Data Center Energy Procurement: New Grid Equipment Executive Order Explained
On August 26, 2026, President Trump signed an executive order declaring a national emergency over foreign-sourced equipment used on the U.S. bulk-power system, invoking authority under the International Emergency Economic Powers Act and the National Emergencies Act. The order responds to concerns that certain countries could embed vulnerabilities, including malware, into grid equipment such as transformers, generators, turbines, circuit breakers, protective relaying systems, and industrial control systems, and it arrives explicitly tied to the surge in electricity demand driven by artificial intelligence and data center growth. For any party involved in data center development or the energy infrastructure that supports it, the order introduces a new layer of federal review sitting directly on top of already-tight equipment lead times and interconnection timelines.
The order prohibits the acquisition, importation, transfer, or installation of bulk-power system electric equipment where a "Covered Foreign Entity" has design, manufacturing, or supply chain involvement, and where the Secretary of Energy determines the transaction poses a risk of sabotage or catastrophic effects to U.S. infrastructure. It applies specifically to equipment used in bulk-power system substations, control rooms, and generating stations, and it expressly excludes local distribution facilities, meaning the practical reach depends heavily on where a given piece of equipment sits within a project's electrical architecture. The order is both forward- and backward-looking: it restricts transactions initiated after August 26, 2026, but also authorizes the Secretary of Energy to impose conditions on equipment that was already installed before that date. The Department of Energy has 120 days to issue implementing rules defining scope and procedure, and 180 days to recommend Federal Acquisition Regulation revisions prioritizing domestically manufactured energy infrastructure in federal procurement.
This order follows the January 2025 National Energy Emergency declaration and a companion grid reliability order that directed the Department of Energy to use Federal Power Act Section 202(c) emergency authority to keep at-risk generation facilities online. Under that authority, the Department of Energy has repeatedly issued short-term orders, typically for 90-day periods, requiring specific coal and gas plants in several states to delay planned retirement, and some of those orders are currently being challenged in federal court. The new order also closely mirrors a 2020 executive order addressing bulk-power system equipment, which was issued and then later revoked, and which used similar definitions and scope.
One of the most significant open questions is definitional. The order does not yet include a published list identifying which countries or entities will qualify as a "Covered Foreign Entity," and that determination will be central to how the restriction applies to any specific transaction. While the order states that such an entity is one tied to embargo or sanctions restrictions, the order also gives the DOE the authority to name countries as Covered Foreign Entities specifically for the purposes of the order. Until the Department of Energy issues its implementing rules, parties evaluating a pending or planned equipment purchase, import, or installation cannot fully determine whether a given transaction falls within scope. This uncertainty could extend to equipment already incorporated into projects currently under construction or already energized, given the order's backward-looking authority over previously installed equipment.
The Department of Energy's forthcoming implementing rules, expected within 120 days of the order, will determine most of the practical detail currently missing, including the definition of Covered Foreign Entity, the review and determination process for specific transactions, and how the backward-looking authority over already-installed equipment will actually be exercised. Parties with pending procurement decisions, financing closings, or construction milestones tied to equipment delivery in the coming months should track this rulemaking closely, as the scope and timeline of DOE's implementation may affect project sequencing.
This post is for general informational purposes only and does not constitute legal advice. For help with your energy procurement needs, contact Elkhoury Law today.
