Skills gaps risk holding back emerging markets

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A Word About Wind
July 18, 2016
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Skills gaps risk holding back emerging markets

The chance of higher returns in emerging markets has always attracted bolder investors.

But these strategies are at risk. A lack of skilled workers threatens to slow the growth of renewables in emerging markets, as capital investment outpaces resources on the ground.

This is an issue that firms in the wind sector need to address. The shortage of people with suitable skills and training domestically is producing a bottleneck for development. Unless companies take appropriate steps to support training on the ground, the shortage of skills is likely to lead to an inflation of labour costs and act as an anchor on growth.

Africa is a good example. In recent years, finance for wind energy projects in sub-Saharan Africa has been extremely forthcoming. Bloomberg New Energy Finance has reported that clean-energy investments in sub-Saharan Africa doubled in 2015, to €5.4bn and it also estimates that over 12GW of renewables is due to be installed over the next four years.

With such a fast rate of development it is no wonder that we are starting to see a dearth of workers with the right skills. In particular, developers and manufacturers are finding managerial positions hardest to fill, and are investing heavily in training local workers.

But the rise in the number and size of wind and other renewable energy projects in Africa means that retaining the workers they have trained may become problematic. Developers will then be forced to inflate wages if they are to attract and retain skilled individuals. This would be great news for local economies, but would also squeeze investors’ margins.

This is not a new challenge. Henrik Stiesdal, former chief technology officer at Siemens, explained in our Emerging Markets report in March that many manufacturers face issues when they have trained people to do a particular job because those people then want to move up the career ladder, and stop doing the role that they have been trained to do.

But the new element of this is that there are more projects coming through in emerging markets, and therefore more roles to fill. It will take time for skills in these countries to improve across the board as, by definition, they are still developing. It will take time for the educational infrastructure to improve and results to be seen.

This is a challenge that wind companies have to address, but they need support from governments. If political leaders see lack of access to power as a key factor in slowing economic growth then supporting the growth of renewables must be part of the solution.

According to the International Energy Association, across sub-Saharan Africa an estimated two thirds of people have no access to electricity. As well as stifling economic growth, this also poses
a major health risk, as 600,000 premature deaths each year are attributed to air pollution resulting from homes using traditional biomass as fuel. The African Investment Bank estimates that fully electrifying the continent in ten years would cost $54bn annually, but it will likely be a shortage of skills, not capital, that will make this goal hard to achieve.

We have seen great growth in emerging markets over the last few years but, if this is to continue, support for supply chains is key. Education and on-the-ground training are both essential to produce a large enough pool of workers.

This carries an up-front cost — but, if successful, the rewards for investors and emerging markets can be substantial.

The chance of higher returns in emerging markets has always attracted bolder investors.

But these strategies are at risk. A lack of skilled workers threatens to slow the growth of renewables in emerging markets, as capital investment outpaces resources on the ground.

This is an issue that firms in the wind sector need to address. The shortage of people with suitable skills and training domestically is producing a bottleneck for development. Unless companies take appropriate steps to support training on the ground, the shortage of skills is likely to lead to an inflation of labour costs and act as an anchor on growth.

Africa is a good example. In recent years, finance for wind energy projects in sub-Saharan Africa has been extremely forthcoming. Bloomberg New Energy Finance has reported that clean-energy investments in sub-Saharan Africa doubled in 2015, to €5.4bn and it also estimates that over 12GW of renewables is due to be installed over the next four years.

With such a fast rate of development it is no wonder that we are starting to see a dearth of workers with the right skills. In particular, developers and manufacturers are finding managerial positions hardest to fill, and are investing heavily in training local workers.

But the rise in the number and size of wind and other renewable energy projects in Africa means that retaining the workers they have trained may become problematic. Developers will then be forced to inflate wages if they are to attract and retain skilled individuals. This would be great news for local economies, but would also squeeze investors’ margins.

This is not a new challenge. Henrik Stiesdal, former chief technology officer at Siemens, explained in our Emerging Markets report in March that many manufacturers face issues when they have trained people to do a particular job because those people then want to move up the career ladder, and stop doing the role that they have been trained to do.

But the new element of this is that there are more projects coming through in emerging markets, and therefore more roles to fill. It will take time for skills in these countries to improve across the board as, by definition, they are still developing. It will take time for the educational infrastructure to improve and results to be seen.

