Lawmakers see power grid security risks from Chinese storage batteries

Concern over Chinese technology in US critical infrastructure has been rising for years, given that US dominance in industrial technology manufacturing has given way over the past several decades to cheaper and often better Chinese suppliers. From bulk power system components to port cranes to video surveillance equipment and more, Chinese-made gear and technology now appear in most, if not the vast majority, of the industrial and commercial systems supporting the US economy.

Given the intensifying adversarial relationship between the US and China and the intertwined relationships between Chinese tech suppliers and China’s government, fears have arisen that China can use this technological predominance for politically or militarily motivated malfeasance. One area of recent concern is China’s growing footprint in supplying storage batteries to the US power grid.

Lawmakers, concerned over the potential security risks these batteries pose, have successfully gotten at least one major US electric utility company to stop using Chinese-made storage batteries. Experts say that these batteries could be used maliciously by China to destabilize and even destroy portions of the US power system. Given the lack of alternative, affordable battery makers, the short-run options for addressing these risks are limited.

Duke decommissioned CATL batteries under Senate pressure

On March 23, 2023, Duke Energy announced it was expanding its battery storage capabilities in North Carolina and had begun commercial operation of the state’s largest battery system, an 11-megawatt (MW) project. Duke said it would frequently operate the system with an adjacent 13MW solar facility on a leased site within Marine Corps Base Camp Lejeune.

This news caught the attention of the US Senate’s Select Committee on the CCP, a special panel focused on the threat posed by the Chinese Communist Party. The CCP committee had already become alarmed by Contemporary Amperex Technology Co. Limited (CATL), the Chinese global leader in the energy storage market, which Duke picked to supply the batteries for the new system.

Likening CATL to the now US-banned Chinese telecom tech leader Huawei, CCP committee members sent a letter to Defense Secretary Lloyd Austin warning that, at the behest of the CCP, CATL could “introduce malware into large-scale power storage stations, threatening the U.S. energy grid.” The letter added that “the significant known cyber risks to BESS [battery energy storage system] systems more broadly, such as security limitations that prevent regular updates and gaps in reviewing vulnerabilities, raise several concerns that a malicious actor, or government, could seek to exploit.”

After attempting to assuage the CCP committee’s concerns, Duke decided to decommission the CATL batteries. In a statement sent to CSO, Duke said, “In partnership with policymakers and the Department of the Navy, we have made the decision to decommission the CATL battery energy storage system at Camp Lejeune and replace it with a domestic or allied nation supplier. By 2027, we are voluntarily moving away from specifying CATL battery energy storage technologies. As an American energy company, we welcome the ability to use American-manufactured batteries.”

The CCP committee was pleased with the energy company’s decision. “We are grateful to Duke for taking this needed first step to protect US grid security from Chinese Communist Party-controlled companies operating in Americans’ backyard,” the committee said in a statement. “Others that continue to work with CATL and other companies under the control of the CCP, should take note.”

At that point, the CCP had already been instrumental in enacting a provision in the National Defense Authorization Act that banned military purchases of batteries from CATL and four other Chinese battery makers. Before that, the committee had successfully pressured Ford Motor Company to pause its partnership with CATL for a battery plant in Michigan and sought to pressure the Treasury Department to withhold taxpayer subsidiaries from the automaker and other automakers who use CATL batteries.

What are the CATL battery concerns?

With this much smoke around CATL, no real-world incidents seem to have materialized that its batteries, or any other storage batteries, could serve as conduits for malicious activity. As was true of Huawei or any other major Chinese tech supplier, however, CATL is required under China’s National Intelligence Law of 2017 and other laws to support, assist, and cooperate with national intelligence work.

Elevating the concern in CATL’s case is that its founder, multi-billionaire Zeng Yuqun, reportedly has a decade-long affiliation with the Chinese People’s Political Consultative Conference (CPPCC), “an important organ for multiparty cooperation and political consultation under the leadership of the CCP, and an important means of promoting socialist democracy in China’s political activities.”

As political tension between the US and China heats up, many policymakers fear that China could place malware into US critical infrastructure, particularly energy infrastructure, or use its growing technological prowess to spy on US activities. On January 31, the CCP committee held a widely reported hearing on the threats of the CCP on the intelligence threats to US infrastructure featuring Cyber Command Commander General Paul Nakasone, FBI Director Christopher Wray, CISA Director Jen Easterly, and National Cyber Director Harry Coker.

In the context of CATL batteries, the main concern is that China would embed malware to bring down the energy grid. Little to no research or technical analysis on the topic is publicly available, and no notoriously press-shy electric utility engineer responded to a request for comment from CSO.

Craig Singleton, China program director and senior fellow for the Foundation for Defense of Democracies, has concluded, “In a worst-case scenario, an attack on these control systems could result in widespread blackouts impacting industrial centers or financial hubs. Sophisticated, sometimes undetectable malware on these energy storage stations could pose a threat to the industrial control systems connected to the US energy grid. In a worst-case scenario, an attack on these control systems could result in widespread blackouts impacting industrial centers or financial hubs.”

