1 June 2021 / Macro

The skills gap in the clean energy transition

By Richard Lum, co-chief investment officer, Victory Hill Capital Advisers

Renewable energy industry populated by professionals with skills and experience narrowly focused on specific technologies and specialisms

The skills gap in the clean energy transition

The build-out of renewable power generation has, in large part, been a stand-out success across developed economies.

A report earlier this year celebrated the ‘landmark’ finding that renewables overtook fossil fuels as the main source of energy in the EU for the first time in 2020. In the UK, a record 42% of electricity came from renewable sources last year, compared to 41% from fossil fuels – a record in its own right.

This success is clearly a step in the right direction towards hitting net zero carbon emission targets, but in the race to secure a clean energy transition the industry has almost singularly focused the build out of renewable power generators such as wind and solar projects. This tunnel vision has resulted in an industry populated by professionals with skills and experience narrowly focused on specific technologies and specialisms. We face a situation where there is a plethora of experts in renewable energy generation, but too few able to focus on developing the energy infrastructure needed to enable that power to be used efficiently and avoid wastage.

See also: – ‘The tide is turning’: Historic week for clean energy transition as oil majors suffer blows

This paucity of skills risks holding back the global clean energy transition if nothing is done to address the imbalance. Simply continuing to develop further renewable capacity is not the sole solution to the global energy crisis, nor does expanding renewable capacity at a faster pace guarantee that countries will push carbon emissions to the lauded ‘net zero’ level.

This is because the very electricity networks that this extra capacity will plug into are often overlooked subjects for investment. Ageing electricity networks are suited to dealing with a lot of power from one large plant, not small surges of power from numerous small wind farms, and most are in desperate need of investment and development to improve their resiliency.

We must face the reality that a large proportion of energy demand continues to be met by fossil fuels. While less fossil fuels are being emitted as renewables take on a bigger role, the balance which remains are as harmful as they were to the environment and to human health half a century ago. Working out how to clean up those fuels that we do burn will have direct impact on the level of harmful emissions pumped into the atmosphere.

See also: – Wind and solar opportunities as China plans to clean up its environment

What is needed is the engagement of highly skilled and experienced energy professionals and firms who have interacted with existing ‘dirty’ fuel sectors, such as oil, gas, and coal, to redefine how elements of conventional technology and practices can be adapted to help facilitate the energy transition. A focus on adding yet more wind farms and solar panels to energy networks will only take countries so far if the network and very infrastructure it relies on to power homes and businesses is not up to scratch.

The skills gap is also an issue when we turn our attention to the financing of projects. Much of the financial backing for the clean energy transition has been funnelled into renewable generation, aided and encouraged by generous government subsidies and perks. Again, this is not an issue in itself. These projects needed financing. The problem arises when the majority of expertise is singularly focused on renewable generation, to the point that wider infrastructure needs are overlooked.

These wider needs may not appear to be ‘clean’ opportunities on the surface. An investment into upgrading an oil refinery, for example, may flag up as an investment into an old dirty fossil fuel. But if we dig deeper, we recognise the need for investment into the technology that can clean up these ‘dirty’ fuels, making them less harmful to use in the period until renewables can power 100% of our energy needs.

Sustainable and renewable are easily confused, and when it comes to the global energy system they are not one and the same. Conventional skills from traditional non-renewable industries such as oil and coal can and should be repurposed to serve more sustainable development. Government and industry should focus on expanding the skills in the sector if they are committed to building sustainable systems that can enable to global transition to clean energy. Not only will this benefit long-term climate ambitions, but also help address the issue of ‘green’ jobs that is central to the climate strategies of leaders such as Joe Biden.

For investors, the opportunity in the global energy transition is far wider and more varied than funding for renewable power generators and battery storage. Looking to other technologies and ideas that can accelerate the energy transition will reap rewards both in terms of the financial opportunity, but also for the long-term future health of our communities and the planet.