This is a challenge that wind companies have to address, but they need support from governments. If political leaders see lack of access to power as a key factor in slowing economic growth then supporting the growth of renewables must be part of the solution.

According to the International Energy Association, across sub-Saharan Africa an estimated two thirds of people have no access to electricity. As well as stifling economic growth, this also poses
a major health risk, as 600,000 premature deaths each year are attributed to air pollution resulting from homes using traditional biomass as fuel. The African Investment Bank estimates that fully electrifying the continent in ten years would cost $54bn annually, but it will likely be a shortage of skills, not capital, that will make this goal hard to achieve.

We have seen great growth in emerging markets over the last few years but, if this is to continue, support for supply chains is key. Education and on-the-ground training are both essential to produce a large enough pool of workers.

This carries an up-front cost — but, if successful, the rewards for investors and emerging markets can be substantial.

The chance of higher returns in emerging markets has always attracted bolder investors.

But these strategies are at risk. A lack of skilled workers threatens to slow the growth of renewables in emerging markets, as capital investment outpaces resources on the ground.

This is an issue that firms in the wind sector need to address. The shortage of people with suitable skills and training domestically is producing a bottleneck for development. Unless companies take appropriate steps to support training on the ground, the shortage of skills is likely to lead to an inflation of labour costs and act as an anchor on growth.

Africa is a good example. In recent years, finance for wind energy projects in sub-Saharan Africa has been extremely forthcoming. Bloomberg New Energy Finance has reported that clean-energy investments in sub-Saharan Africa doubled in 2015, to €5.4bn and it also estimates that over 12GW of renewables is due to be installed over the next four years.

With such a fast rate of development it is no wonder that we are starting to see a dearth of workers with the right skills. In particular, developers and manufacturers are finding managerial positions hardest to fill, and are investing heavily in training local workers.

But the rise in the number and size of wind and other renewable energy projects in Africa means that retaining the workers they have trained may become problematic. Developers will then be forced to inflate wages if they are to attract and retain skilled individuals. This would be great news for local economies, but would also squeeze investors’ margins.

This is not a new challenge. Henrik Stiesdal, former chief technology officer at Siemens, explained in our Emerging Markets report in March that many manufacturers face issues when they have trained people to do a particular job because those people then want to move up the career ladder, and stop doing the role that they have been trained to do.

But the new element of this is that there are more projects coming through in emerging markets, and therefore more roles to fill. It will take time for skills in these countries to improve across the board as, by definition, they are still developing. It will take time for the educational infrastructure to improve and results to be seen.

This is a challenge that wind companies have to address, but they need support from governments. If political leaders see lack of access to power as a key factor in slowing economic growth then supporting the growth of renewables must be part of the solution.

According to the International Energy Association, across sub-Saharan Africa an estimated two thirds of people have no access to electricity. As well as stifling economic growth, this also poses
a major health risk, as 600,000 premature deaths each year are attributed to air pollution resulting from homes using traditional biomass as fuel. The African Investment Bank estimates that fully electrifying the continent in ten years would cost $54bn annually, but it will likely be a shortage of skills, not capital, that will make this goal hard to achieve.

We have seen great growth in emerging markets over the last few years but, if this is to continue, support for supply chains is key. Education and on-the-ground training are both essential to produce a large enough pool of workers.

This carries an up-front cost — but, if successful, the rewards for investors and emerging markets can be substantial.

The chance of higher returns in emerging markets has always attracted bolder investors.

But these strategies are at risk. A lack of skilled workers threatens to slow the growth of renewables in emerging markets, as capital investment outpaces resources on the ground.

This is an issue that firms in the wind sector need to address. The shortage of people with suitable skills and training domestically is producing a bottleneck for development. Unless companies take appropriate steps to support training on the ground, the shortage of skills is likely to lead to an inflation of labour costs and act as an anchor on growth.

Africa is a good example. In recent years, finance for wind energy projects in sub-Saharan Africa has been extremely forthcoming. Bloomberg New Energy Finance has reported that clean-energy investments in sub-Saharan Africa doubled in 2015, to €5.4bn and it also estimates that over 12GW of renewables is due to be installed over the next four years.

