Executive Order 14420: Impacts on Energy Projects, Power Supply, and Data Centers

Executive Order 14420, "Declaring a National Emergency to Secure the United States Bulk-Power System" (EO or Order) invokes the International Emergency Economic Powers Act and authorizes the U.S. Department of Energy (DOE) to prohibit or condition certain transactions involving bulk-power system (BPS) electric equipment produced by persons associated with certain foreign countries. The Order also gives DOE authority to impose conditions on BPS equipment that is already installed and operating that was sourced from such countries. Consequently, the EO creates significant uncertainty for energy and data center developers trying to expedite project development and increases needed due diligence for procuring utility-scale inverters, battery energy storage systems (BESS), transformers, generation turbines, SCADA and remote terminal units, including software and cloud-based monitoring systems. A practical checklist for companies working through this uncertainty appears at the end of this Insight.

The EO increases scrutiny for BPS equipment that has a nexus with "Covered Foreign Entities." These entities are defined to include countries subject to U.S. arms embargoes under the International Traffic in Arms Regulations (ITAR) like China (including Hong Kong), Iran, Venezuela, and Russia, as well as entities owned or controlled by those jurisdictions, along with any additional countries or persons designated by the Secretary of Energy, affording a great amount of discretion to broaden the Order's coverage to newly "risky" entities.

DOE must issue implementing regulations within 120 days, by December 24, 2026. But this later regulation implementation date does not create a safe harbor now for BPS equipment transactions; the Order took effect upon issuance and applies to covered transactions initiated after August 26, 2026. DOE may make transaction-specific determinations before issuing generally applicable regulations. Additionally, the Order authorizes DOE to impose conditions on the continued use, operation, maintenance, etc. of foreign-produced BPS equipment acquired or installed before the date of the Order.

The most immediate consequence is uncertainty around procurement rather than widespread federal action to remove or replace operating BPS equipment. Project owners, suppliers, lenders, utilities, and contractors must decide how to proceed with equipment purchases before DOE confirms the countries, entities, products, and national security risks on which it will focus. The Order builds in important ways upon a 2020 directive, Executive Order 13920, that was suspended under the Biden Administration but the brief implementation of which may provide guidance. Executive Order 13920 was implemented through a December 2020 DOE prohibition order targeting high-risk grid equipment from foreign adversaries before being suspended for a broader supply chain review in 2021.

The Order Does Not Impose a Blanket Ban on Foreign BPS Electric Equipment

Executive Order 14420 does not categorically prohibit all foreign-produced BPS electric equipment. For DOE to prohibit an acquisition, importation, transfer, or installation "initiated" (which is a term undefined in the Order) after August 26, 2026, DOE must determine that:

1. The equipment, or an associated critical component, software, firmware, digital service, maintenance service, or remote-access capability, has the required connection to a "Covered Foreign Entity"; and
   
   
2. The transaction poses one of the risks specified in the Order, including an undue risk of sabotage, subversion, unauthorized access, malicious remote action, or supply disruption; catastrophic effects on critical infrastructure or the economy; or an unacceptable risk to national security or the safety of U.S. persons.

It is important that the Order does not refer to foreign origin for customs purposes to make a transaction prohibited—rather, the equipment must be foreign "designed, developed, manufactured, or supplied." But the Order does not identify particular manufacturers or products that may no longer be purchased, installed, or used. So, while both a listed risk and connection to a Covered Foreign Entity must be present, the Order does little to clarify what transactions are actually prohibited.

The immediate legal question is how DOE will exercise this authority before adopting implementing regulations. The immediate commercial question is different: whether the possibility of a future DOE determination warrants additional diligence, alternative sourcing, revised contract provisions, schedule contingencies, or delayed procurement.

The Order's Scope Reaches Electric Generation, Storage, and Related Digital Systems

The Order defines BPS to mean: (a) facilities and control systems necessary for operating an interconnected electric energy transmission network (or any portion of such a network); and (b) the electric energy from generation facilities needed to maintain electric system reliability. BPS equipment also includes transmission lines rated at 69 kV or more. Facilities used solely for local distribution of electric energy are expressly excluded from the BPS definition.

