There is little doubt that new approaches to condition monitoring of critical equipment can offer both new and more timely information on whether or not a piece of equipment is on a fast course toward a sudden failure.

GSU Transformer failures are often caused by faults in other equipment in the system, outside forces or human error.

Unfortunately, the short term out-of-pocket costs for this type of equipment and related monitoring is usually much higher than expected when all related costs (purchase costs, installation costs and ongoing costs) are finally added.

There will always be strong debate on the right approach to mitigating the potential impact of a critical equipment failure; whether it is better to invest additional human and capital resources to improve pre-loss condition monitoring; to utilize these finite resources to buy spares on a pre-loss basis; or to “save” these resources and pay increased amounts for replacement equipment from third party after a loss event happens etc.

Clearly knowing as much as one can about the condition of critical equipment before a loss happens can prevent sudden failures and allow steps to be taken to mitigate a potential loss. However, the actualized benefits associated with implementing the most advanced forms of condition monitoring (such as real-time remote monitoring services or other online services etc) might only serve to improve aggregate losses for the industry as opposed to addressing the ultimate operational concerns of a specific plant’s management team (or financing partners).

Along these lines, several observations stand-out. Specifically:
  • There will be always losses that cannot be foreseen no matter how advanced the monitoring (insurance companies refer to these type of rare events as “tail events” – a reference to a distribution curve of expected losses that actuaries usually design). Real-world examples of “tail events” that likely could not be foreseen by any form of condition monitoring equipment include:
    • Direct lightning strikes to critical equipment;
    • Shorting/ grounding due to contact with a foreign object (in one case a transformer failed due to an eagle dropping a deer head on it…the head was taken from a local dump etc);
    • Employee error;
    • Earthquake etc.
  • Existing forms of condition monitoring such as Dissolved Gas Analysis and other testing approaches (Infrared, Insulating Oil Screen, Power Factor, FRA etc) are well defined and have proven results for a wide number of failure attributes. They are also relatively inexpensive to implement especially when combined with other routine maintenance and inspections of the equipment in the field and have become more efficient in recent years. In contrast, newer online condition monitoring approaches open up a host of new questions that might include:
    • Who will buy/own the installed hardware- will this hardware ever need to be replaced?; How often must it be tested/ serviced?
    • Who will pay for any ongoing software and equipment upgrades or license fees?; How long will you be locked-into the online condition monitoring vendor’s services?
    • Who will monitor (how often will they effectively monitor) and what is their track-record using this specific online technology?
    • Who will “own” the data that is sourced from the equipment?
    • Will it be necessary to continue traditional testing approaches in addition to the new online condition monitoring approaches? – Will management, OEMs, and financing partners (banks, insurance companies etc) accept this online condition monitoring in lieu of the traditional testing approaches at this time or in the near future?
  • Insurance companies that insure power plants (or financiers of power plants) rarely encounter loss prevention measures that they do not like. However, more often than not, few material discounts are achieved in insurance premium charges or financing costs when additional loss prevention approaches (like advanced forms of online condition monitoring) are implemented by a client. The additional benefits that might be achieved are usually hard to quantify. A greater economic and social benefit might be found by knowing that a spare piece of HV equipment can be readily sourced should a failure happen, or more frequent traditional testing; and/or enhanced employee training.

Along these lines, an insurance company likely would be much more inclined to offer Business Interruption/ Business Income coverage on a power generation operation if there was confirmed knowledge that spare equipment could be quickly sourced and installed as opposed to providing this coverage based only on additional insurance premiums.

GSU Transformer failures are often caused by faults in other equipment in the system, outside forces or human error.

More often than not, the premium to exposure equation is too leveraged against the insurer in a premium only situation in these cases. Moreover, there is the always present insurance concern of “adverse selection” (only those people who believe/ know that they have a higher than usual failure risk will buy this insurance coverage).

This is not to suggest that advanced forms of online condition monitoring should not be implemented as there will be real-world situations where the incremental benefit of having this type of analysis prevents a sudden or unforeseen failure. Rather, the intent is to highlight that the economic (and, importantly, the broader non-economic decision) considerations associated with implementing the most advanced forms of remote/ online condition monitoring are more complex than some vendors might suggest.

The power generation business by nature does not allow a client to spread the high cost of the most advanced forms of condition monitoring over large numbers of like equipment. There is often a need to have a variety of condition monitoring systems covering the different pieces of equipment that are part of the power generation system. The fact remains that most power generation businesses have finite human and capital operational budgets. Condition monitoring alone cannot mitigate all potential failure situations.

Online and other advanced condition monitoring approaches offer one solution to sudden equipment failure and related losses but also open a host of new and challenging questions. Many of the largest losses to the insurance industry can ultimately be tied to some sort of human error as opposed to just equipment failure. These human errors can cause a loss to happen, or, in many cases, make the loss much worse than necessary once the loss occurs.

Accordingly, simply spending more money on condition monitoring might not be the best answer for many power generation businesses.

Our Value Proposition

If you are a power generation facility, a third party firm that works with a client in the power generation industry, or an insurance company that insures worldwide power generation risks, Fast-Track Power LLC offers the following value:

  • Reduce the Cost of Business Interruption

    We seek to help you (or your client) reduce the very high cost of business interruption by providing expedited “fast-track” access to the necessary high-voltage equipment and services at competitive terms.  We are your global fast-track resource for both equipment and services on a turn-key / seamless basis.

  • Provide Expert Knowledge for Better Decision Making

    By injecting competition and experience into the process of a fast-track situation, Fast-Track Power LLC positions you to receive significant cost savings, reduced risk, and enhanced decision making knowledge.

In a recent failure of a large GSU transformer, the presence of competition in the fast-track replacement process achieved a client over $200,000 in savings from the firm that had originally been contacted to source a replacement transformer.  Moreover, the client and its financial partners also gained the direct attention of the most experienced people (who used their expertise to lower the chance of a problem during the replacement process) and a better understanding of the universe of credible options.