Renewable-energy development in a net-zero world: Overcoming talent gaps

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Across economies, the Great Attrition is making it difficult for companies to find and retain employees. Since April 2021, 20 million to 25 million US workers have quit their jobs, and 40 percent of employees globally say they are at least somewhat likely to leave their current position in the next three to six months.1‘Great Attrition’ or ‘Great Attraction’? The choice is yours,” McKinsey Quarterly, September 8, 2021; Aaron De Smet, Bonnie Dowling, Bryan Hancock, and Bill Schaninger, “The Great Attrition is making hiring harder. Are you searching the right talent pools?,” McKinsey Quarterly, July 13, 2022; Table 4. Quits levels and rates by industry and region, seasonally adjusted, US Bureau of Labor Statistics, October 4, 2022. Companies have yet to get a handle on this problem. Many do not understand why their employees are leaving or know where they are going. Furthermore, 65 percent of these employees will not return to the same industry, complicating matters for companies.2The Great Attrition is making hiring harder,” July 13, 2022.

This environment presents a particularly acute challenge for industries such as renewable energy, in which specific technical expertise and experience are crucial elements of success. The pressure intensifies when those industries are also growing rapidly. McKinsey estimates that the global installed capacity of solar and onshore and offshore wind projects will have quadrupled from 2021 to 2030.3Global Energy Perspective 2022, McKinsey, April 26, 2022. This huge surge in new wind and solar installations will be almost impossible to staff with qualified development and construction employees as well as operations and maintenance workers (Exhibit 1).

Estimated full-time-equivalent needs for the global development, construction, and operation of wind and solar assets will more than quadruple by 2030.

Even if today’s demand for workers in the renewables industry could be met, it’s unclear where these employees will come from in the future. There are too few people with specialized and relevant expertise and experience, and too many of them are departing for other companies or other industries. Once employees leave, replacing them can be extremely difficult for companies.

In this article, we delve into the talent challenges the renewables industry faces as it plans for massive scaling and expansion—and what players can do to get ahead of the game.

A scarcity of specialized talent in both blue- and white-collar jobs

The sheer size of the talent gap is staggering. Our analysis suggests that between now and 2030, the global renewables industry will need an additional 1.1 million blue-collar workers to develop and construct wind and solar plants and another 1.7 million workers to operate and maintain them.4Global Energy Perspective 2022 Achieved Commitments scenario; Renewable energy benefits: Leveraging local capacity for onshore wind, IRENA, 2017; Renewable energy benefits: Leveraging local capacity for offshore wind, IRENA, 2018; Renewable energy benefits: Leveraging local capacity for solar PV, IRENA, 2017. These include construction laborers, electricians, and operating engineers. Prior to the Great Attrition, the market for such on-site technical occupations was already small and subject to the significant employee turnover common in blue-collar jobs. In Europe, some of these blue-collar professions needed for renewable energy expansion, such as electricians, are in the shortest supply.5 Making matters worse, time to hire in the energy industry is long. For instance, with 1.7 vacancies per unemployed energy technician in Germany, the average time to fill a vacancy for this role is more than six months.6Global Energy Perspective 2022 Achieved Commitments scenario.

White-collar workers will also be difficult to find. Until 2030, projects will require a total of 1.3 million additional wind and solar project developers, project managers, finance experts, legal staff, and many other roles to install, operate, and maintain the projected capacities.7 Individuals with successful track records and more than half a dozen years of experience will represent the biggest shortage for these white-collar roles. When companies do manage to hire these workers, keeping them will be crucial.

The reasons these employees switch jobs or industries go beyond salaries. For example, one major driver is a lack of career development opportunities, including the chance to switch roles (such as from project manager to technical expert) or to progress quickly in one’s current role. For experienced high performers, compensation mechanisms with limited opportunities for bonuses or upsides also play a role. Additionally, employees in the renewables industry sometimes leave their jobs for cultural or personal reasons. For example, at large utilities that have gone through periods of fast growth over the past decade, decision-making processes and collaboration styles have not kept pace with the changing times and have led to employee frustration.

Once these white-collar talents leave for more attractive options, they are often removed, at least temporarily, from the job market. Their new employers may use long-term incentives, such as equity options on renewables assets, to bind them to the company for as long as possible, thus exacerbating the scarcity of white-collar talent.

The global renewables industry will need an additional 1.1 million blue-collar workers to develop and construct wind and solar plants and another 1.7 million workers to operate and maintain them.

