Empowered Citizens, Informed Consumers and Skilled Workers

Annex A. Deep dive: The transition of the energy sector and its implications for skills development

The energy sector plays a pivotal role in the green transition, but the energy transition is off-track a trajectory in line with limiting warming to 1.5°C by 2100, and rapid acceleration of action is needed. The International Energy Agency (IEA)’s 2023 net-zero emissions scenario shows that achieving net-zero CO₂ by 2050 is technically and economically feasible, with key roles being played by renewable energy, energy efficiency and electrification of heat and transport (IEA, 2023[1]). For example, each year, approximately 1,000 GW of renewable power must be installed to be on track for a 1.5°C pathway. In 2022, around 300 GW of renewable capacity was added worldwide, comprising 83% of new installations, while fossil fuels and nuclear power together accounted for only 17% (IRENA, 2023[2]). While the surge of renewables is a positive development, there is a pressing need to significantly further increase renewable capacity and the share of renewables in the electricity mix.

In terms of mitigation, the latest science indicates that net-zero CO₂ energy systems require substantial reductions in fossil fuel use, minimal use of unabated fossil fuels and the adoption of carbon capture, utilisation and storage (CCUS) technologies. This transformation also requires extensive electrification across various sectors, including those less amenable to direct electrification, such as heavy industry, aviation and shipping, alongside the development of alternative energy carriers. Enhancing energy conservation and efficiency measures is crucial, as is integrating various components of the energy system more effectively. This integration will involve, for example, connecting renewable energy sources with energy storage solutions to ensure stability and reliability, especially for intermittent resources like solar and wind. Feasible adaptation options support resilient infrastructure, reliable power systems, and efficient water use across existing and new energy generation systems. Enhanced energy reliability and resilience to climate impacts can be achieved by diversifying energy generation through wind, solar, and small-scale hydropower, coupled with demand-side management initiatives like energy storage and efficiency upgrades. Implementing climate-responsive energy markets and deploying smart-grid technologies, strengthening transmission systems, and bolstering supply response capabilities are all feasible in the medium to long term, offering additional benefits through climate mitigation efforts (IPCC, 2023[3]).

To effectively support the transition towards net-zero CO₂ energy systems, the workforce will require a range of technical skills to meet the demands of this evolving energy landscape. Table  A.1 summarises the implications of these potential measures for technical skills demand in this sector.

Table A.1. Examples of mitigation and adaptation measures in the energy sector and implications for technical skills demand

Examples of mitigation and adaptation options

Technical skills needed for achieving these options

 Fossil Fuel Reduction and Carbon Capture: Substantial reductions in fossil fuel use; Minimal use of unabated fossil fuels; Adoption of carbon capture and storage technologies.  Electrification and Alternative Energy: Extensive electrification across various sectors, including those less amenable to direct electrification; Development of alternative energy carriers.  Energy Conservation and System Integration: Enhancing energy conservation and efficiency measures; Effective integration of various components of the energy system.  Adaptation and Resilience: Enhancing energy reliability and resilience to climate impacts through diversifying energy generation (wind, solar, small-scale hydropower) and demand-side management initiatives (energy storage, efficiency upgrades).  Technological and Market Innovations: Implementing climate-responsive energy markets; Deploying smart-grid technologies; Strengthening transmission systems; Bolstering supply response capabilities; Offering additional benefits through climate mitigation efforts.

Renewable energy system expertise (wind, solar). Expertise in installation, maintenance, and operation of renewable energy systems. Grid integration techniques. Skills related to carbon capture and storage technology implementation. Techniques on electrification system operation and maintenance. Alternative energy carrier development (hydrogen, synthetic fuels, biofuels). Energy conservation and efficiency optimisation.

