Trump has hit pause on his proposed tariffs against Canada and Mexico, but the uncertainty remains. Meanwhile, FERC has signed off on MISO’s plan to limit interconnection requests, a move that could reshape grid expansion in the Midwest. And Exxon is making waves with a bold challenge to nuclear power, betting big on carbon-captured natural gas. Plus, a look at how tariffs could disrupt the U.S. grid supply chain, and a promising investment in domestic manufacturing that might actually benefit from the trade shakeup.

Tariffs and the U.S. Power Grid

President Trump's recent proposal to impose a 25% tariff on Canadian goods, including a 10% duty on Canadian energy resources, has been temporarily paused. However, if such tariffs were enacted in the future, they could significantly affect the U.S. electrical grid, particularly in regions that rely heavily on Canadian electricity imports. In 2022, Canada exported approximately 58.4 terawatt-hours of electricity to the United States, accounting for about 1.6% of U.S. electricity retail sales. The value of these power sales was $3.2 billion in 2023, nearly 30% less than in 2022.

The northeastern U.S. is especially dependent on Canadian hydroelectric power. For instance, in 2014, New England and New York imported 60% of the total electricity from Canada, representing 12%-16% of the region's retail sales. These imports primarily come from Quebec's substantial hydroelectric resources.

Imposing tariffs could lead to increased electricity costs in these states, as utilities might need to source more expensive domestic alternatives or invest in new infrastructure to replace the imported power.

Potential Impacts of Enforced Tariffs:

• Increased Electricity Costs: Tariffs on Canadian electricity could raise prices for consumers in the northeastern U.S., where reliance on Canadian imports is significant.

• Supply Chain Disruptions: The U.S. imports various electrical components from Canada, including transformers and switchgear. Tariffs could disrupt supply chains, leading to delays in grid maintenance and expansion projects.

• Strain on Grid Reliability: Reduced imports from Canada might necessitate increased reliance on domestic power sources, potentially straining the U.S. grid during peak demand periods.

• Retaliatory Measures: Canadian officials have indicated potential countermeasures, such as restricting electricity exports to U.S. states like Michigan, New York, and Minnesota, which could further complicate the energy trade relationship.

While the tariffs are currently on hold, it's crucial for stakeholders in the U.S. energy sector to consider these potential outcomes and prepare for possible future policy changes that could impact cross-border energy trade.

FERC Approves MISO Interconnection Queue Cap

The Federal Energy Regulatory Commission has approved the Midcontinent Independent System Operator’s (MISO) proposal to cap the size of its interconnection queue studies, dismissing concerns from clean energy groups that the cap could stifle competition or reduce grid access. The plan is aimed at managing the surge in interconnection requests while ensuring a more realistic and efficient study process.

Under the new plan, MISO will set a megawatt cap at 50% of the non-coincident peak value for each study region in its most recent transmission expansion plan. Exemptions will be allowed for certain projects, including those replacing retiring power plants and those converting from energy resource interconnection service to network resource interconnection service. FERC Chairman Mark Christie urged MISO to revisit exemptions related to resource adequacy, signaling that further changes could come.

$8 Billion Boost for African Electrification

The Mission 300 initiative, an ambitious effort to connect 300 million Africans to electricity within six years, just secured an additional $8 billion in funding from global lenders. The new commitments, led by the Islamic Development Bank and the Asia Infrastructure Investment Bank, bring total pledged funding to $56 billion—still short of the estimated $90 billion needed to complete the project.

Africa’s electrification crisis remains staggering, with 600 million people still lacking access to power. Half of the planned new connections will come from grid expansions, while the other half will rely on renewables like solar and wind mini-grids.

Debt remains a major obstacle. Many African governments lack the financial capacity to fund large-scale infrastructure projects, and existing state-run utilities are often mismanaged and deeply in debt. That’s why this initiative is banking on a mix of development finance, private investment, and regulatory overhauls to attract more capital.

World Bank President Ajay Banga called the effort “foundational to everything,” noting that energy access is critical for economic development, job creation, and political stability. The big question now: Will the funding commitments translate into real-world results, or will bureaucratic inertia and political roadblocks slow progress yet again?

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Conversation Starters

• Barron’s – Exxon enters the electricity business, takes a swipe at nuclear
  Exxon plans to build gas power plants with carbon capture to compete with nuclear for supplying AI data centers. CEO Darren Woods claims gas can be built faster and deliver “clean” power at scale.
  

• Financial Post – Why electricity will be hard to weaponize in a trade war with Trump
  Canada exports far more electricity to the U.S. than it imports, but restricting flows as retaliation for tariffs may not be as simple as it seems. Experts say the U.S. grid could adapt faster than many expect.
  

• The Spectator – Big Wind is in big trouble
  Offshore and onshore wind projects face mounting challenges as permitting delays, rising costs, and political shifts disrupt expansion plans. Trump’s recent executive orders add further uncertainty.

Good Bet, Bad Bet

Good Bet: Transformers and Grid Equipment Manufacturers
With potential restrictions on Canadian energy imports and continued U.S. investment in domestic power infrastructure, demand for transformers, switchgear, and transmission upgrades is likely to rise. Companies in this space stand to benefit from grid modernization and resilience efforts.

Bad Bet: The “Trains Over Trucks” Freight Prediction
With potential restrictions on Canadian energy imports and continued U.S. investment in domestic power infrastructure, demand for transformers, switchgear, and transmission upgrades is likely to rise. Companies in this space stand to benefit from grid modernization and resilience efforts.

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