The MIDEL Transformer Risk Report

2020

MIDEL®

SAFETY INSIDE

midel.com02 The MIDEL Transformer Risk Report 2020

Mladen Banovic Managing Editor, Transfomers Magazine

Better understanding of risk will naturally lead to improved mitigation strategies. Fact-based communication and education can make the difference, provided it is also understandable to non-engineering decision makers and such reports in this area are welcome.

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MIDEL®

SAFETY INSIDE

AS A MANUFACTURER OF FIRE SAFE, K-CLASS TRANSFORMER FLUIDS, RISK MITIGATION IS A SUBJECT WE ENCOUNTER EVERY DAY.

Our experience tells us that for engineers to ensure the safe, reliable operation of assets on their electrical networks, the sharing of knowledge is critical. So too is a shared appreciation across the business of how to best manage the day-to-day risks of running high voltage equipment.

This can present a problem best described as “lost in translation”; if an identified risk is manifestly “technical” by nature, the benefits of an engineer’s recommendation – and the consequences of a failure – might not be immediately clear to non-engineering decision makers.

The MIDEL Transformer Risk Report 2020 unpicks those interactions and potential roadblocks to explore the awareness and knowledge gap surrounding transformer risk between the substation and the boardroom.

With any report of this kind, it is possible that the conclusions may be perceived as being deliberately contentious. Here our findings make it clear that lowering risk is given universal priority and engineers are diligent in the work conducted to that end.

Moreover, our research shows that engineers are using every means at their disposal to not only highlight and mitigate risks, but to help protect their employers from the consequences of transformer failure.

While we believe our findings are largely very positive, it’s quite clear there is more to be done to inform key decision makers, not only about ways to mitigate risk, but how their businesses can also benefit.

Equally, some of the ways in which transformer and substation risk mitigation help businesses might even resonate more with a finance director than an electrical engineer. This underlines not only why we undertook this research, but why the findings are so important.

In conclusion, we believe our report makes for compelling reading regardless of the level of your knowledge about electrical networks - and we hope you find the conclusions insightful and cause for further reflection on these important issues.

Barry Menzies Managing Director Global, MIDEL

Foreword

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WHY IS TRANSFORMER RISK SO IMPORTANT? The consequences of transformer failure ranges from the inconvenient to the catastrophic, particularly in the case of transformers insulated by mineral oil.

With a high calorific value, mineral oil transformer fires burn intensely and are notoriously difficult to control – clearly a safety concern. This is before the consequences of their failure is felt by the operator or owners in terms of downtime, business continuity, loss of revenue and site damage – all of which can extend into the millions of dollars. With all that said, the importance of businesses to accurately assess and mitigate transformer risk cannot be overstated.

ASSESSING TRANSFORMER RISK Year on year, MIDEL’s research shows that transformer failure happens: 63% of survey respondents revealed they had experienced a transformer failure in the last five years. This year, respondents also provided an insight into the common causes of transformer failures. Bushing failure was widely reported, followed by winding failure, maintenance issues, short circuiting and load. Age and corrosion related concerns were also highlighted by several respondents.

Yet, while age as a standalone factor appears to be one of the least common causes of failure, it remains a top concern for engineers, year on year. In the 2020 results, nearly two thirds (61%) of respondents identified age as the factor that most affects their assessment of transformer risk. This echoes the results frrom our previuos report where ageing and damaged equipment was the second most concerning cause of transformer failure. A further 61% also identified location of transformers as a major risk factor.

In keeping with the failure causes, 56% of respondents identified load/power demands as a key factor to their transformer risk assessment, followed by fire risk (51%) and environmental impact (47%).

What combination of the factors would most affect your assessment of transformer risk?

“Taken together, there is little wonder that condition-based maintenance strategies – that can tailor recommendations to each asset – have risen in popularity so quickly. It is clear engineers are aware of the risks and are doing all they can to ensure the safe, reliable operation of their fleets, while meeting increasingly challenging cost efficiency requirements.”

“The extent to which respondents identified age as a risk indicates that many operators are likely dealing with the consequences of an old or ageing fleet of transformers,” Barry Menzies.

LOAD / POWER DEMANDS 56%

51%

47%

FIRE RISK

ENVIRONMENTAL IMPACT

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While age is not always the main cause of failure, it can amplify other issues. The location of each transformer can also have significant and unique implications for its operation and maintenance.