Source: Based on IPCC (2023), Climate Change 2023: Synthesis Report. Contribution of Working Groups I, II and III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, H. Lee and J. Romero (eds.)]. IPCC, Geneva, Switzerland., IPCC, Geneva, Switzerland, https://doi.org/10.59327/IPCC/AR6-9789291691647 (IPCC, 2023[3])

Skilled labour shortages are emerging as a major potential bottleneck for the net-zero transition in the energy sector. Countries emitting 70% of global greenhouse gas emissions have pledged to decarbonise their energy sectors, and in this context, a peak, followed by a decline, in the demand for oil, gas and coal is expected in this current decade. A major shift in energy employment worldwide has been underway since the COVID-19 pandemic, spurred by rapidly growing clean energy investment. Employment in clean energy rose by around 15% between 2019-2023, while fossil fuel-related jobs fell by about 1% over that time. Clean energy already employs more workers than fossil fuels worldwide, and significant growth to 2030 is projected under all scenarios developed by the International Energy Agency (IEA, 2023[4]). Indeed, the energy sector has high job vacancy rates, and with employers struggling to fill positions, skills shortages are already translating into project delays. A lack of workers with energy specialisations is a particular barrier for those companies seeking to fill positions.

This is an issue that requires more attention from policy makers in all regions (see Box A.1 for a discussion of some of these challenges and potential strategic approaches to addressing the skills gap in the energy sector). As most energy jobs are tied to the location where installations are developed – around 60% of energy jobs cannot be offshored – it is essential to develop a sufficiently large and skilled local workforce in every region. Most of the jobs in growing clean energy sectors are in construction and manufacturing, both of which are already facing worker shortages across the broader economy in most parts of the world. Moreover, construction and manufacturing are expected to grow significantly through 2030 in all IEA scenarios, implying a skills bottleneck whose importance is likely to increase. This growth in construction and manufacturing employment varies by region, and the share of construction and manufacturing in total energy employment tends to be higher in developing countries (IEA, 2023[4]).

Taking a global perspective, energy sector transformation is a key pillar of both development processes and the net-zero transition. Developing countries are home to two-thirds of global energy jobs. In particular, the world’s largest energy workforce is in Asia, due to factors including its large population, lower labour costs and brisk investment. China has by far the largest national energy labour force, of which clean energy accounts for roughly 60% (IEA, 2023[4]). The global transition to net-zero emissions in the energy sector will thus have a marked impact on labour markets in developing countries.

To date, developing countries have not been able to capture a proportionate share of the benefits of clean energy job growth. Since 2019, over two-thirds of new clean energy jobs have been created in developed countries and China. Employment in clean energy in developing countries (excluding China) grew by 10% from 2019 to 2023, compared to 3% growth in fossil fuel employment. Although the growth in clean energy jobs has been strong, fossil fuel jobs continue to represent a significant share of total energy employment in developing countries (IEA, 2024[5]).

The net-zero transition presents significant challenges for fossil fuel producer developing countries, as they seek to manage their labour markets. The transition risk is particularly acute for coal miners, as coal mines in these countries tend to be less mechanised and rely heavily on unskilled workers. 90% of the coal supply jobs lost in the IEA’s net-zero emissions scenario through 2030 are located in developing countries (IEA, 2023[4]). Greening their economies while minimising adverse employment impacts requires well-designed skills policy responses.

Generally lower levels of education and skills availability act as a barrier to more rapid growth in clean energy jobs in developing countries. Companies looking to start or scale up operations in these countries are generally faced with higher costs associated with onboarding and training employees. The fact that many developing countries outside of China have relatively newer and smaller clean energy industries means that even high-skilled workers, where available, are less likely to have the specific experience required by the nascent clean energy industry, and even less likely to be prepared to train others (IEA, 2024[5]).

Careful planning and collaboration between public and private actors is needed to ensure the skills development that will allow developing countries (excluding China) to capture a greater share of clean energy jobs (IEA, 2024[5]). Development finance institutions and other international partners can provide technical and financial assistance to public actors, and to educational and vocational training institutions on the planning, design, and implementation of measures (OECD, 2022[6]). Collaboration with international partners can be useful for skills development through mechanisms such as degree conferrals, training programmes, certification and standard building, curriculum design, and joint ventures and Build-Operate-Transfer agreements. Supporting skills development for the evolving green economy fits well with broader goals of many developing countries of achieving higher youth education levels, formalising the economy, and raising the base skill level of the workforce at large (IEA, 2024[5]).

Box A.1.  Addressing the skills gap in the energy sector: challenges and strategic approaches

Analysis conducted by the International Energy Agency (IEA) indicates that the number of workers pursuing degrees or certifications relevant to energy sector jobs is not keeping pace with growing demand. The conferral of relevant science, technology, engineering and mathematics (STEM) degrees is not rising fast enough to meet demand for new workers with these credentials. The gap is even more severe for vocational jobs than for STEM. Vocational education and training (VET) programmes are not expanding fast enough to meet the growing demand in the energy industry. This may in part be due to a poor image of VET among students, along with a lack of understanding of the associated career and salary options. In addition, training courses tailored to energy technologies, particularly newer technologies, are not always available.

