New Executive Order Targets Foreign-Produced Equipment Across the U.S. Bulk-Power System

The White House fact sheet frames the Order as a response to possible cyber backdoors, remote manipulation and supply disruptions at a time when data centers, artificial intelligence, advanced manufacturing and defense production are increasing dependence on reliable electricity. The Order and emergency declaration principally impact sourcing of bulk-power system electric equipment critical for the grid, such as transformers, grid-connected inverters, battery energy storage systems (ESS), generators, and associated critical software. The Order’s practical effect, however, will depend heavily on U.S. Department of Energy (DOE) determinations, rules, licenses, mitigation arrangements and any pre-qualified equipment or vendor list, including with respect to the scope of relevant equipment and covered foreign entities. 

How the Order Works

Prospective transactions. The Order prohibits an acquisition, importation, transfer or installation initiated after August 26 if the transaction involves property in which certain targeted foreign countries or nationals of such countries have an interest, including through an equipment contract, and DOE makes two further findings: (1) DOE must determine that the equipment—or an associated critical component, software, firmware, digital service, maintenance service or remote-access capability—was designed, developed, manufactured or supplied by a person owned by, controlled by or subject to the jurisdiction or direction of a Covered Foreign Entity (such as China, Russia, Iran, or North Korea); and (2) that the transaction presents one of the specified undue or unacceptable risks.

Existing equipment. For equipment acquired or installed before August 26, DOE may impose conditions on continued use, operation, maintenance, servicing or updating after making the same determinations. Available measures include identification, isolation, monitoring, securing, disconnection, replacement and removal of critical power equipment for grid infrastructure, such as generators, transformers, inverters, and BESS. Before requiring isolation, disconnection, replacement or removal, DOE must consider reliability and safety, the availability of secure replacements and continuity of essential service, and may phase compliance. The Order therefore creates installed-fleet exposure, but does not itself mandate immediate fleet-wide removal.

Implementation tools and timing. DOE may approve mitigation measures, license otherwise prohibited transactions and establish a pre-qualified equipment or vendor list, although qualification may later be revisited. DOE is directed to publish implementing rules or regulations as needed within 120 days—by December 24, 2026—and to identify high-risk equipment and recommend inventory, isolation, monitoring or replacement measures as soon as practicable. While the Order does not require DOE to wait until the 120-day deadline before acting, the full time is likely to be used given staffing constraints.

Federal procurement. Within 180 days—by February 22, 2027—DOE must recommend revisions to the Federal Acquisition Regulation (FAR) that account for energy-infrastructure security risks and prioritize U.S.-manufactured energy infrastructure. The FAR Council must then consider proposed amendments within 90 days after receiving DOE’s recommendations.

Scope Is Broader Than Traditional Grid Hardware
The Order defines the bulk-power system to include facilities and control systems necessary to operate an interconnected transmission network and generation needed to maintain electric-system reliability. It expressly includes transmission facilities rated 69 kV or above and excludes local distribution. Its threshold is lower than the 100 kV starting point commonly associated with the North American Electric Reliability Corporation (NERC) Bulk Electric System definition.

Covered equipment includes reactors; capacitors; substation transformers; utility-scale and other grid-connected inverters; battery energy storage systems (BESS); certain uninterruptible power supply (UPS) systems; large, small and backup generators; voltage regulators; reclosers; instrument transformers; protective relays; metering; high-voltage breakers; generation turbines; remote terminal units (RTUs); programmable logic controllers (PLCs); intelligent electronic devices; distributed control systems; and safety instrumented systems. Agencies may also consider software, firmware, remote-access capabilities, lifecycle maintenance and update mechanisms, and other supply-chain dependencies. “Foreign-produced” means not manufactured, produced or assembled in the United States, although as noted, functional restrictions will focus on Covered Foreign Entities, and not on allied supply chains. Equipment outside the listed categories or having broader uses unrelated to the Order’s national-security concerns is outside scope.

A Covered Foreign Entity includes a country—or a person owned by, controlled by or subject to the jurisdiction or direction of the government of a country—subject to an arms embargo or sanctions regime under ITAR section 126.1, as well as other countries or persons DOE may designate. The definition reaches China and other jurisdictions identified through the ITAR framework, but it is not limited to a static country or vendor list.

