Home > Property & Casualty > Aging transformers are causing high prices and more risk

Aging transformers are causing high prices and more risk

transformerGenerator step up transformers, while not often mentioned in the renewable energy world, are a vital part of the grid and help to keep green energy moving forward. That being said, the time has come when many transformers are reaching the end of their life and are starting to break down and cause outages. These transformers are critical in energy output to the grid and are essential to all utility scale renewable energy projects. Having a contingency plan in the event the transformer breaks down is rare and is something that investors and owners should begin to explore.  An example might be the AES spare transformer program.

While the prices for transformers are high, the cost to replace or fix one is no where near what the cost could be in lost revenue to the owner during the outage time. Claims are growing each year and yet plants are still being developed around a single step up generator that is forced to supply the energy export for the entire project and sometimes multiple projects when there is a shared facilities agreement in place. When something does eventually happen to the lone generator, the cost of repair is huge, as is the wait time; The average wait time to repair in the US is currently between 6 and 18 months. With the utility scale renewable energy projects usually placed in obscure locations and qualified mechanics few to come by, many times these transformers go months on end without being fixed properly.

The long term monetary damage to these projects is large, yet plants are still developed without backups or spares. The cost savings of not having a contingency plan may not seem worth the risk at first due to the knowledge that insurance will take care of the claims and the plant goes on with business as usual once the power is back up. However, risk managers should evaluate the time and effort it takes to work through such a complicated insurance claim and they may find that the cost to have a spare transformer is actually the right thing to do.  Stakeholders and owners of the projects need to focus on the sustainability of the plants rather than the short term cost cutting goals. Downtime of a plant can cost a business millions; having the proper risk mitigation plan in place will help get business back up quickly at a lesser cost.


About the Author

Charlie Long is a Client Executive and leader of the Renewable Energy and Clean Technology Practice at Gallagher WGA. He works with independent power developers, owner operators and manufacturers in the business of power generation.

617.646.0251 | Charles_Long@AJG.com | Connect with Charlie on LinkedIn

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