Singleton cites several sources related to electric vehicles to back up his assessment of the security risks of storage batteries, including two university-based academic studies and an analysis from Sandia National Labs. He also cites a trade press article that details the operational technology (OT) concerns identified by risk management company Aon for a BESS system, such as the system under development in Camp LeJeune. The potential vulnerabilities enumerated by Aon for BESS systems are standard risk factors most cybersecurity professionals consider for all systems, such as out-of-date patching, inadequate passwords, lack of proper segmentation, and lack of OT knowledge.

Batteries can catch on fire

In that same piece, Nathan Jones, director of cyber, infrastructure sector at Aon, gets closer to the genuine concern of adversarial control over storage batteries. Lithium-ion batteries, most commonly used in BESS, require careful monitoring and control of their voltage, current, and temperature conditions. Jones warned that overcharging of these batteries can lead to a “thermal runaway” event resulting in overheating, a fire, or an explosion.

“One of the things with batteries is they catch on fire,” Patrick Miller, CEO of Ampere Industrial Security, tells CSO. “So, if I had the ability to put the battery into a physical state or make it more prone to catch on fire, that’s a problem because in some cases, depending upon the size of the installation of these batteries, that would be a really big fire. Get a foam truck kind of fire.”

“Power systems operate based on what are known as frequency and voltage conditions,” Miller explains. “You’re spending all your efforts trying to balance a power system; power coming in and going out have to match.” It doesn’t take a lot to destabilize the system. “There are ways to take batteries and use just enough subtle condition changes to upset that delicate balance in the power system, and you can destabilize the power system by modifying these conditions in subtle ways,” he says.

It’s not the batteries themselves that are the inherent source of risk. It’s that for any battery management system, “you can manipulate what it is putting into or pulling off the system,” Miller says.

Manipulation of the battery system doesn’t have to cause a fire or explosion to do real damage, according to Miller. “Once the system starts to get destabilized, in order to protect the system, it starts either turning off generation — it sends a signal that says you’re pushing too much generation, you’re going to harm the system — or trip generation offline or trip load offline, which is effectively a blackout.”

For its part, CATL says, “CATL’s energy storage products sold to the US contain ‘passive’ devices only, which are not equipped with communication interfaces that may enable CATL to control the sold products. Additionally, CATL’s US products do not have the capability to collect, transfer or send data and therefore do not pose any security threats.”

Regarding grid integration, the company says, “CATL products cannot interact directly with or affect the US electrical grid. CATL provides energy storage batteries to US integrators, and because it is the integrators that manage connections to the grid and the grid operators set up an additional layer of security measures, CATL products can in no way interact with it.”

Miller thinks that CATL’s defense is misleading. “There’s a control system that sits on top and it’s also Chinese-made. So, it may not be made by CATL, but it’s likely made by a partner company or another Chinese company. The Communist party can effectively manipulate all companies in China.” So CATL’s defense of providing only passive products is “not an exonerating factor,” he says.

Coping with a Chinese-dominated battery market

Duke’s use of CATL projects is not an isolated instance. The company has also deployed CATL batteries in three Florida County BESS projects. Dominion Energy has deployed CATL batteries in a Virginia project. Primergy Solar, which builds, owns, and operates energy storage and solar projects used by utilities across North America, is working with CATL on a storage project in Nevada.

Countless other utilities in the US have no doubt deployed CATL batteries. CATL is by far the largest storage battery provider in the world, boasting a nearly 40% market share. Duke’s desire to work with an American manufacturer of batteries is ambitious, given that none of the current top ten manufacturers of storage batteries are American, and eight of them are Chinese rivals to CATL.

At least in the short term, most utilities will be forced to depend on likely cheaper Chinese battery suppliers. Miller says that the top of the US energy sector’s dependence on Chinese batteries was much-discussed at the Department of Energy’s Grid Modernization Summit in early February.

“Everybody was talking about how to operate knowing that is the case,” Miller says, citing several precautionary measures companies are taking to limit any damage China could cause. “There are even companies that are looking at doing physical state changes and detections of those. So that’s how far we’re already thinking in front of this. We know that China has pwned all of this stuff. We have that as an expectation.”

The bottom line is that most utilities don’t have a choice right now except to use Chinese hardware and technology, but they can develop strategies to defend against the worst-case scenarios. “We don’t have the choice because, first of all, no one else makes the stuff, and no one else makes it at that price at that scale,” Miller says. “If we’re being pushed to modernize and do all these things, meet these goals, we’re stuck between a rock and a hard place. The only other option is to go ahead, buy it, put it in service knowing that at some point it may need to be defended and disconnected.”

Advanced Persistent Threats, Critical Infrastructure, Government

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