U.S. to Prioritize Power Grid Supply Chain in Defense

On April 20th, the United States officially issued a presidential order, invoking Section 303 of the Defense Production Act (DPA), to designate electric grid infrastructure, critical equipment, and supply chain capacity as priority areas for national defense. The document clearly states that the design, manufacturing, and deployment capabilities of the U.S. power grid are severely inadequate and pose a threat to the national economy and security. Transformers, high-voltage transmission components, advanced conductors, power electronic devices, and electrical steel have been officially classified as critical materials for national defense.

This move is not a coincidence. The latest research from Citrini Research emphasizes that electricity is the most explicit intersection of AI and financial dominance as the two major decadal themes, and this policy implementation is a concentrated reflection of this core logic.

Continued worsening of power grid supply and demand, with bottlenecks becoming fully apparent

Even after years of capacity increases, the backlog of orders for the U.S. power grid is still accelerating. In the first quarter of 2026, the order backlog of the electrification segment at GE Vernova has approached the incremental level of the entire period from 2022 to 2025. Its order volume has soared from $9 billion in 2022 to $50 billion in the first quarter of 2026, with the gap continuing to widen rather than easing.

Transformers represent the sharpest bottleneck across the entire chain. The United States, previously highly dependent on Chinese supplies, has now turned to friendly region suppliers, with relevant manufacturers witnessing record orders and announcing expansions in the U.S. The four largest South Korean transformer companies have become marginal suppliers in the U.S. market, with a combined backlog of $23.9 billion as of the third quarter of 2025, equivalent to 5-6 years of workload.

Looking at the delivery cycle, the imbalance between supply and demand has become extremely severe: distribution transformers have a lead time of 13 months, 4.3 times the historical level; large power transformers take 42 months; and ultra-high voltage transformers extend up to 60 months, generally 2-4 times longer than before.

Three major effects of the new DPA policy: priority, funding, and long-term framework

The significance of this DPA determination goes beyond the short-term financial volume. Although the available funds for fiscal year 2026 are only about $323 million, the policy will bring about three key impacts:

First, it grants power grid equipment the highest production and delivery priority, prioritizing power grid projects and shortening the delivery time at the grid end;

Second, it uses federal funds to leverage social capital, protecting domestic manufacturers from being disrupted by low-cost external capacities;

Third, it shifts electric grid infrastructure from climate policy to a national security framework, significantly enhancing sustainability across party lines and administrations.

The shift in policy positioning ensures that grid investment is no longer affected by changes in administration and policy orientation, becoming a long-term certain track.

Core benefits are concentrated in the segments垄断 materials, transformers, and EPC, which are the most elastic

The benefits are highly concentrated in segments with supply rigidity and difficulty in rapid expansion:

1. Electrical Steel (GOES): Only Cleveland-Cliffs (CLF) in the United States has the capability for mass production and has exclusive production capacity for high magnetic permeability products. The DPA clearly classifies electrical steel as a critical material for national defense, coupled with a 50% high tariff, continuously strengthening its monopolistic position.

2. Power grid equipment leader: GE Vernova (GEV) has a substantial order backlog; Eaton (ETN) benefits from platformization; Hubbell (HUBB) dominates in the field of distribution transformers; the four Korean companies rely on U.S. domestic production capacity to continue capturing market share.

3. Underestimated supporting and engineering segments: Worthington Steel (WS), which is engaged in precision processing of electrical steel, directly benefits from the front programming, and the market has not yet adequately priced it; Quanta Services (PWR), as a leader in power grid EPC, is constrained by the long-term shortage of line construction personnel, making the labor bottleneck harder to alleviate than equipment capacity, and is expected to outperform equipment manufacturers in the mid to long term.

4. Dry transformer leader: Hammond Power (HPS-A) is the largest dry transformer manufacturer in North America, fitting the rapid deployment needs