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Construction and Labor

Source : McKinsey & Company
Skilled labor to work on RES in the European Union is already scarce today, and employers experience a high level of competition from adjacent sectors. In 2019, for example, there were 1.8 job vacancies in Germany for every unemployed energy technician.

This labor scarcity will get significantly worse: the demand for blue- and white-collar workers to develop and construct wind and solar assets in the European Union, for example, is expected to increase by a factor of between three and four by 2030 (Exhibit 5). Labor shortages will be further exacerbated by an increasing demand for workers to operate and maintain these wind and solar projects; the lack of technicians is expected to be a particular pain point.

Stakeholders can act to minimize supply chain risks – and seize the opportunities 

Businesses and other relevant stakeholders could take a range of mitigation actions to guard against supply chain risks. These actions are not just about mitigating risk, however: building supply chain resilience can also be an opportunity and a catalyst for collaboration and partnerships, as well as a driver of innovation—for example, to replace materials and increase productivity.

Potential actions for businesses

 

The right next steps will vary by the type and the specifics of individual businesses, but the following resilience-boosting actions can be beneficial to businesses along the supply chain:

  • Diversify and localize supply chains for critical raw materials and components across multiple suppliers and geographies.
  • Explore opportunities for cross-industry pooled procurement of raw materials.
  • Invest in recycling, innovation, and research around substitutes for critical materials.
  • Explore opportunities for vertical integration to secure critical raw materials and decrease price volatility, either through alliances and partnerships or through targeted acquisitions.
  • Optimize procurement strategies by targeting long-term supply agreements or developing streaming agreements with advance lump-sum payments for future production.
  • Send clear demand signals via long-term target and volume commitments, such as by announcing target developments in offshore wind to drive the upgrade of vessels.
  • Attract and retain workers from the European Union and beyond by conducting early outreach in schools and offering targeted reskilling programs.
  • Reduce labor demand through automation and digitalization.

Potential actions for other stakeholders

Other stakeholders could consider the following actions:

  • Scale up regional supply chains to a critical minimum; for example, use incentives (including both taxes and subsidies) or insert sustainability and local content criteria into tenders and policies.
  • Encourage innovation, including around substitutes for critical and scarce raw materials.
  • Harmonize regulations and streamline permitting processes.
  • Introduce intra-European Union alliances to source strategic raw materials, including rare-earth materials.
  • Increase OEM recycling of raw materials such as aluminum, lithium, and cobalt by creating financial incentives and setting standards regarding higher levels of reuse.
  • Communicate and commit on growth plans to build the confidence that will allow businesses to make proactive investments.
  • Invest in labor programs for blue-collar energy transition jobs focused on metallurgy and RES manufacturing capabilities. Programs could include skilling and reskilling while also facilitating international and cross-sector utilization.
  • Attract and retain workers from the European Union and beyond—for example, by facilitating migration, activating passive workforce segments, and ensuring a predictable and steady project pipeline.
The supply chains for crucial energy transition and electrification technologies are only as strong as their weakest links. Therefore, businesses and other relevant stakeholders may benefit from plotting out and mitigating potential risks along every step of the supply chain. This is a significant endeavor, but it is also a real opportunity for innovation and collaboration among stakeholders. Those that can build resilient, future-ready supply chains will be well positioned to reap significant benefits as the energy transition continues to gather momentum.

ABOUT THE AUTHOR(S)

Stathia Bampinioti is a consultant in McKinsey’s Athens office; Harald Bauer is a senior partner in the Frankfurt office, where Friederike Liebach is a consultant; Nadia Christakou is an associate partner in the Geneva office, where Luigi Gigliotti is an associate partner; Lorenzo Moavero Milanesi is a partner in the Milan office; Humayun Tai is a senior partner in the New York office; and Raffael Winter is a partner in the Düsseldorf office, where Emil Hosius is a consultant.

This article represents views from McKinsey’s Advanced Industries and Electric Power & Natural Gas Practices and McKinsey’s initiatives on orderly energy transition and industrial electrification.

The authors wish to thank Marcelo Azevedo, Patricia Bingoto, Stefan Burghardt, Greg Callaway, Tommaso Cavina, Spencer Dowling, Tamara Gruenewald, Alessandro Gentile, Magda Handousa, Blake Houghton, Jake Langmead-Jones, Simon Norambuena, Philipp Pfingstag, Hamid Samandari, Eivind Samseth, Namit Sharma, Erlend Spets, Paolo Spranzi, Fabian Stockhausen, Christer Tryggestad, Antonio Volpin, Alexander Weiss, and Jakub Zivansky for their contributions to this article.