To meet the evolving job and skills needs in the energy sector, close co-ordination between governments, agencies, education institutions, industry and workers will be vital. Social dialogue will be important to develop a more responsive and inclusive education system, which would enable low-skilled or underqualified workers to more easily receive additional training and take advantage of these growing opportunities.

There is a need both to integrate new clean energy skills into the curricula of pre-existing certifications and to develop new ones to reflect emerging skill requirements, especially for new industries like carbon capture, utilisation and storage (CCUS) and low-emissions hydrogen. Using skills assessment and anticipation results to update curricula and training programmes is key for these efforts (see also section on Anticipating future skills needs for the green transition). In order to systematically integrate these considerations, National Qualification Frameworks should incorporate skills needed for clean energy as far as possible.

Retraining will be key for enabling the transfer of workers from energy sub-sectors with falling labour needs (e.g. fossil fuels) to growing clean energy sectors. Just under half of the fossil-fuel related job losses from 2023 to 2030 in the IEA NZE Scenario are potentially transferable to new clean energy jobs with retraining (especially workers in oil, gas, and internal combustion engine vehicle manufacturing). However, workers most at risk of displacement are least likely to participate in training. Facilitating access, ensuring affordability, and encouraging participation should be a priority for policymakers. At the same time, workers from fossil fuel sectors cannot address all of the evolving skills demand, and not all workers will be easily transferable with retraining. For instance, workers in coal mining will be challenging to transfer. Previous coal transitions over the past century may offer some policy lessons, including targeted reskilling and community support policies.

Wages in the energy sector are typically higher than pay for similar occupations, reflecting higher skilling and specialisation requirements. Wage premiums in energy continue to attract needed skilled labour. For those requiring additional skills to enter the energy sector, wage premiums must be sufficiently high to incentivise retraining. Government financial support for retraining can help to reduce those premiums needed to attract workers requiring additional skills.

Increasing the number of women entering vocational or educational programmes relevant to energy is an important step to overcoming skills shortages. The share of women awarded STEM bachelor degrees (besides those in biological and medical sciences, where graduates are less likely to work in the energy sector) is gaining some ground, having reached around 29% in the United States, 34% in the European Union, and 44% in India as of 2022. In emerging and developing economies, skilling programmes targeting women can help expand the available labour force and support growing local businesses.

Source: (IEA, 2024[5]) World Energy Employment 2024, https://www.iea.org/reports/world-energy-employment-2024 (accessed on 10 December 2024); (IEA, 2023[1])Net Zero Roadmap: A Global Pathway to Keep the 1.5 °C Goal in Reach, IEA, Paris, https://www.iea.org/reports/net-zero-roadmap-a-global-pathway-to-keep-the-15-0c-goal-in-reach.

References

[5] IEA (2024), World Energy Employment 2024, https://www.iea.org/reports/world-energy-employment-2024 (accessed on 10 December 2024).

[1] IEA (2023), Net Zero Roadmap: A Global Pathway to Keep the 1.5 °C Goal in Reach, IEA, Paris, https://www.iea.org/reports/net-zero-roadmap-a-global-pathway-to-keep-the-15-0c-goal-in-reach.

[4] IEA (2023), World Energy Employment 2023, https://www.iea.org/reports/world-energy-employment-2023.

[3] IPCC (2023), Climate Change 2023: Synthesis Report. Contribution of Working Groups I, II and III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, H. Lee and J. Romero (eds.)]. IPCC, Geneva, Switzerland., IPCC, Geneva, Switzerland, https://doi.org/10.59327/IPCC/AR6-9789291691647.

[2] IRENA (2023), World Energy Transitions Outlook 2023: 1.5°C Pathway, International Renewable Energy Agency, Abu Dhabi.

[6] OECD (2022), Equitable Framework and Finance for Extractive-based Countries in Transition (EFFECT), OECD Development Policy Tools, OECD Publishing, Paris, https://doi.org/10.1787/7871c0ad-en.