Businesses that own their facilities turn to property & casualty (P&C) insurance to help secure their investments in physical plants and equipment. P&C coverage can be invaluable in the case of a fire or other events that cause damage to buildings or machinery. And in some cases, this insurance also covers a portion of the revenues (or even profits) lost while operations get up and running again. However, your business interruption coverage – if you have it – might not be as comprehensive as you think it is. This could leave your company in a cash crunch if it faces extended downtime in the wake of a non-covered event or reaching the cap of your coverage.
One prime example is the stoppage that could occur in the wake of an electrical distribution system problem. These events can result in millions of dollars of lost production, with absolutely none of the physical damage that may be required to trigger business interruption coverage. Incidents related to poor power quality may trigger production equipment shutdowns, and then require hours or days to track down the root cause and fix it effectively.
In a previous article in this series, I looked at how today’s increased interest in digitizing power distribution systems can help prevent dangerous electrical systems events – and potentially lead to new types of insurance products. In this article, I’ll be exploring the ways power digitization can help reduce business interruption risks. The combination of sensors and cloud-based analytics can bring real-time monitoring to electrical distribution systems, along with the intelligence needed to call attention to possible problems before related shutdowns occur. Such “industrial internet of things (IIoT)” capabilities are only growing in importance these days, as businesses strive to encourage personnel to do as much work as they can remotely.
What business interruption coverage actually covers
P&C insurance often protects owners from interruptions related to property damage, whether that’s from an electrical fire, equipment explosion or other cause. This coverage can be a lifesaver for businesses in the wake of such events, when getting a business up and running again can take weeks or months. However, distribution system problems can bring manufacturing lines, data center servers and other critical operations to a halt without causing any recognizable physical damage.
Take, for instance, the impact harmonics or other power-quality problems can have on a manufacturing plant’s output. In the past, such distribution-system irregularities might have gone unnoticed until they caused irreparable damage to motors, drives and other connected equipment. More recently, devices have been upgraded with fail-safe capabilities that shut them off before such damage can occur. However, without the diagnostic capabilities digitization can enable, owners can be left in the frustrating position of hours or days of lost production while root causes can be tracked down and corrected. Actually, in some industries, the unplanned power outage can be catastrophic, like in the healthcare industry, where patient safety is a must.
In fact, critical-equipment failure is a large and growing problem. Some 94% of Fortune 500 companies surveyed by leading commercial insurer FM Global rated the risk of such events as a major concern. Additionally, 43% of the survey’s respondents say such risks have grown over the last five years, compared to only 29% who say they’ve fallen. And in a review of its own 2018 claims, FM Global found that equipment breakdown now rivals fire loss in both frequency and severity of claims. Almost two-thirds (62%) of these losses were due to lack of maintenance – another aspect of plant operations that can be aided by electrical distribution-system digitization.
Understanding four distribution-system risks
It’s important to understand the full scope of the problems that can lead to operational shutdowns in larger commercial, industrial and institutional facilities. These include distribution-system problems related to:
- Grid-supplied power. Irregularities in utility-system operations can create power-quality conditions that continue into customer facilities, causing connected equipment to go offline.
- Internal operations. The majority of power-quality problems, including harmonics and other concerns, arise on the customer side of the utility meter. Such conditions also can force equipment into safe mode and shut down entire manufacturing lines. One should realize that even well protected facilities with UPS may face power quality issues because those are generated by the load and system downstream
- Poor maintenance. Neglected electrical equipment maintenance practices and/or schedules can lead to a buildup of dust, grease and other pollutants, along with uninspected electrical connections that loosen over time. Additionally, technicians with lack of training might not adjust parameters to the latest requirement for various reasons. Distribution-system anomalies resulting from such maintenance shortfalls can be another factor leading to safe-mode related shutdowns.
- Inadequate backup generation. Utility outages can lead to total facility blackouts without adequate resources for backup. These risks can be mitigated through simple onsite generator connections, and also with more sophisticated microgrid-style systems that drawn on onsite renewable resources and battery-based storage alongside traditional gas or diesel generators.
How digital power can help
Currently, the most common method for monitoring a facility’s electrical distribution system is with an annual thermographic inspection. These inspections use temperature-sensing cameras to detect overheating that could be related to derating electrical equipment. However, only heat-producing problems can be detected, and the results only represent a snapshot of a system’s operations at the time the inspection takes place under conditions that might not be representative of the real risk that they are trying to evaluate.
Today’s facility operators now have a more comprehensive approach to monitoring power distribution-system, through the union of digital sensors and cloud-based analytics. The sensors, installed throughout the distribution system – and, especially, in critical process areas – offer the ability to understand a system’s operating conditions on a near-real time, 24/7 basis. This include monitoring:
- Power sources, including the connected network/grid, back-up generator and distributed renewables,
- Connected electrical equipment
- The loads and power flowing through the system
- The sensors related to the environment of the electrical system.
The cloud-based analytics can use the data sensors provide to understand when operating characteristics are pointing toward a possible problem in the near- or longer-term future. The combination of sensors data and analytics also can help direct maintenance efforts toward where they’re needed most. Specific sensors installed at the electrical-service entry point also can help facility personnel keep an eye on possible quality issues from utility-supplied power.
Connected power systems provides a significant opportunity to prevent shutdowns and reduce your risk profile. Such digitization efforts support and coordinate multiple onsite backup resources, including solar panels, battery-based storage and generators. A connected power distribution infrastructure can lead to near-seamless power transfers to maintain operations even when the utility grid goes down. The power quality and the electrical assets are under control, and such installations also can pay for themselves in utility-bill savings, through peak-shaving and time-of-use rate programs that incentivize companies to reduce their usage during periods of high electricity demand.
Now is the time to act
Current conditions underscore the advantages digitization can bring to increase reliability of your distribution system operations. By pairing digital sensors with cloud-based analytics, facility managers can keep their eyes on the health of their power systems from any remote location. And, when attention is needed, facility staff can more easily identify where problems might be occurring, enabling quicker, in-and-out service routines. Maybe an audit can help you assess your risk exposure.
Download our brochure to further learn how to keep your operations running smoothly. You can also visit our EcoStruxure Power homepage for more on the advantages of IIoT-connected power systems. Otherwise, you can reach out to your local customer support office.