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Discussion

Sam Dewinski:

On August 26, 2026, President Trump signed Executive Order 14420. It declares a national emergency concerning foreign-supplied equipment used in the bulk-power system—the high-voltage infrastructure that moves electricity from generating stations through major substations and control facilities. The order gives the Department of Energy, or DOE, authority to prohibit or condition transactions involving equipment connected to designated Covered Foreign Entities when that equipment presents specified national-security or resilience risks.

Red Velhouse:

So when people hear that the order is banning foreign equipment, what should they understand—and what should they not assume?

Ann Tofado:

They should not assume there is an immediate ban on every transformer, inverter, or battery made outside the United States. The order creates authority and a framework. DOE still has to identify the relevant entities, equipment, transactions, and risks. The practical rules—lists, exemptions, certifications, waivers, and transition periods—will determine how broad the restrictions become.

Kate Burvish:

And that distinction is important for anyone buying grid equipment. “Foreign-produced” is defined broadly as equipment not manufactured, produced, or assembled in the United States. But the restrictions depend on a connection to a Covered Foreign Entity or covered foreign interest. A utility cannot answer the question simply by checking the shipping label. It may need to trace ownership, software, firmware, remote access, maintenance, and updates through a multinational supply chain.

Red Velhouse:

Let’s unpack that supply chain. What equipment is covered, and why does software belong in an order that sounds as though it is about physical machinery?

Sam Dewinski:

The order covers large transformers, circuit breakers, protective relays, metering equipment, generators, turbines, industrial-control systems, grid-connected inverters, and battery-storage systems used in bulk-power applications. It excludes ordinary local electric-distribution equipment and items outside those listed uses. Historically, grid security was discussed mainly as a question of physical hardware. This order reflects a newer reality: a device may be installed in the United States while its software, updates, diagnostic tools, or vendor access remain elsewhere.

Ann Tofado:

That broader definition also gives the administration political room to frame this as more than a restriction on Chinese solar equipment. China is an obvious target in the wider technology competition, but the order is not textually limited to China. A Covered Foreign Entity can include a country or person under an arms embargo or sanctions regime, or an entity DOE determines is acting against U.S. national security or foreign policy. That flexibility may help the administration respond to different risks, but it also creates uncertainty for allies and multinational manufacturers.

Red Velhouse:

Sam, this sounds familiar. The United States had a bulk-power order in 2020. What did that earlier experience teach policymakers?

Sam Dewinski:

The immediate precedent is Executive Order 13920, which President Trump signed on May 1, 2020. It also declared an emergency over foreign-adversary risks to the bulk-power system and authorized restrictions on risky transactions. In December 2020, the Energy Department issued a narrower prohibition focused on specified Chinese equipment serving critical defense facilities. The Biden administration suspended the 2020 executive order in January 2021, and DOE revoked that prohibition in April. The lesson is that announcing authority is not the same as creating a durable operating regime.

Red Velhouse:

And what is the current order trying to do differently?

Sam Dewinski:

It speaks more explicitly to batteries, inverter-based resources, firmware, remote access, lifecycle servicing, and software updates. It also arrives alongside a broader reliability and industrial-policy campaign, including a 2025 grid-security order, a 2026 Defense Production Act determination, and efforts to expand domestic transformer production. So this is not simply a repeat of the earlier China-focused procurement action. It connects national security and industrial capacity to a period when electricity demand is also rising.

Kate Burvish:

That connection is where the economic trade-off becomes difficult. DOE reported that more than 80 percent of U.S. demand for transformers rated above 60 megavolt-amperes—a measure of electrical capacity—was imported in 2019. Lead times have also worsened: distribution transformers went from roughly three-to-six months in 2019 to one-to-two years or longer in 2024, while large transformers can take three-to-four years. If the supplier pool narrows before domestic factories are ready, grid upgrades, data-center connections, renewable projects, and battery installations could be delayed.

Red Velhouse:

So the policy may reduce dependence over time, but make expansion harder in the meantime. Is that a fair summary?

Kate Burvish:

Yes, with an important qualification: domestic production could reduce geopolitical exposure, create manufacturing jobs, and improve availability over time, but reshoring is not automatically cheaper or faster. DOE has announced a program of up to 375 million dollars for domestic distribution and power transformers and related components. Large transformers are custom-designed, expensive, difficult to transport, and can cost up to about 10 million dollars each. Utilities and consumers may bear higher costs unless federal support, standardization, and larger production volumes offset them.

Ann Tofado:

And politically, that is the central tension. The administration can argue that it is addressing a strategic vulnerability before an attack occurs. Its threshold is unacceptable risk, not proof that a particular supplier has already sabotaged the grid. But utilities and project developers experience the policy through prices, delivery schedules, and approval uncertainty. If the government cannot explain which vendors are covered or what happens to equipment already installed, critics can portray prevention as disruption.

Red Velhouse:

That raises the evidence question. Officials have warned about undocumented communications capabilities in Chinese inverters and batteries. What has actually been demonstrated?

Ann Tofado:

A DOE assessment reported in February 2026 found no definitive evidence of intentionally introduced malicious wireless functionality in the roughly 30 inverters it examined. Two documentation discrepancies were reportedly characterized as non-malicious and non-intentional. That does not eliminate the security concern: undocumented capabilities, remote access, or opaque update systems can create risk without proving deliberate tampering. But politically, the distinction matters. The administration is arguing that capability and dependence can be dangerous even when an attack has not been proven.

