Partial discharge is a localized electrical discharge that partially bridges the gap between conductors. Defects in the insulation between conductors can significantly reduce the breakdown strength of the insulation. These defects in the insulation come in the form of floating metal particles, gas or water bubbles in the insulating oil and cracks or holes in solid insulation.

Thermo-chemical reactions within the cellulose paper are the principal cause of degradation of the paper insulation through life. As the insulation paper degrades, dielectric inconsistencies are formed within the paper. Electrical stresses across these defects cause discharges to start to occur within them, causing field intensification and when these intensifications exceed the breakdown strength of the insulation material, a micro-discharge occurs. In this way, PD can be considered the first evidence of insulation problems, although it can occur in new and young transformers due to design or manufacturing issues.

Once micro-discharge starts to occur, they further degrade the insulation in the area of the discharge by causing the molecular breakdown of the oil or paper. Breakdowns in the oil predominately lead to volatile gases forming. In the paper, carbon-based byproducts like CO2 and CO are formed.

As the stresses accumulate on the defected insulation system, the amplitude and extensity of PD pulses will increase significantly, which can result in a breakdown of the transformer insulation and even lead to the failure of the whole unit.

A transformer can be free of partial discharge at new. But through aging-related insulation breakdown, begin to show PD later in life. If the PD is in a vulnerable location, then it grows in magnitude and propensity until failure is likely with any level of overstress. Therefore, it is the growth of PD which is of most concern.