Add another layer of complexity to the multi-dimensional challenge of fortifying and retooling the nation’s electrical grid.

An executive order (EO) from the White House issued Aug. 26 puts the U.S. Department of Energy (DOE) on a path to start assessing and preventing critical security risks to the grid, a process that could lead to new, potentially disruptive rules governing how the grid will be maintained, expanded and modernized going forward.

The order, framed as a response to a “national emergency,” aims to insulate the nation’s bulk-power system from “interference from (certain) foreign actors” that could jeopardize the nation’s security, economy, and well-being.

Identified risks linked to a broad spectrum of non-domestic sourcing activities involving specific “covered foreign entities” range from component supply chain disruption and engineered vulnerabilities to software-linked cybersecurity and operational integrity and reliability impacts.

A White House fact sheet says the order “focuses on transactions involving foreign nationals that pose an undue risk of sabotage, unauthorized access, or other disruption, an undue risk of catastrophic effects on the security or resiliency of U.S. critical infrastructure, or an unacceptable risk to the security of the U.S.”

Effective with its signing, the order generally prohibits the byproduct of any transaction with a “covered foreign entity” — generally those subject to arms embargoes such as China, Russia, Iran, and North Korea — from being utilized in the bulk power system if it is found to present an undue or unacceptable risk that had been expressly identified.

It also imposes strict conditions on the use of the same acquired or installed prior to Aug. 26. Those could include identification, monitoring, isolation, securing, and disconnecting to address possible security risks.

In advance of publishing rules, the DOE is now soliciting input through Oct. 9 to help guide it on crafting a workable order. The agency will consider comments collected through the formal Request for Information to draw up implementing rules and regulations and publish them by Dec. 24.

The DOE then has less than 60 days to recommend revisions to the Federal Acquisition Regulation Council addressing concerns laid out in the order. The FAR Council will then have 90 days to formally begin consideration of the proposed amendments.

For entities engaged in the U.S. grid transformation process, the order tees up more concerns related to sourcing essential components. Shortages, shipment delays, and rising costs are already affecting acquisition of products like transformers, battery energy storage systems, inverters, generators, and cable, much of which is now sourced in whole or part from other countries, including those that may be targeted by the order.

Cutting off that trade in any way and trying to shift more reliance to either other foreign suppliers or to domestic production, which is idealized in the order but is taking time to ramp up, could make the growing supply chain issue more acute.

Interested analysts, consultants, and industry groups have been quick to weigh in on the order’s possible implications.

A brief prepared by Pillsbury Winthrop Shaw Pittman LLP, a energy infrastructure legal specialist, advises potentially affected parties to start examining their sourcing relationships.  

“Developers, utilities, operators, OEMs, EPC contractors, lenders and investors should begin supply-chain and installed-base mapping now and revise project documents to allocate compliance, delay, substitution and remediation risk,” the firm’s Aug. 28 alert stated, adding that “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.” Special attention, it added, “should be given to equipment with remote connectivity, lifecycle vendor dependence or limited replacement availability.”

Further insight came from a recent webinar sponsored by the energy security advocacy group, Securing America’s Energy Future (SAEF). Representatives from National Electrical Manufacturers Association (NEMA) and the Transformer Manufacturing Association of America joined SAEF’s Danielle Russo in concluding that the order, while important from a national security perspective, is likely to pose practical challenges.

Bridget Bartol, NEMA’s executive director for the grid, said the focus on the grid security issue comes at a time NEMA member companies are scrambling to meet the rapidly growing and changing equipment demands of a more sophisticated power generation, transmission, and distribution system. That pressure has forced suppliers to expand the sourcing lens while also recognizing the desirability of increasing domestic supply.

“We’re in supercycle of demand” for equipment needed to ensure the “security, reliability, and safety” of the grid,” Bartol says. “The electrical transmission and distribution system is getting more dynamic and as we move ahead we see an opportunity to bring more production of what is needed to the U.S. We look forward to working with DOE to make the most of this moment of increased domestic manufacturing and navigating this new future heavily dependent on electricity.”

Joe Donovan, executive director of the transformer organization, praised the order’s focus on security and encouraging more domestic production of the critical infrastructure component. But the domestic industry has been slow to ramp up, hampered not just by competition from an established overseas industry but sourcing challenges for essential raw materials for transformer manufacturing.

“There are substantial pricing constraints in addition to the capital cost of building out an expansion of existing domestic manufacturing and new greenfield construction,” he says, noting the challenge of shifting from a government policy environment that supported offshoring to one that prioritizes domestic production.

Given the variety of inputs needed to build transformers, new DOE rules on overseas sourcing could end up complicating any movement toward more domestic transformer manufacturing, Donovan adds. That’s just one part of the many unknowns that now exist with respect to the order, one he describes as “massive in scope, vague, and challenging to digest” at the outset.

“It will be important to ensure that there are secure replacements,” he says. “If there are new chokepoints to access in the name of security and no secure replacement we’re just moving risk around. If we get the right policies in place we’ll see more domestic procurement and more supply chains feeding that. If we get it wrong how much more a hole will we be in five years down the line?”