US Electricity Threatened By Tariffs

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According to The Wall Street Journal, Mexico, Canada, and China all provide transformer parts essential to running America’s massive and weak energy grid. Over 3,000 companies make up sections of the U.S. electric grid. Some are public, and others are private. While a portion of the grid is new, much is several decades old. In cases where parts of the system fail, the failure can cause blackouts.

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The Journal reports, “The power industry has already been experiencing a shortage of transformers, for which demand is expected to jump even more in the coming years.” The paper also points out that the ROI on this capex can take decades, which makes some companies unable to handle upgrades.

Flat Electricity Demand

As has been endlessly pointed out, the need for electricity in the US has been almost flat for years. AI server installations have rapidly changed that, and demand could rise for years as major tech companies and utilities fight to bring new capacity online. However, if this happens too slowly, which is anticipated, the legacy commercial industry and residential customers will compete with AI for power. This eventually become political and legal actions.

Tariffs are one way to look at grid issues, but they are hardly the only one. Access to capital is critical because it covers every part of the system that moves electricity.

Private Grids

Tariffs on transformers may also threaten tech companies that want to build their own electricity generation systems. In some cases, these may have their grids. However, in others, that will not happen. The ancient system will be further pressed.