Sam Dewinski:

That distinction also helps explain why the 2020 analogy has limits. The earlier experience shows how sweeping restrictions can run into questions about existing contracts, agency authority, and implementation. But today’s grid is facing rising demand from data centers and manufacturing, aging infrastructure, and a larger role for inverter-based solar, wind, and storage. The challenge is not merely excluding one supplier. It is securing a system that must expand quickly while its supply chains remain global.

Red Velhouse:

Could technical safeguards address some of those risks more precisely than broad country-of-origin rules?

Kate Burvish:

They could reduce risk more selectively. Utilities might require transparent bills of materials, secure firmware, domestic servicing options, segmented networks, and contractual limits on remote access. That could preserve more suppliers and reduce costs. But these are continuing obligations, not a one-time certification. A secure installation can become less secure through a later software update or service arrangement, so safeguards require ongoing auditing and enforcement.

Ann Tofado:

Country-of-origin rules nevertheless have a political appeal that technical standards lack. They are easier to communicate: trusted supply chains, less dependence on strategic rivals, and more American production. They also give the executive branch leverage with vendors and allies. The risk is overreach. If “foreign-produced” expands into a broad domestic-content regime, allied suppliers—and U.S. companies using international components—could face the same uncertainty as firms from adversarial states.

Red Velhouse:

Let’s turn to equipment that is already operating. The order does not require an immediate nationwide replacement, but it appears to allow restrictions on continued use and servicing. What could that mean in practice?

Kate Burvish:

It could become a major cost issue if DOE later requires monitoring, disabling, replacement, or limits on vendor servicing. Existing grid equipment is not interchangeable like ordinary consumer electronics. A large transformer can take years to replace, cost millions of dollars, and require specialized transportation. Even a mitigation step—such as removing remote access or changing maintenance arrangements—could involve engineering work and outages. The order itself does not mandate immediate removal, so the scale remains unknown.

Sam Dewinski:

That is another lesson from 2020. A policy can begin with urgent security language and then encounter practical questions about installed equipment and agency authority. The durable version will likely be the one that distinguishes genuinely high-risk equipment from lower-risk foreign components while giving operators enough time to adapt.

Red Velhouse:

What should we watch next to judge whether this is becoming an effective security policy rather than just a broad mandate?

Ann Tofado:

Watch DOE’s implementing rules and designations: which countries, companies, ownership structures, product models, and software services are covered. Watch whether allies receive clear safe harbors or are drawn into wider domestic-content requirements. And watch Congress, utilities, manufacturers, and possibly the courts if the rules affect existing equipment or major contracts. The administration will want visible action; the institutions responsible for reliability will demand workable definitions.

Kate Burvish:

I would add measurable outcomes. Are domestic factories increasing transformer and component supply? Are lead times falling, or are projects being delayed? Are costs being absorbed by federal support, utilities, developers, or ratepayers? Fewer imports alone would not prove success. The stronger test is whether the grid becomes more auditable and resilient without making power expansion materially slower or more expensive.

Red Velhouse:

The unresolved issue is how to convert a broad national-security mandate into rules that identify real supply-chain risks without treating every foreign-made component as equally dangerous—or making an already-constrained grid harder to build. Watch DOE’s vendor and equipment designations, the treatment of installed systems and allied suppliers, the size and speed of domestic manufacturing investment, and the effect on transformer lead times, project costs, and grid reliability. Sources and references for this discussion are available with the episode at Factolio.com.

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Sources and References

These sources supported the factual material used in this discussion. Factolio’s panel discussion is AI-generated from researched evidence and is written in original language.

1. The White House — Declaring a National Emergency to Secure the United States Bulk-Power System (PRIMARY)
2. The White House — Fact Sheet: President Donald J. Trump Declares a National Emergency to Secure America’s Bulk-Power System (PRIMARY)
3. Reuters — Trump signs order banning some foreign equipment from US energy grid (NEWS)
4. The White House — Fact Sheet: President Donald J. Trump Strengthens the Reliability and Security of the United States Electric Grid (PRIMARY)
5. The White House — Presidential Determination on Grid Infrastructure, Equipment, and Supply Chain Capacity (PRIMARY)
6. U.S. Department of Energy — Strengthening America’s Grid Supply Chain (PRIMARY)
7. Reuters — US probe finds no evidence of spyware in Chinese power inverters (NEWS)
8. pv magazine — U.S. authorities find no definitive evidence of hidden devices in Chinese solar inverters (NEWS)
9. National Renewable Energy Laboratory — Critical Energy: Supply Chain Attacks—Clearing Up Misconceptions (PRIMARY)
10. U.S. Department of Energy — Large Power Transformer Resilience Report to Congress (PRIMARY)
11. U.S. Government Accountability Office — Electricity Grid: DOE Could Better Support Industry Efforts to Ensure Adequate Transformer Reserves (PRIMARY)
12. U.S. Department of Energy — Supply Chain and Market Analysis (PRIMARY)
13. U.S. Department of Energy — Distribution Transformer Webinar Text Alternative (PRIMARY)
14. Federal Energy Regulatory Commission — FERC Takes Action to Enhance Reliability of the U.S. Electric Grid (PRIMARY)
15. North American Electric Reliability Corporation — Reliability and Security Technical Committee Strategic Plan 2026 (PRIMARY)