Despite the title of this article, we are not thinking of non-human ‘aliens’ found in Mexico as green workers. Nor are we thinking of UK Prime Minister, Rishi Sunak, and his troubling row-back on Net Zero climate targets as a strategy. However, strategic thinking does require looking at the longer term business environment and recognizing a genuine problem. Thankfully, most countries at the UN General assembly in New York last week agreed the climate crisis is real and requires action. But…the cleantech construction industry is facing an acute worker shortage which is going to require thought leadership and non-human digital solutions which hopefully won’t involve talent searches on other planets. This is not a futuristic fantasy problem. The construction projects and huge surge of capital investment are very real.
The shift away from fossil fuel usage by the global economy is expected to result in a $275 trillion spend by 2050(Source: McKinsey). Currently, the US and Bidenomics are grabbing the headlines with manufacturing construction – new factories – tracking a $189 billion annual investment rate, triple the average rate in the 2010s ($63 billion). Europe and Asia might be playing catch up but the direction of travel is very clear. Earlier this month, European Commission President, Ursula von der Leyen, showcased in her State of The Union Address the construction of 38 clean steel factories and more clean hydrogen investment than the US and China combined. European bragging rights were also enhanced by the successful $1.5 billion raise of equity for Sweden’s H2 Green Steel Project, the largest private funding round of the year in the region. So, lots of capital and projects to lead the decarbonising revolution but this might be the first revolution where the workers are not quite on board. Not yet, anyway.
The European Commission estimates that its target of 45% of energy coming from renewables will require the generation of more than 3.5 million jobs by 2030. In the US, the $370 billion of investment via the Inflation Reduction Act focused on electric vehicles(EVs), heat pumps and solar panels could require up to 537,000 new jobs a year for a decade according to BW Research. The trade publication, Rewiring America, goes even further by stating the USA needs 1 million more electricians to meet its climate goals. Arguably, this ramp up in worker demand could not have come at a worse time for big project investment. Consider the following structural challenges facing the construction industry alone:
• Construction Europe’s newsletter is quoting some studies suggesting 50% of the global construction workforce is due to retire within the next decade.
• Lead times to hire electricians in Germany are longer than those for software engineers.
• Just 2% of electricians in the US are women.
• Oxford Economics estimate women make up just 15% of the European construction workforce.
It would be easy to conclude that the cleantech construction revolution will stall for demographic and structural reasons but capital and capitalism usually finds a way. As stakeholders in the cleantech ecosystem we are watching a number of trends and headlines very closely. Clearly, given the whole world is on ‘inflation watch’ the most obvious consequence of demand outstripping supply is the potential increase in salaries in the sector. The United Auto Workers strike for better pay might be grabbing the old economy headlines but South Korea’s SK Innovation is making headlines (and batteries for Ford Motor Co. EVs) in Georgia, USA. It plans to ramp up its workforce from 4,000 to 20,000 by 2025 but is thinking ahead on pay and benefits – advertising pay between $20 and $34 per hour which is well above Georgia’s median hourly rate of $18.43(Source: US Bureau of Labour Statistics). It’s also covering 100% of life insurance costs and paying in an above-market retirement plan contribution of 6.5%. However, there are less blunt instruments than remuneration to attract workers.
The opportunity to upskill and train neglected, or challenged, parts of the workforce should be considered. For example, the US which is facing a retirement demographic challenge in construction is attaching tax benefits to factory construction projects with significant apprentice programmes for youth employment – see the latest America Climate Corps initiative from the White House. Furthermore, the impact of technology and AI on other sectors is potentially an opportunity to source from alternative talent pools – think military, truck driving and clerical workers facing non-human replacement. In fact, as a current illustration of tech replacement, the use of drones should not be seen as alternative instruments of warfare but also a potentially huge assist to the cleantech construction sector in health and safety. For example, SunRun Inc in the US is deploying drones to survey roofs ahead of solar panel installation, reducing the number of workers required to scale upper floors of buildings. However, new tech will still need skilled people and this is where things might get interesting at a corporate strategic level.
With such acute shortages of skills coming down the tracks, will companies be tempted to buy entire businesses with specific skills? Think about an electrical engineering contractor with 200 electricians. Now, think about the EU Commissioner for Energy estimating that Europe needs to invest €584 billion in its power grids by 2030. Then, consider the need for 80 million kilometres of new grids globally by 2050. Plugging new energy sources into our expanding energy grids is only one part of the decarbonising shift. The strategic reality is that electrification is the green end-game requiring storage, connectivity, charging stations etc. However, it looks like worker “power” will be another critical plug-in for the global economy to deliver a decarbonised future. Let the search begin!