Belcher: Energy Sector Grapples with Looming Labor Crisis

U.S. energy demand is soaring. A recent report by Syracuse University’s Dynamic Sustainability Lab and the Sustainability and Energy Value Advisors highlighted a doubling of five-year demand growth and the need for new generation capacity, transmission lines and grid infrastructure, grid security, battery storage and an electrical system supply chain to avoid serious issues in terms of future electricity reliability.

That demand growth is being led by artificial intelligence (AI) and the proliferation of data centers, as well as manufacturing growth and consumer demand. The oil and gas industry continues to grow as an energy provider and consumer. Global natural gas demand is also a significant factor as contracts expire for piped gas to Europe and LNG demand continues to grow.

All of this demand—for power, AI and data centers, infrastructure, LNG/natural gas, a domestic supply chain and manufacturing facilities—will require a huge amount of specialized labor in the form of engineers and technical trades, something we are currently lacking in the U.S. In 2025, the U.S. economy will need about 1 million more STEM professionals than it can produce, according to the U.S. Bureau of Labor Statistics. STEM jobs are projected to grow by 13% between 2017 and 2027, outpacing non-STEM jobs.

The U.S. needs approximately 400,000 new engineers each year moving forward but is currently only able to fill about one-third of the engineering positions available through at least 2030. Recent workforce development studies have identified shortages in trades and crafts occupations, with severe problems in recruiting welders and electricians.

Exacerbating this problem are retirements. Older workers have been hanging on to make up for shortages in skilled trades, but this has been going on for years. More and more workers are reaching the end of their careers and the shortfalls are becoming daunting.

We all know this to be true in the oil and gas industry, which has for years been struggling with the big “crew change,” replacing older seasoned technical workers with younger ones. The burgeoning U.S. LNG industry is desperately seeking qualified engineers and skilled workers as its facilities come online.

The U.S. nuclear renaissance, which is initially focused on the reopening or expansion of traditional large-scale nuclear facilities and is expected to include the deployment of numerous small modular reactors (SMRs), or microreactors, to provide localized power to support industrial, commercial and residential development, will necessitate the employment of highly-skilled and specialized workers with experience in radiation physics and radiation protection. Currently, training for those skills is limited.

At the same time, the sector will also need large numbers of skilled workers such as electricians and welders, adding further strain to recruitment of these workers. If the U.S. were to build our its supply chain to support the industry, even more technical and skilled workers would be needed.

“We have a generation that is retiring. We have a lack of specialist engineering and geoscience graduates,” said Charles Philpott, global natural resources leader at risk capital and human capital solutions provider Aon. “But at the same time, there are new sub-sectors and technologies that are developing, with roles that have never existed before. We’re missing a generation of workers with the skills to supply the global population with energy.”

Keep productive workers working

Finally, the space defined as the energy transition is also creating demand for engineers and technically skilled workers for renewable energy projects and infrastructure, carbon capture and storage projects, hydrogen projects and other decarbonization projects. The Inflation Reduction Act, which was signed into law in 2022, directed $500 billion in spending and tax breaks for clean energy and decarbonization projects, of which $75 billion has been invested into 42 online and operating manufacturing facilities in solar, energy storage, wind, offshore wind and transmission. In the past two years alone, 160 new “clean energy facilities” have been built.

One way to meet this demand is through the process of reskilling, in which workers with a particular set of skills are trained with new skills so that they can take on a new job or set of responsibilities. It is an investment by individual companies to enable their employees to stay in an organization that focuses in another area.

For society, it is an opportunity to keep productive workers employed in a changing environment. Studies have shown that as employees are encouraged to take advantage of reskilling opportunities for their professional and personal growth, people metrics, such as employee engagement and retention, also increase.

According to the World Economic Forum, 50% of workers will need reskilling in the next five years, but only 18% of companies have made “significant progress” in establishing a reskilling program. The organization noted that reskilling can significantly boost global GDP, with estimates suggesting an $11.5 trillion increase by 2028 through enhanced workforce productivity.

‘Toolbelt generation’

Another interesting development that addresses the skilled labor shortfall has been a noticeable rise in enrollment in vocational training in trade schools and community colleges. This trend was highlighted in a Wall Street Journal article earlier this year entitled, “How Gen Z is Becoming the Toolbelt Generation.”

The newspaper interviewed students who have opted not to attend traditional four-year colleges in favor of a trade skills education. The article cited the growing number of college graduates with non-technical or business-based degrees who can’t find stable careers and are often saddled with tremendous student loan debt. Many feel that trade school offers them opportunities to pursue skills and careers that will not be easily replaced by AI.

So, while the trade school trend is a move in a positive direction, there remains a daunting gap that the oil and gas industry, and society-at-large, needs to address. Policymakers need to be better informed about the significance of the skills gap in terms of its ability to thwart the U.S. oil and gas industry, the energy transition and a manufacturing and supply chain renaissance.

This involves industry taking the time to vocalize the gap and the potential impacts. We also need to take a long look at our overall education system. Emphasis on STEM education needs to start in elementary school and continue all the way through high school and college. It needs to be better encouraged in underrepresented communities and for female students.            

As for higher education, we need to better inform young people about the degree programs that they are following with realistic expectations about the job opportunities and earning potential of many programs with a non-technical or non-financial focus. They need to understand the potential consequences of taking out student loans for a degree that offers few viable career paths. We also need to shine a light on the opportunities that technical education at trade schools and community colleges can offer and their alignment with the future needs of our economy.  

As a society, we need to stop looking at the skills gap as an industry-by-industry phenomenon, but rather as an issue impacting the entire U.S. and global economy. There isn’t one solution to the problem. It requires a concerted effort, by industry and government, to identify the gaps in skills and training, rethink how our education system works, emphasize and incentivize STEM and technical degrees and trade school training, and put our people to work building the energy and manufacturing economy of the future.

This shouldn’t be a partisan issue. It is in the interest of all of us to educate, train and employ a new generation of workers who can get the work done.