The BPS electric equipment definition is broad and expressly includes equipment used in BPS substations, control rooms, and generating stations, such as:

• power transformers and instrument transformers;
• large generators and generation turbines;
• utility-scale and other grid-connected inverters;
• battery energy storage systems;
• certain uninterruptible power supply systems supporting critical infrastructure;
• high-voltage circuit breakers;
• protective relays and metering equipment; and
• industrial control systems, including programmable logic controllers and remote terminal units.

The 69 kV threshold is not, by itself, a complete test. The Order is not clear as to whether the 69 kV threshold applies to infrastructure other than transmission lines (e.g., generation facilities). Moreover, the 69 kV threshold differs from the Bulk Electric System threshold of 100 kV used by the North American Electric Reliability Corporation to approve and enforce electric reliability standards, thereby creating regulatory tension among Federal agencies tasked with maintaining BPS reliability and security. Consequently, a project may contain generating-station, substation, control, storage, or digital equipment within the Order's definitions even if portions of the project operate below that voltage, while equipment used solely for local distribution is excluded. The transmission-distribution boundary may require a facility-specific analysis.

For utility-scale solar, wind, battery storage, and hybrid projects, the Order may affect not only the point-of-interconnection facilities but also inverters, transformers, storage systems, relays, metering, controls, and other equipment used at the generating station or associated substation.

Software and Service Dependencies May Be Harder To Evaluate Than Physical Equipment

The Order does not stop at the country in which a transformer, turbine, inverter, or battery system was produced. It also reaches critical components and software, firmware, digital services, maintenance services, and remote-access capabilities associated with BPS equipment.

For physical equipment, developers may be able to identify the manufacturer, producer, or country of assembly through existing procurement records. The digital inquiry may be considerably more complicated. Software may be developed, modified, hosted, updated, maintained, or remotely accessed by different entities operating in different jurisdictions. A product sold through a U.S. subsidiary may depend on code, technical support, cybersecurity services, cloud services, or lifecycle updates provided from elsewhere.

Diligence should therefore go beyond a vendor's headquarters and the nameplate on the principal equipment, and cover:

• ownership and country of manufacture, down to critical components;
• who develops, updates, and patches the software and firmware;
• who has remote access, and who provides maintenance, technical support, and data hosting; and
• whether foreign-supported functionality can be disabled, segregated, or replaced.

The Order Creates a Tension Between Security and Infrastructure Deployment

The policy objective of reducing the risk of foreign access to critical grid infrastructure is evident. The implementation challenge is that the Order arrives while the United States is seeking substantial expansion of electric generation, transmission, and utility infrastructure to serve advanced manufacturing, data centers, artificial intelligence, and defense production.

Restricting the pool of available equipment and suppliers could constrain or delay that infrastructure, particularly where transformers, turbines, batteries, and other major components already face limited supply or long procurement cycles.

None of this determines how DOE will implement the Order, but it illustrates why DOE's licensing, mitigation, exemption, and vendor-prequalification procedures may matter as much to project development as the underlying prohibitions in the Order.

Existing BPS Equipment Is Implicated by the Order, but Removal Is Not Automatic

The Order authorizes DOE to impose conditions on the continued use, operation, maintenance, servicing, or updating of certain foreign-manufactured or foreign-operated BPS electric equipment acquired or installed before August 26, 2026. Available measures could include monitoring, securing, isolating, disconnecting, replacing, or removing equipment.

That does not mean DOE has automatically prohibited the use of existing equipment or directed its removal or replacement. Before requiring isolation, disconnection, removal, or replacement, DOE must consider reliability, safety, the availability of secure replacement equipment, and the continuity of essential service. DOE may also establish phased compliance over time.

The Order nevertheless leaves DOE substantial discretion to decide:

• which installed equipment it will review;
• which suppliers, technologies, or risks it will prioritize;
• how it will determine that an undue or unacceptable risk exists;
• the evidence and process used to make that determination;
• what conditions it will impose; and
• whether an initial review of selected equipment may expand into broader monitoring or replacement requirements.

Operating projects should therefore prepare for the possibility of information requests, inventories, mitigation requirements, or equipment-specific review, but not assume that widespread physical removal or replacement of existing BPS equipment is imminent.

Implications for Individual Project Types

Renewable generation

Solar and wind developers should review grid-connected inverters, transformers, generating-station controls, relays, metering, software, and remote support. Projects approaching equipment procurement or notice to proceed may face difficult decisions if their preferred vendors have potential Covered Foreign Entity connections.

