Mark Ahlstrom, “New Skills Needed: Structural Transformation in the Electricity Industry,” IEEE Power & Energy, 2017, DOI: 0.1109/MPE.2017.2755472 18 October 2017
For the average male worker of age 25, the inflation-adjusted wage level peaked in 1968 and has been falling ever since
The market for workers has irreversibly changed in major ways that also have clear messages about structural transformation that apply to the electricity industry
Future power system jobs will be much more about software and services, communications and system optimization, and other new skill sets that are radically different.
Fatih Guvenen, a University of Minnesota economist, conducted a new analysis of the lifetime earnings of American workers. The study was done for the National Bureau of Economic Research and clearly shows that the market for workers has irreversibly changed in major ways that also have clear messages about structural transformation that apply to the electricity industry.
The jobs of 200 years ago were based on farming and trade; there were almost no manufacturing jobs. There was a major structural transformation as manufacturing jobs became the norm, and this resulted in significant gains for men entering the job market (and, to a lesser extent, for women as well). However, for the average male worker of age 25, the inflation-adjusted wage level peaked in 1968 and has been falling ever since. The data make it clear that all developed countries are well along in another major structural transformation with huge ramifications for workers and industries—the decline of manufacturing and the rise of services. Jobs in manufacturing, mining, and farming are not coming back.
An analogous transformation is underway for the electricity industry, and as with the job changes in the transformation from a manufacturing to a services economy, the transformation in the energy economy requires a different skill set. Gone are the days when utilities could put most of their efforts into building “big iron” resources, such as large factory-like power plants that manufacture electricity. Future power system jobs will be much more about software and services, communications and system optimization, and other new skill sets that are radically different.
These transformations to a services economy have large impacts on our education systems and society, and they also have huge impacts on the electric utility industry. Demand for power is largely stagnant. The good news for utilities is that overall electricity use is likely to grow dramatically as we electrify more of our overall energy use from other sectors such as transportation. The challenge for utilities is that this will be a new world based on services and customer interactions, and there will be many new competitors.
when I started to write this column, the idea was to discuss whether renewable energy had arrived yet and if it was becoming mainstream. looking at events since the previous special issue on renewable energy integration just two years ago, this question already seems completely out of date. The cost of wind energy has fallen to levels where, for much of North America and the world, wind plants are now the cheapest source of new generation for providing energy. From a more expensive starting point, the cost of photovoltaic solar power has fallen to the point where it is now the cheapest source of new on- peak generation. Already in some states and countries, the challenge is more around having too much energy during the working day, to the point that we must alter customer behaviors or build large-scale storage systems to deal with excess generation.
Without doubt, renewables are mainstream and continue to be a major catalyst of change, not just in the electricity sector where the impacts are huge but through our service economy in general. Another factor that has been difficult for both utilities and regulators to grasp is that while cost does matter, this transformation is just as much about customer preference. Just as many customers now go out of their way (and often willingly pay a premium price) for groceries that are organic or raised locally, customers for electricity are now choosing to purchase their electrons from specific types of clean energy sources or from their own rooftop.
Utilities should work hard to provide customers with the flavors of electricity that they want. But they must work even harder to remain as the preferred provider of platforms and services for this transformed world. similar to other industries like telecommunications, photography, and music that have already been changed forever, the utility industry is undergoing a digital transformation. This is visible in the characteristics of our power plants and loads, with a transition from large synchronous devices to computer-based control systems and inverters that are increasingly prevalent in new generators, electronics, lighting, and motors.
Another part that may be even more disruptive, however, is in the relationship with the end-use customers themselves. Power is no longer produced only at large utility-owned power plants, but there will still be value in ensuring reliability and balancing the needs of all customers at all times. There will be many buyers and sellers, but there will still be value in the tracking, settlement, and billing for an increasingly diverse set of products and transactions. And more than anything, there will be value in control systems, software, platforms, and the overall understanding that is necessary to optimize an increasingly complex system and make it all work. This will be a great business, but with a very different skill set.
Has renewable energy arrived? Are renewables mainstream? Of course, and more than that, they have catalyzed a structural transformation of the energy industry. Renewables are a major catalyst and driver of change, and they are mainstream today in every sense of the word.
Change is difficult and painful for many. In the newspaper interview, the economist was asked if the coal mines or factories will come back. No was his answer, as there is no going back to the other side of a major structural transformation of our economy, as much as some may wish for it to happen.
The same is true for the electric utility industry. This is a major structural transformation that goes beyond renewables. The old days are not coming back, but new opportunities are bright for utilities and energy companies that develop the skill sets and services for the future.