Key Risks by Stakeholder Group

Contracting and Diligence Implications

• Expand supplier diligence. Capture country of manufacture, production and assembly; ownership and control; critical subcomponents; software and firmware provenance; cloud and digital services; maintenance channels; remote access; update mechanisms; and service personnel. Existing sanctions, foreign-entity-of-concern (FEOC) or domestic-content diligence is useful but does not answer the Order’s distinct tests.
• Require traceability and continuing notice. Obtain vendor representations, bills of material, serial-level records and subcontractor flow-downs, together with audit rights and prompt notice of ownership, manufacturing, software, access or agency-status changes.
• Preserve substitution rights. EPC and supply agreements should permit rejection or replacement of affected equipment and establish approval, price, schedule, warranty and performance consequences for a DOE determination, license condition or loss of pre-qualified status.
• Allocate installed-equipment remediation. Specify who bears the cost and operational risk of monitoring, securing, isolating, disconnecting, replacing or removing equipment, including outage coordination, spares, testing, recommissioning, warranty restoration and access to vendor support.
• Protect project and financing schedules. Align change-in-law, force-majeure, delay, milestone, damages, termination and financing provisions across EPC, supply, interconnection, offtake and credit documents.
• Address utility and interconnection interfaces. Interconnection documents should assign responsibility for developer-, utility- and contractor-furnished equipment at the point of interconnection and for evolving utility, ISO/RTO or DOE requirements.

Salient Points

• This is not a blanket foreign-equipment ban. The transaction must involve foreign-produced equipment and satisfy DOE’s Covered Foreign Entity and national-security risk determinations. The Order nonetheless creates immediate commercial uncertainty because future determinations may address individual transactions or classes of transactions.
• Contract date may not settle grandfathering. The Order does not define when a transaction is “initiated” and states that prohibitions apply notwithstanding pre-existing contracts, licenses or permits. Parties should not assume that a signed purchase order conclusively protects a later importation, transfer or installation.
• Behind-the-meter is not a categorical exclusion. Local distribution facilities are excluded, and a behind-the-meter system without a sufficient bulk-power nexus may fall outside scope. Meter location alone is not dispositive, particularly for assets interconnected at transmission voltage, providing grid services or supporting critical infrastructure.
• Digital access can be outcome-determinative. A U.S.-assembled product may still present concerns through covered components, firmware, maintenance services, update channels or remote access; conversely, foreign production alone does not satisfy all elements of the prohibition.
• Installed equipment is exposed, but immediate rip-and-replace is not required. DOE must make the relevant findings and consider reliability, safety, secure-replacement availability and continuity before ordering the most disruptive remedies.
• Other reliability and cybersecurity regimes remain relevant. NERC CIP compliance, utility cybersecurity standards and other supply-chain controls may support risk mitigation, but they do not create an express safe harbor under the Order.

Pillsbury Perspective
The Order is best treated as a present supply-chain, contracting and asset-management issue, even though DOE has not yet published its implementation framework. The prudent near-term response is risk-based rather than a wholesale procurement freeze: Identify high-risk equipment and digital dependencies, verify supplier ownership and manufacturing facts, preserve qualified alternatives, and build a defensible installed-base inventory that can support rapid engagement with DOE, utilities and reliability coordinators.

Implementation of the proposal will also impact producers and importers of critical grid equipment, such as transformers, generators, and BESS. The Order may increase opportunity for allied supply chains and providers, including for some pre-existing infrastructure depending on DOE’s findings. Stakeholders should monitor their supply chain for imports of relevant equipment with respect to Covered Foreign Entities and the evolving regulatory regime.

Projects with long-lead transformers, turbines, inverters, batteries and control systems should review procurement and financing documents now, before equipment is imported, transferred or installed. Operators should prioritize equipment with remote connectivity, lifecycle vendor dependence or limited replacement availability. Early documentation and carefully aligned remedies will matter if DOE proceeds through class determinations, licensing conditions or a pre-qualified vendor regime.