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”Paul Jarman Former Technical Leader, National Gridand Professor of Electrical Power Equipment and Networks, University of Manchester

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A DISCONNECT AT THE TOP? While engineers are on the front line of transformer operations, what happens on the ground can have equally significant implications at board level, not least in the face of failure.

When asked which transformer risk factors are most important to senior management, it is clear that safety, business continuity and fire risk continue to be front of mind. Seven in ten (71%) respondents said safety is a top concern, and this is matched by a further 71% who said business continuity. Fire risk (60%) and reliability (48%) also score highly. This mirrors last year’s results where business continuity and fire risk scored in the top three.

Which transformer risk factors are most important to senior management?

“Company directors rightly prioritise safety above all else and that’s a positive indication that business leaders are striving to operate in the right way. However, it is a worry that commercial factors such as CAPEX, insurance and regulatory compliance do not feature prominently in their thinking. It may indicate that not all decision makers are fully briefed on the risks and consequences of transformer failure,” comments Menzies.

When asked to give an opinion on whether respondents thought their senior management team is aware of transformer-related risk, the results were telling.

Only 56% of respondents are confident in their senior management team’s awareness of the risks. While a further quarter (24%) feel their senior management team are aware, they also feel they lack the knowledge to plan effectively.

Is your senior management team aware of transformer-related risk?

56% Confident 24% Aware 20% Unable to respond

Menzies explains: “While the survey asked respondents to make an informed observation of their senior management team’s understanding, no doubt most decision makers would welcome better understanding of the consequences of transformer failure. The links between risk, failure, CAPEX, OPEX and insurance matters are intricate and it’s understandable if not everyone on the board is up to speed. However, our previous research shows that transformer failure can impact business continuity for months, so it’s not something boards will want to leave unmitigated.”

The results also indicate a level of disconnect over the importance of environmental issues. While 47% of respondents identified environmental impact as important for transformer risk assessment, only 38% think it’s important to their senior management.

BUSINESS CONTINUITY 71%

60%

48%

FIRE RISK

RELIABILITY

56%24%

20%

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“We are increasingly moving towards an age where environmental issues are a standing item on many boardroom agendas. That said, it’s important that engineers know that their concerns are not only being heard but also addressed”. Barry Menzies.

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MAKING IMPROVEMENTS Although there may be a level of disconnect over transformer-related risks, the survey reveals respondents remained committed to reducing them.

While the results reveal a good spread of recommendations, a move to condition-based monitoring stands out, with nearly half (49%) of respondents making it a suggestion. In the past 12 months, what recommendations have you made regarding your transformers?

Recommendations to changes to the maintenance regime (34%) are equally popular as asset replacement (34%), asset repair and reconditioning (32%) and substation upgrades (33%).

Menzies comments: “It’s positive that decision makers at board level are being presented with a range of options geared towards reducing substation risk. However, it is also a little concerning that many respondents do not see all of their recommendations implemented fully.

“The findings suggest that some recommendations may be getting lost in translation between the substation and the boardroom. It may be that engineers need to reframe these recommendations to catch the ear of decision makers. Whether that’s by ensuring transformers are placed on the risk register, or conveying the commercial implications of transformer risk for aspects such as insurance.” When asked whether their recommendations had been implemented, less than half (44%) of respondents report that they had, with a further 41% reporting some implementation.

“It may benefit decision makers to be more transparent in communicating the reasons behind their decisions to deny or delay recommendations. It’s important that engineers feel confident in their senior management team’s understanding of the risks and consequences, particularly when high-voltage equipment is involved” Menzies adds. Indeed, of those that had not had all or any of their recommendations implemented, most (56%) report cost as the main barrier. More pressing commercial (38%) and engineering (36%) priorities also score highly.

Are key benefits to risk mitigation techniques being overlooked? Menzies remarks: “Many of these risk mitigation strategies will likely save money in the long run. For example, retrofilling is a proven and cost-effective technique that not only reduces fire risk but can elongate the lifespan of the transformer.

“It can also have positive implications for resilience to overloading, as well as being non-toxic to the environment. However, decision makers need to be appropriately informed of these additional benefits so they can understand more fully what that cost really buys them over the full asset lifecycle. Industry could do more to arm engineers with the best possible commercial case for their recommendations.”

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CONDITION-BASED MONITORING 49%

34%

33%

34%

32%

MAINTENANCEREGIME CHANGE

ASSET REPLACEMENT

SUBSTATIONUPGRADES

ASSET REPAIR

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Gavin Allen Managing Director, Grosvenor Oil Services

Safety is always a top priority on any site, and avoiding transformer failure or fire is critical. Although cost needs to be a consideration, strategies such as retrofilling can also address other commercial priorities while contributing to longer-term improvements to OPEX, resilience and sustainability.