With such a fast rate of development it is no wonder that we are starting to see a dearth of workers with the right skills. In particular, developers and manufacturers are finding managerial positions hardest to fill, and are investing heavily in training local workers.

But the rise in the number and size of wind and other renewable energy projects in Africa means that retaining the workers they have trained may become problematic. Developers will then be forced to inflate wages if they are to attract and retain skilled individuals. This would be great news for local economies, but would also squeeze investors’ margins.

This is not a new challenge. Henrik Stiesdal, former chief technology officer at Siemens, explained in our Emerging Markets report in March that many manufacturers face issues when they have trained people to do a particular job because those people then want to move up the career ladder, and stop doing the role that they have been trained to do.

But the new element of this is that there are more projects coming through in emerging markets, and therefore more roles to fill. It will take time for skills in these countries to improve across the board as, by definition, they are still developing. It will take time for the educational infrastructure to improve and results to be seen.

This is a challenge that wind companies have to address, but they need support from governments. If political leaders see lack of access to power as a key factor in slowing economic growth then supporting the growth of renewables must be part of the solution.

According to the International Energy Association, across sub-Saharan Africa an estimated two thirds of people have no access to electricity. As well as stifling economic growth, this also poses
a major health risk, as 600,000 premature deaths each year are attributed to air pollution resulting from homes using traditional biomass as fuel. The African Investment Bank estimates that fully electrifying the continent in ten years would cost $54bn annually, but it will likely be a shortage of skills, not capital, that will make this goal hard to achieve.

We have seen great growth in emerging markets over the last few years but, if this is to continue, support for supply chains is key. Education and on-the-ground training are both essential to produce a large enough pool of workers.

This carries an up-front cost — but, if successful, the rewards for investors and emerging markets can be substantial.

The chance of higher returns in emerging markets has always attracted bolder investors.

But these strategies are at risk. A lack of skilled workers threatens to slow the growth of renewables in emerging markets, as capital investment outpaces resources on the ground.

This is an issue that firms in the wind sector need to address. The shortage of people with suitable skills and training domestically is producing a bottleneck for development. Unless companies take appropriate steps to support training on the ground, the shortage of skills is likely to lead to an inflation of labour costs and act as an anchor on growth.

Africa is a good example. In recent years, finance for wind energy projects in sub-Saharan Africa has been extremely forthcoming. Bloomberg New Energy Finance has reported that clean-energy investments in sub-Saharan Africa doubled in 2015, to €5.4bn and it also estimates that over 12GW of renewables is due to be installed over the next four years.

With such a fast rate of development it is no wonder that we are starting to see a dearth of workers with the right skills. In particular, developers and manufacturers are finding managerial positions hardest to fill, and are investing heavily in training local workers.

But the rise in the number and size of wind and other renewable energy projects in Africa means that retaining the workers they have trained may become problematic. Developers will then be forced to inflate wages if they are to attract and retain skilled individuals. This would be great news for local economies, but would also squeeze investors’ margins.

This is not a new challenge. Henrik Stiesdal, former chief technology officer at Siemens, explained in our Emerging Markets report in March that many manufacturers face issues when they have trained people to do a particular job because those people then want to move up the career ladder, and stop doing the role that they have been trained to do.

But the new element of this is that there are more projects coming through in emerging markets, and therefore more roles to fill. It will take time for skills in these countries to improve across the board as, by definition, they are still developing. It will take time for the educational infrastructure to improve and results to be seen.

This is a challenge that wind companies have to address, but they need support from governments. If political leaders see lack of access to power as a key factor in slowing economic growth then supporting the growth of renewables must be part of the solution.

According to the International Energy Association, across sub-Saharan Africa an estimated two thirds of people have no access to electricity. As well as stifling economic growth, this also poses
a major health risk, as 600,000 premature deaths each year are attributed to air pollution resulting from homes using traditional biomass as fuel. The African Investment Bank estimates that fully electrifying the continent in ten years would cost $54bn annually, but it will likely be a shortage of skills, not capital, that will make this goal hard to achieve.

We have seen great growth in emerging markets over the last few years but, if this is to continue, support for supply chains is key. Education and on-the-ground training are both essential to produce a large enough pool of workers.

This carries an up-front cost — but, if successful, the rewards for investors and emerging markets can be substantial.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.