Geopolitical Risks are Threatening the Power Grid

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There are many geopolitical risks that pose a major threat to the U.S. power grid.  While severe weather and cybersecurity remain the primary concerns, utility companies can no longer ignore the geopolitical threat.

Which Geopolitical Risks are Most Concerning?

China represents perhaps the biggest geopolitical issue as of the time of this writing.  The U.S. in general has become increasingly reliant on foreign-made electronic equipment and components, and China is one of the biggest suppliers of these items.  In fact, just about every component of the smart grid technology is dependent on Chinese-made components.

This presents a problem because Chinese cartels hold monopolistic power to control the supply of these items.  During times of heighted tension, one of the first things the Chinese government can do is reduce exports and basically cut off U.S. access to these critical components, which include items like high-powered magnets, circuit boards, wind turbines, solar cells, and lithium batteries to name just a few.

Adding fuel to the fire is that fact that the possibility of a direct China-U.S. conflict is not out of the question.  While opinions vary, there are plenty of military experts who believe this to be likely if not inevitable.

One way to diffuse the risk is to diversify sources of supply, but obviously this is easier said than done given the utility supply chain chokehold China has on certain electronic components.  But even beyond China, some critical infrastructure items like transformers are generally not produced in the U.S. – foreign-produced transformers can take months or even years to build, representing yet another supply chain risk.

Therefore, producing more critical infrastructure components in the U.S. is the only legitimate way to reduce the geopolitical risks.  The Inflation Reduction Act and CHIPS Act are partially structured to help reduce U.S. dependence on foreign supply chains for microchips and other electronical components.  This is definitely a step in the right direction, but there is little doubt that these risks aren’t going away anytime soon.