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METHODS FOR MITIGATING RISK The way assets in all industries are monitored and maintained is changing, encapsulated by a growing trend to consider asset management more holistically. The survey results reveal transformers are no different. Transformer risk mitigation strategies used now versus strategies being considered

When asked what transformer risk mitigation strategies they presently employ, time-based maintenance (58%) is more common than predictive maintenance (55%). However, when asked what strategies are being considered for the future, the results are stark. Only 37% are considering time-based maintenance, a substantial decrease on the status quo. Menzies comments: “As infrastructure digitalises, assets can report their condition in real-time meaning engineers are no longer required on-site all the time to manage asset risk. Correspondingly, our research shows a decline in popularity for time-based maintenance, with fewer respondents recommending it to mitigate transformer risk.”

For those risks that are more difficult to mitigate through digital techniques, such as fire, more physical solutions could still hold the answer.

Retrofilling of transformers from mineral oil to fire-safe, readily biodegradable ester fluids is expected to increase in use, with 20% of respondents saying it’s a risk mitigation strategy they use now, and 25% reporting that they are considering it.

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CURRENTLY USE TIME BASED MAINTENANCE 58%

55%

37%

CURRENTLY USE PREDICTIVE MAINTENANCE

CONSIDERINGTIME-BASEDMAINTENANCE

“These results reflect the growing trend toward more holistic asset management approaches, which is in part enabled by the unprecedented level of insight that increasing digitalisation can provide.” Barry Menzies.

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Transformer Takeaways

Taken together, the results of the MIDEL Transformer Risk Report 2020 survey point to a number of key conclusions:

1 2 3 DECISION MAKERS NEED MORE SUPPORT TO UNDERSTAND RISK

While many respondents are confident in their senior management team’s awareness of and ability to respond to transformer-related risk there is an element of uncertainty. Strengthening the connection between the substation and the boardroom gives industry a focus for improvement – what actions need to be taken for respondents’ confidence to rise? Whether it’s an issue with communication or education, or both, each team will require a tailored approach.

CONDITION-BASED MAINTENANCE IS THE EMERGING PREFERENCE

There is a notable shift away from more traditional time-based maintenance approaches in favour of condition based regimes, as engineers seek to maintain their assets in the most cost-effective way. However, with many respondents experiencing difficulty in having their recommendations implemented, some companies are likely to miss out on understanding their asset condition in real-time, along with any resultant factors which affect their risk level.

TRANFORMER FLEET AGEING CONTINUES TO BE A TOP CONCERN

Engineers are increasingly faced with ageing fleets that not only become more time consuming to maintain, but can also increase risks. While condition-based monitoring stands to alleviate many of these concerns, physical improvements such as retrofilling will also continue to be important particularly for mitigating risk at scale with large ageing fleets of distribution transformers.

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Barry Menzies Managing Director, MIDEL Ester Fluids

Given the consequences of transformer failure, it’s important that engineers’ recommendations to their C-suite is heard and understood – not just for business continuity and risk reduction, but related commercial aspects which such advice can improve.

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MIDEL®

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METHODOLOGY AND DEMOGRAPHICS

The survey for the MIDEL Transformer Risk Survey 2020 was launched in October 2019 and ran for eight weeks, collecting responses from 110 electrical engineering professionals.

Respondents shared views from all over the world, with the majority listing their main operating areas as Europe (40%), followed by Asia (20%), Africa (14%), Americas (12%), Australasia (8%) and Middle East (6%).

The survey attracted responses from transmission (11%) and distribution (15%) operators, commercial and industrial (33%) and renewable energy generators (5%). Of those that answered ‘other’ (36%) to type of business, research, oil and gas engineering, testing and safety providers and manufacturers all featured.

The survey attracted respondents from maintenance (30%), asset management (20%) and reliability (13%) job roles followed by respondents in operations (9%), health and safety (4%) and compliance (1%). The ‘Other’ section (23%) included respondents from engineering, project management, manufacturing and design.

When asked what type of transformer fluid they mainly use, the majority (73%) cited mineral oil while 40% opt for ester fluid. A minority (16%) use silicone and 25% have dry type transformers. Thirty percent of respondents use mineral oil exclusively, while 34% said they use both mineral oil and ester fluids.

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