On Thursday, the White House issued an order introducing restrictions on certain types of foreign electrical equipment for power grids. The order declares a national emergency regime due to foreign supplies of electrical equipment for backbone power systems.
The Administration is now empowered to prohibit the import or installation of equipment and software developed, manufactured, or supplied by persons under the control or jurisdiction of so-called “foreign entities of concern” if doing so creates an unreasonable risk to the integrity of the power grid or the security of the United States.
The concept of a backbone power transmission system covers equipment with a rated voltage of 69 kV and above and extends to the components required to operate the interconnected power grid, rather than local distribution networks. The list of regulated product categories includes transformers, inverters, uninterruptible power supplies, and other high-voltage electrical equipment—including automatic circuit breakers—as well as generators and turbines, battery energy storage systems, and control systems, including programmable logic controllers.
Citi analysts believe that the order is effectively aimed at Chinese suppliers. In the bank’s view, the restrictions affect Siemens Energy the most, and overall the order is seen as a moderately positive factor for the company.
Restrictions on Chinese suppliers in the U.S. market should help other players protect their market share and raise prices, Citi notes. A supply shortage in the U.S. market attracted Asian players, including Chinese companies—particularly due to their ability to deliver relatively quickly.
Siemens Energy relies on imports to meet demand for transformers in the U.S. and, judging by the outlook, will be able to supply large transformers from its new U.S. plant in Charlotte no earlier than the end of 2027. Brazil and Mexico are among the company’s most important manufacturing bases, while China has so far not been a significant source of transformer supplies.
The introduced restrictions may also help improve the profitability of Wärtsilä’s joint venture in the energy storage sector—taking into account the curbing of Chinese suppliers of battery system solutions, Citi indicates.