Battery energy storage systems

The express inclusion of battery energy storage systems makes BESS projects particularly important to assess. Developers should evaluate both battery-cell sourcing and the broader system components, including power-conversion systems, energy-management software, firmware, controls, communications, and vendor access.

Transmission and substation projects

Transmission developers and utilities may face exposure across transformers, circuit breakers, protection systems, control-room equipment, and industrial controls. The effect of any supplier restriction may be magnified by existing procurement lead times and the difficulty of substituting equipment after design or interconnection requirements have been established.

Data center power infrastructure

Data center development may be affected indirectly by limitations on the utility generation, transmission, and substation equipment needed to energize new campuses. Certain data-center BESS, inverters, controls, Uninterruptible Power Supply (UPS) systems supporting critical infrastructure may also raise direct questions under the Order.

The DWT data center team has separately identified power-supply delays, substation-transformer procurement, UPS coverage, BESS sourcing, and the potential role of vendor prequalification as issues requiring attention.

Checklist for Companies

Developers, utilities, project owners, and major equipment purchasers can use the following checklist to work through near-term exposure while DOE's rules are pending. Each item identifies an action, the internal owner is typically a mix of project development, procurement, legal, as well as finance, and the work can begin now.

1. Identify exposed transactions. Determine which acquisitions, imports, transfers, or installations were or will be initiated after August 26, 2026.


2. Map the full supply chain. Review manufacturers, producers, ownership, countries of manufacture, critical components, software, firmware, maintenance providers, digital services, and remote-access capabilities.


3. Prioritize long-lead equipment. Focus first on transformers, turbines, inverters, BESS, UPS systems, breakers, relays, metering, and industrial controls that could affect the critical path.


4. Review existing equipment. Create an accessible inventory of potentially covered operating equipment, associated digital dependencies, available mitigation measures, and potential replacement options.


5. Revisit contract allocation. Review equipment supply; engineering, procurement, and construction (EPC); interconnection; and operations and maintenance (O&M) agreements for compliance representations, change-in-law provisions, termination and substitution rights, force majeure treatment, schedule relief, and allocation of replacement and delay costs.


6. Address new contracts expressly. Consider provisions dealing specifically with DOE prohibitions, licensing delays, mitigation requirements, loss of vendor qualification, required redesign, and responsibility for increased costs.


7. Coordinate with utilities. Determine who selects equipment for substations and interconnection facilities, what vendor diligence the utility is performing, and who bears the consequences of required changes.


8. Evaluate financing implications. Consider whether restrictions on critical equipment could affect completion deadlines, funding conditions, project representations, material contracts, reserves, or required disclosures.


9. Preserve the diligence record. Document information requested from suppliers, responses received, alternatives evaluated, and the basis for procurement decisions made during the interim period.


10. Monitor DOE implementation. Track regulations, transaction-specific orders, licensing and mitigation procedures, and any equipment or vendor-prequalification program.

Looking Ahead

Executive Order 14420 is not merely a cybersecurity directive or a restriction affecting traditional transmission utilities. Its broad equipment and sourcing definitions, treatment of digital and lifecycle services, application to transactions initiated after August 26, 2026, and potential reach into existing infrastructure make it a project-development, procurement, contracting, and financing concern.

The significant near-term challenge is that energy infrastructure decisions cannot stop for 120 days while DOE develops its rules. Projects must continue to address equipment lead times, interconnection schedules, financing commitments, and growing demand. DOE's implementation will determine whether the Order creates a manageable diligence and mitigation regime or materially constrains infrastructure deployment.

Until that framework becomes clearer, developers can reduce risk by identifying supply-chain dependencies, preserving sourcing flexibility, revisiting contractual allocation, and making deliberate decisions about which transactions can proceed under present uncertainty.

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Nick Giannasca is a partner in our Washington, D.C., office and a member of our energy, natural resources & environmental practice group. Elaine Albrich is a partner in our Portland office and co-chair of the energy, natural resources & environmental practice group. Wendy Kearns is partner-in-charge of DWT's Seattle office and co-leader of the firm's technology industry group. For any questions, please contact the authors or another member of our energy, natural resources & environmental and technology teams. To stay informed, sign up for our alerts.