnerabilities in critical infrastructure.
Citi analysts noted the restrictions appear aimed at Chinese suppliers, a view supported by the order's framing. They highlighted that constraints on Chinese suppliers entering or expanding in the U.S. market could help other players defend market share and support pricing power. Historically, the U.S. market's tightness had attracted Asian suppliers, including Chinese firms, due to their ability to deliver equipment relatively quickly.
Siemens Energy was identified by Citi as the firm most relevant to the restrictions, with analysts viewing the order as a moderate net positive for the company. The firm relies on imports to meet U.S. transformer demand, though its new U.S. factory in Charlotte is not expected to begin large transformer deliveries until late 2027. Citi also noted that China has not been a significant sourcing hub for transformers to date.
Analysts further suggested the restrictions could benefit Wartsila’s Storage joint venture by limiting competition from Chinese battery energy storage system suppliers. The order takes effect immediately, with implementation details to be outlined in subsequent regulatory guidance.
