What causes sludge formation in transformer oil?

Sludge forms mainly from oil oxidation and degradation under heat, oxygen exposure, and catalytic effects of metals. As oil ages, acids and polymerized by products increase and can precipitate as sludge, which blocks cooling channels and reduces heat transfer. Moisture accelerates aging, and high operating temperatures worsen oxidation. Using inhibited oil, maintaining breathers, limiting oxygen ingress, and periodic testing help reduce sludge formation.