Broad increases in salary levels across the industry

As talent has grown scarce, salaries paid by companies in the renewables industry have risen and are expected to keep growing. Notable variations exist among geographies, individual positions, and company types. Unsurprisingly, US companies pay significantly more than their European counterparts: the average US salary is roughly 40 percent higher. The highest salaries belong to senior-management positions in the United States, such as directors or vice presidents of renewables business units. Across different companies—utilities, renewables developers, oil and gas majors, and financial firms—average salaries are comparable but the ranges differ. Utility salaries often don’t reach beyond a certain level, whereas other players, especially oil and gas majors, have more flexibility to offer prospective employees higher salaries and more upside potential (Exhibit 2).

On average, salaries are similar across renewables players, but utilities pay less for top jobs.

These differences confer a competitive advantage on companies with the flexibility and financial power to make the best offers. A decade ago, most people in the renewables industry worked for small and medium-size developers, utilities, or independent power producers. In recent years, large oil and gas companies and financial firms have entered the market. These well-heeled competitors exert pressure on the search for land, wind and solar project returns, M&A options, and talent. They try to attract top performers with offers that include high salaries, bonuses, and long-term incentives. In response, small and medium-size developers have upped their game by offering employees unconventional incentives, such as equity participation in new wind and solar projects.

Traditional utility companies, independent power producers, and large renewables developers are having difficulty keeping pace. Although their average salaries are in line with the market, the upside potential they offer to experienced high performers is limited. As oil and gas majors increasingly expand their renewables’ businesses via organic growth instead of acquisitions, the stakes will heighten. These companies will lure more talent from the open job market with attractive offerings, making it even harder for utilities to compete. As a result, utilities risk being left behind in the race to hire top talent.

How to thrive on the bumpy road ahead

To find the right talent at affordable salaries, renewables players will have to rethink critical HR and recruitment strategies and processes. While they can apply some best practices from other industries, ambitious companies will also want to consider new and unconventional ways of attracting and retaining talent. Five approaches can help companies thrive in this world of increasing talent scarcity:

  • A strong brand that is visible to employees. Attracting a large pool of new talent can present challenges if few people have heard of you or know you are in the renewables business. Companies will want to consider how they are perceived by potential employees in their primary market and across the globe. Global players with a strong brand in their home country tend to underestimate the value of regional branding, which they will need to attract the employees—including those with much-needed specialized talents—that will help them grow in new locations.

    Additionally, when targeting both blue- and white-collar workers, a strong brand outside of the renewables industry is important. Being part of the clean-energy transition is not enough of an appeal to compete with other thriving industries, such as tech or other construction sectors, that offer explicit and attractive benefits for employees.
  • Clear career path development for key job positions. A lack of career development opportunity is a major driver of employee attrition. If employees can visualize a future path at their company, they are more likely to want to follow it and stay at the company. Renewable-energy companies will need to articulate their plans for employee development along many paths, offering multiple tracks with different specializations, such as technical, management, and project management. As companies in the renewables industry increasingly go global, they will also need to make temporary relocation to other countries part of an attractive career path. For many decades, companies in the oil and gas industry have been sending their top managers across the globe for their exploration and production businesses; now it is time for pure-play renewable-energy companies to learn from them.
  • Employee incentives. Ambitious and highly educated employees are often motivated to work for companies that allow them to share in its success. Along with classic stock options and awards, long-term incentive programs, such as equity options for newly built wind and solar projects, could help attract new talent and increase the chances that employees will stay for longer. Although these awards might take longer to materialize due to development and construction lead times, they can be a competitive advantage over industries without aggressive growth expectations.
  • Early capture of high potential employees. The talent scarcity problem is only going to get worse. Recruiting initiatives at the early phases of someone’s career, such as efforts at target universities and vocational schools, can help secure future talent and build a strong bond. At the same time, companies should make sure they have adequate regional recruiting programs so relocated employees can eventually be replaced with local talent.
  • Hiring by acquiring. In a world in which talent is one of the scarcest assets in a renewables business, buying a company for its top talents is an expensive but effective way of acquiring new workers. This form of talent acquisition could become a more common phenomenon, especially for companies looking for very specific technical capabilities, such as energy technicians for renewables operations and maintenance, or for specialized talents in a particular environment, such as developers in a country with an immature renewables industry.
  • Structured training. Having sufficient technicians and other blue-collar workers is a major pain point for the construction, operation, and maintenance of new wind and solar plants. To attract and retain these workers, employers should go beyond wages and use training programs that focus on clear, long-term career path development. This can apply particularly to roles that are temporary. Individuals who begin constructing solar plants in the coming years, for instance, could spend their entire careers doing this type of work, depending on the size of build-out.

Given the growth ambitions of the renewables sector, attracting and retaining much-needed workers is crucial. Companies in this sector need to be ahead in the talent game to succeed.

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