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Is There A Workforce Crisis In The Utility Industry?

Rakesh  Sharma's picture
Journalist, Freelance Journalist

I am a New York-based freelance journalist interested in energy markets. I write about energy policy, trading markets, and energy management topics. You can see more of my writing...

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  • Nov 18, 2017
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Is there a millennial workforce crisis within the utility industry?    

According to a Department of Energy report released earlier this year, the utility industry is facing a vacuum in its middle and top management layers. “A dip in the electricity industry workforce training programs in the 1980s contributed to a currently low number of workers in the electric utilities able to move into middle and upper management positions - creating a workforce gap as a large number of baby boomers retire,” the report states.

A December 2016 report by PA consulting provides further evidence of the industry’s problems. According to the report, the industry faces a shortfall of 75,000 new workers required for the smart grid and utility industries by 2020. It’s relatively unglamorous reputation and lack of avenues for growth hasn’t helped matters and attracted bad reviews from millennials, a generation for whom self-gratification is extremely important in the workplace.  

“It is a monster in the closet (of the industry),” says Janet Kieffer, CEO of Influence. A veteran of the energy industry, Kieffer says she has been working to grow awareness about the demographic crisis plaguing the industry. According to her, there is a massive age and culture gap within the utility industry. This is primarily due to a surfeit of trained employees, who have worked with utility companies for decades. These workers extended their employment tenure, when the industry was confronted with a similar crisis in 2004.

But the dice is loaded against utilities this time around as a flood of workers, who had postponed their retirement earlier, are set to retire in the coming months. Kieffer estimates that the industry will shed 30% of its workers each year in the next three years.

To be sure, not all these jobs will be lost to retirements. Smart grid technologies have redefined and streamlined processes and jobs within the industry. According to a 2014 EU study, the utilities sector there will lose 6.3% of its workforce by 2025 as smart grids evolve there. Indeed, the evolution of smart grid technologies has changed the industry’s employment makeup. Certain jobs, such as meter readers, are set to become redundant in the future even as new jobs, which require a radically different skillset, are created. For example, software engineer and data analyst jobs are expected to increase as are those pertaining to relay technicians and communications technicians.

But the smart grid transformation could turn out to be an opportunity for startups, instead of companies. In a report about the digitization of utilities last year, consulting firm PriceWaterhouseCooper (PWC) stated that “..these companies have not made material efforts to tailor roles, responsibilities, talent, and organizational culture to drive digital transformation. Utilities that don’t address this contradiction may find themselves optimizing their distribution assets for rival technologically savvy companies — mostly new players in the sector that will own the customer connection and service layers and, along with those, a potentially lucrative revenue stream.”  

Hiring technology-conversant millennials would be the ideal way for utilities to tackle this problem. But they do not seem to be interested.

“Millennials consider these industries to be old, stodgy, and not very creative,” says Ron Calzolari, vice president of sales at SAP. The ERP company has launched a partnership with energy and utility companies to attract millennials to these industries. The initiative is called SAP Launchpad and conducts an assortment of activities, including arranging hackathons and education sessions about processes within the energy and utilities industries.

According to Calzolari, there is a moral and ethical element to millennials’ disdain for utility companies. “Quite frankly, it’s a rat hole if they try to address that situation,” he says, referring to the perception that such companies pollute the environment and are slow-moving. Instead, SAP shifts the narrative to applications of technology to the industry.   

Within 72 hours, SAP Launchpad educates college students about the energy and utility industries, its processes, and problems. Subsequently, students are asked to design solutions to problems using available toolsets. Calzolari says their solutions tend to include popularly available tools, such as smartphones, Uber, and Airbnb.

The initiative also partly helps address the “messaging problem” faced by companies in the utility and energy sector. “They are limited by the degree to which they can message, how they are trying to integrate technology and work with it,” says Calzolari. “They work in a highly regulated industry and have standards that cannot be compromised.”   

One of the millennials that SAP Launchpad has roped in to talk to young college students is Marathon Oil’s Thomas McCormick. The thirty-something works as a water management supervisor and says he “fell” into the energy industry after studying pipeline design in college. According to him, the perception that millennials are unwilling to learn about the energy and utility industries is incorrect. “I consider millennials to be young and ready to learn,” he says, adding that they have skillsets that need direction. “Ultimately, they just want to be appreciated for all the hard work they put in.”    

While his spiel of self-gratification sounds typically millennial, McCormick may be an atypical example of his breed in that his career path has been remarkably straight and confined to a single industry. More often than not, the average millennial changes jobs and tastes. Kieffer estimates that they change jobs at three times the rate of previous generations. The problem does not stop there. Young technology professionals, who are most in demand among millennials, are also used to generous salaries and benefits.

As Kieffer puts it, millennials like to work on their laptops, eat organic foods and are used to office conveniences, such as free laundry and pet-sitting services at their workplace. This is a different setup from the energy industry’s work culture, which relies on workers being on the ground.  “How do we apply that (the benefits and conveniences) to an industry that has to have employees for an average of 10 to 20 years?” asks Kieffer.

Competition from technology companies with savvy branding, such as Google and Apple, located in the sunny climes of California or cultural centers, such as New York, has also pushed average salaries for such professionals higher. Kieffer estimates that it will cost utilities approximately $1.5 million (including benefits) per annum in order to hire just three millennials.

The expense, notwithstanding, utilities are moving towards integrating technology and, in turn, millennials into their operations. For example, Southern Power Company appointed a chief information officer in 2015. Chief Digital Officers are also becoming common among utilities. Energy startups at incubators have become common. Technology and millennials will transform the industry, as we know it. “It’s a different way of looking at it, a different way of approaching the problem and innovating,” says Calzolari. “There is a huge room for advancement (in the industry) and that advancement will come from people who think about things differently.”

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